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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549





FORM 10-Q





QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended
March 31, 2011





PARK BANCORP, INC.

(Exact name of registrant as specified in its charter)





0-20867

(Commission File Number)

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)





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 whether the registrant has submitted electronically and posted on its corporate Web site, if any, every
Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such
files).    Yes   ̈    No   ̈

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



|                        |  |   |  |                           |  |  
|----------------------- |  | - |  | ------------------------- |  | -
|Large accelerated filer |  |  ̈ |  | Accelerated filer         |  |  ̈
|                        |  |   | 
|Non-accelerated filer   |  |  ̈ |  | Smaller Reporting Company |  | x

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

As of May 16, 2011, the Registrant had outstanding 1,193,174 shares of common stock.









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TABLE OF CONTENTS



|                               |  |                                                                                       |    |      |    | 
|------------------------------ |  | ------------------------------------------------------------------------------------- | -- | ---- | -- | 
|                               |  |                                                                                       |    | Page |   
|PART I  FINANCIAL INFORMATION |  |                                                                                       |    |     
|                               |  |                                                                                      
|Item 1.                        |  | Financial Statements                                                                  |    |      | 3  | 
|                               |  |                                                                                      
|Item 2.                        |  | Managements Discussion and Analysis of Financial Condition and Results of Operations |    |      | 24 | 
|                               |  |                                                                                      
|Item 3.                        |  | Quantitative and Qualitative Disclosures About Market Risk                            |    |      | 28 | 
|                               |  |                                                                                      
|Item 4.                        |  | Controls and Procedures                                                               |    |      | 29 | 
|                               | 
|PART II  OTHER INFORMATION    |  |                                                                                       |    |     
|                               |  |                                                                                      
|Item 1.                        |  | Legal Proceedings                                                                     |    |      | 30 | 
|                               |  |                                                                                      
|Item 1A.                       |  | Risk Factors                                                                          |    |      | 30 | 
|                               |  |                                                                                      
|Item 2.                        |  | Unregistered Sales of Equity Securities and Use of Proceeds                           |    |      | 30 | 
|                               |  |                                                                                      
|Item 3.                        |  | Defaults Upon Senior Securities                                                       |    |      | 30 | 
|                               |  |                                                                                      
|Item 4.                        |  | [Removed and Reserved]                                                                |    |      | 30 | 
|                               |  |                                                                                      
|Item 5.                        |  | Other Information                                                                     |    |      | 30 | 
|                               |  |                                                                                      
|Item 6.                        |  | Exhibits                                                                              |    |      | 30 | 
|                               | 
|SIGNATURES                     |  |                                                                                       | 31 |     



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

This Quarterly Report on Form 10-Q 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. These forward-looking statements may be identified by the use of words such as believe, expect, anticipate, intend,
should, planned, estimated, and potential, or other similar terms. These forward-looking statements relate to, among other things, expectations of the business environment in which the Company
operates, projections of future performance, perceived opportunities in the market, potential future credit experience, and statements regarding the Companys strategies. These forward-looking statements are based upon current management
expectations and may, therefore, involve risks and uncertainties. The Companys actual results, performance, or achievements may differ materially from those suggested, expressed, or implied by forward-looking statements as a result of a wide
variety or range of factors including, but not limited to: interest rate fluctuations; economic conditions in the Companys primary market area; deposit flows; demand for residential, construction/land development, commercial real estate,
consumer, and other types of loans; health of the local real estate market; our ability to manage our levels of our non-performing assets and other loans of concern; real estate values; success of new products; competitive conditions between banks
and non-bank financial service providers; regulatory and accounting changes; the Companys ability to comply with the provisions of any regulatory enforcement actions, including the Memorandum of Understanding and the Cease and Desist Order;
legislative changes, including the implementation of the Dodd-Frank Wall Street Reform and Consumer Protection Act; monetary and fiscal policies of the U.S. government, including policies of the U.S. Treasury and the Federal Reserve Board;
competition; accounting principles, policies and guidelines; success of new technology; technological factors affecting operations; costs of technology; pricing of products and services; and other risks detailed from time to time in our filings with
the Securities and Exchange Commission. Any of the forward-looking statements that we make in this Form 10-Q and in the other public statements we make may turn out to be wrong because of the inaccurate assumptions we might make, because of the
factors illustrated above or because of other factors that we cannot foresee. Because of these and other uncertainties, our actual future results may be materially different from those expressed in any forward-looking statements made by or on behalf
of the Company. Therefore, these factors should be considered in evaluating the forward-looking statements, and undue reliance should not be placed on such statements. The Company undertakes no responsibility to update or revise any forward-looking
statements unless required to do so under the federal securities laws.



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PART I  FINANCIAL INFORMATION



|Item 1. | Financial Statements.
|------- | ---------------------

PARK BANCORP, INC.

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(In thousands of dollars,
except share data)

(Unaudited)



|                                                                                                                                                         |  |                |         |   |                   |   |         |  
|-------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------- | ------- | - | ----------------- | - | ------- | -
|                                                                                                                                                         |  | March 31, 2011 |         |   | December 31, 2010 |  
|Assets                                                                                                                                                   |  |                |         |   |                   |   |         |  
|Cash and due from banks                                                                                                                                  |  | $              | 2,742   |   |                   | $ | 2,683   |  
|Federal funds sold                                                                                                                                       |  |                | 9,728   |   |                   |   | 9,708   |  
|Interest-bearing deposits with other financial institutions                                                                                              |  |                | 8,379   |   |                   |   | 6,627   |  
|                                                                                                                                                         |  |                |         |   |                   |   |         |  
|Total cash and cash equivalents                                                                                                                          |  |                | 20,849  |   |                   |   | 19,018  |  
|                                                                                                                                                         |  |               
|Securities available for sale                                                                                                                            |  |                | 25,804  |   |                   |   | 30,031  |  
|Loans receivable, net of allowance of $5,723 and $5,144                                                                                                  |  |                | 133,579 |   |                   |   | 135,559 |  
|Federal Home Loan Bank stock, at cost                                                                                                                    |  |                | 5,423   |   |                   |   | 5,423   |  
|Premises and equipment, net                                                                                                                              |  |                | 8,905   |   |                   |   | 9,018   |  
|Accrued interest receivable                                                                                                                              |  |                | 709     |   |                   |   | 761     |  
|Bank-owned life insurance                                                                                                                                |  |                | 8,673   |   |                   |   | 8,596   |  
|Real estate owned                                                                                                                                        |  |                | 2,059   |   |                   |   | 1,794   |  
|Other assets                                                                                                                                             |  |                | 1,664   |   |                   |   | 1,589   |  
|                                                                                                                                                         |  |                |         |   |                   |   |         |  
|                                                                                                                                                         |  |               
|Total assets                                                                                                                                             |  | $              | 207,665 |   |                   | $ | 211,789 |  
|                                                                                                                                                         |  |                |         |   |                   |   |         |  
|                                                                                                                                                         |  |               
|Liabilities and Stockholders Equity                                                                                                                     |  |                |         |   |                   |   |         |  
|Liabilities                                                                                                                                              |  |                |         |   |                   |   |         |  
|Non-interest bearing deposits                                                                                                                            |  | $              | 6,491   |   |                   | $ | 6,525   |  
|Interest bearing deposits                                                                                                                                |  |                | 139,844 |   |                   |   | 142,272 |  
|                                                                                                                                                         |  |                |         |   |                   |   |         |  
|Total deposits                                                                                                                                           |  |                | 146,335 |   |                   |   | 148,797 |  
|                                                                                                                                                         |  |               
|Securities sold under repurchase agreements                                                                                                              |  |                | 2,600   |   |                   |   | 2,600   |  
|Advances from borrowers for taxes and insurance                                                                                                          |  |                | 1,261   |   |                   |   | 1,932   |  
|Federal Home Loan Bank advances                                                                                                                          |  |                | 39,800  |   |                   |   | 39,800  |  
|Accrued interest payable                                                                                                                                 |  |                | 141     |   |                   |   | 151     |  
|Other liabilities                                                                                                                                        |  |                | 676     |   |                   |   | 486     |  
|                                                                                                                                                         |  |                |         |   |                   |   |         |  
|Total liabilities                                                                                                                                        |  |                | 190,813 |   |                   |   | 193,766 |  
|                                                                                                                                                         |  |               
|Stockholders Equity                                                                                                                                     |  |                |         |   |                   |   |         |  
|Preferred stock, $.01 par value, 1,000,000 shares authorized; none issued and outstanding                                                                |  |                |        |   |                   |   |        |  
|Common stock, $.01 par value, 9,000,000 shares authorized; 2,914,028 shares issued; 1,193,174 shares outstanding at
March 31, 2011 and December 31, 2010 |  |                | 29      |   |                   |   | 29      |  
|Additional paid-in capital                                                                                                                               |  |                | 32,101  |   |                   |   | 32,095  |  
|Retained earnings                                                                                                                                        |  |                | 15,683  |   |                   |   | 16,473  |  
|Treasury stock, at cost, 1,720,854 shares held at March 31, 2011 and December 31, 2010                                                                   |  |                | (31,025 | ) |                   |   | (31,025 | )
|Accumulated other comprehensive income                                                                                                                   |  |                | 64      |   |                   |   | 451     |  
|                                                                                                                                                         |  |                |         |   |                   |   |         |  
|Total stockholders equity                                                                                                                               |  |                | 16,852  |   |                   |   | 18,023  |  
|                                                                                                                                                         |  |                |         |   |                   |   |         |  
|                                                                                                                                                         |  |               
|Total liabilities and stockholders equity                                                                                                               |  | $              | 207,665 |   |                   | $ | 211,789 |  
|                                                                                                                                                         |  |                |         |   |                   |   |         |  

See accompanying notes to consolidated financial statements.



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PARK BANCORP, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands of dollars, except share data)

(Unaudited)



|                                                            |  |                             |       |   |      |   |       |  
|----------------------------------------------------------- |  | --------------------------- | ----- | - | ---- | - | ----- | -
|                                                            |  | Three Months EndedMarch
31, |      
|                                                            |  | 2011                        |       |   | 2010 |  
|Interest income                                             |  |                             |       |   |      |   |       |  
|Loans receivable                                            |  | $                           | 1,985 |   |      | $ | 2,141 |  
|Securities                                                  |  |                             | 166   |   |      |   | 315   |  
|Interest-bearing deposits with other financial institutions |  |                             | 6     |   |      |   | 3     |  
|                                                            |  |                             |       |   |      |   |       |  
|                                                            |  |                            
|Total                                                       |  |                             | 2,157 |   |      |   | 2,459 |  
|                                                            |  |                            
|Interest expense                                            |  |                             |       |   |      |   |       |  
|Deposits                                                    |  |                             | 423   |   |      |   | 596   |  
|Federal Home Loan Bank advances and other borrowings        |  |                             | 373   |   |      |   | 396   |  
|                                                            |  |                             |       |   |      |   |       |  
|                                                            |  |                            
|Total                                                       |  |                             | 796   |   |      |   | 992   |  
|                                                            |  |                             |       |   |      |   |       |  
|                                                            |  |                            
|Net interest income                                         |  |                             | 1,361 |   |      |   | 1,467 |  
|                                                            |  |                            
|Provision for loan losses                                   |  |                             | 807   |   |      |   | 444   |  
|                                                            |  |                             |       |   |      |   |       |  
|                                                            |  |                            
|Net interest income after provision for loan losses         |  |                             | 554   |   |      |   | 1,023 |  
|                                                            |  |                            
|Non-interest income                                         |  |                             |       |   |      |   |       |  
|Gain on the sale of securities available for sale           |  |                             | 317   |   |      |   |      |  
|Gain on the sale of loans                                   |  |                             | 2     |   |      |   |      |  
|Service fee income                                          |  |                             | 46    |   |      |   | 51    |  
|Earnings on bank-owned life insurance                       |  |                             | 77    |   |      |   | 77    |  
|Other operating income                                      |  |                             | 21    |   |      |   | 9     |  
|                                                            |  |                             |       |   |      |   |       |  
|                                                            |  |                            
|Total non-interest income                                   |  |                             | 463   |   |      |   | 137   |  
|                                                            |  |                            
|Non-interest expense                                        |  |                             |       |   |      |   |       |  
|Compensation and benefits                                   |  |                             | 734   |   |      |   | 835   |  
|Occupancy and equipment expense                             |  |                             | 222   |   |      |   | 271   |  
|Professional fees                                           |  |                             | 193   |   |      |   | 97    |  
|Real estate owned impairment and expenses                   |  |                             | 117   |   |      |   | 121   |  
|Federal deposit insurance expenses                          |  |                             | 102   |   |      |   | 89    |  
|Other operating expenses                                    |  |                             | 439   |   |      |   | 402   |  
|                                                            |  |                             |       |   |      |   |       |  
|                                                            |  |                            
|Total non-interest expense                                  |  |                             | 1,807 |   |      |   | 1,815 |  
|                                                            |  |                             |       |   |      |   |       |  
|                                                            |  |                            
|Loss before income taxes                                    |  |                             | (790  | ) |      |   | (655  | )
|Income tax benefit                                          |  |                             |      |   |      |   |      |  
|                                                            |  |                             |       |   |      |   |       |  
|                                                            |  |                            
|Net loss                                                    |  | $                           | (790  | ) |      | $ | (655  | )
|                                                            |  |                             |       |   |      |   |       |  
|                                                            |  |                            
|Basic loss per share                                        |  | $                           | (.66  | ) |      | $ | (.55  | )
|Diluted loss per share                                      |  | $                           | (.66  | ) |      | $ | (.55  | )

See accompanying notes to
consolidated financial statements.



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PARK BANCORP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands of dollars)

(Unaudited)



|                                                                        |  |                             |        |   |      |   |        |  
|----------------------------------------------------------------------- |  | --------------------------- | ------ | - | ---- | - | ------ | -
|                                                                        |  | Three Months EndedMarch
31, |       
|                                                                        |  | 2011                        |        |   | 2010 |  
|Cash Flows From Operating Activities                                    |  |                             |        |   |      |   |        |  
|Net loss                                                                |  | $                           | (790   | ) |      | $ | (655   | )
|Adjustments to reconcile net loss to net cash from operating activities |  |                             |        |   |      |   |        |  
|Net premium amortization on securities                                  |  |                             | (7     | ) |      |   | 5      |  
|Gain on sales of securities available for sale                          |  |                             | (317   | ) |      |   |       |  
|Gain on sales of loans                                                  |  |                             | (2     | ) |      |   |       |  
|Write-down of real estate owned property                                |  |                             | 28     |   |      |   | 27     |  
|Earnings on bank-owned life insurance, net                              |  |                             | (77    | ) |      |   | (77    | )
|Provision for loan losses                                               |  |                             | 807    |   |      |   | 444    |  
|Depreciation                                                            |  |                             | 122    |   |      |   | 122    |  
|Stock based compensation                                                |  |                             | 6      |   |      |   | 17     |  
|ESOP compensation expense                                               |  |                             |       |   |      |   | 14     |  
|Net change in:                                                          |  |                             |        |   |      |   |        |  
|Accrued interest receivable                                             |  |                             | 52     |   |      |   | 47     |  
|Accrued interest payable                                                |  |                             | (10    | ) |      |   | (17    | )
|Other assets                                                            |  |                             | (75    | ) |      |   | 795    |  
|Other liabilities                                                       |  |                             | 190    |   |      |   | 99     |  
|                                                                        |  |                             |        |   |      |   |        |  
|                                                                        |  |                            
|Net cash from operating activities                                      |  |                             | (73    | ) |      |   | 821    |  
|                                                                        |  |                            
|Cash Flows From Investing Activities                                    |  |                             |        |   |      |   |        |  
|Net change in loans                                                     |  |                             | 654    |   |      |   | 21     |  
|Proceeds from sales of loans                                            |  |                             | 228    |   |      |   |       |  
|Proceeds from sales of securities available for sale                    |  |                             | 5,794  |   |      |   |       |  
|Purchase of securities available for sale                               |  |                             | (3,022 | ) |      |   | (1,000 | )
|Maturities and calls of securities available for sale                   |  |                             | 1,392  |   |      |   | 2,675  |  
|Purchase of premises and equipment                                      |  |                             | (9     | ) |      |   | (9     | )
|                                                                        |  |                             |        |   |      |   |        |  
|                                                                        |  |                            
|Net cash from investing activities                                      |  |                             | 5,037  |   |      |   | 1,687  |  
|                                                                        |  |                            
|Cash Flows From Financing Activities                                    |  |                             |        |   |      |   |        |  
|Net change in deposits                                                  |  |                             | (2,462 | ) |      |   | (5,576 | )
|Net change in advances from borrowers for taxes and insurance           |  |                             | (671   | ) |      |   | (696   | )
|Federal Home Loan Bank advances                                         |  |                             |       |   |      |   | 1,500  |  
|Repayments of Federal Home Loan Bank advances                           |  |                             |       |   |      |   | (615   | )
|                                                                        |  |                             |        |   |      |   |        |  
|                                                                        |  |                            
|Net cash from financing activities                                      |  |                             | (3,133 | ) |      |   | (5,387 | )
|                                                                        |  |                             |        |   |      |   |        |  
|                                                                        |  |                            
|Net change in cash and cash equivalents                                 |  |                             | 1,831  |   |      |   | (2,879 | )
|Cash and cash equivalents at beginning of period                        |  |                             | 19,018 |   |      |   | 11,975 |  
|                                                                        |  |                             |        |   |      |   |        |  
|                                                                        |  |                            
|Cash and cash equivalents at end of period                              |  | $                           | 20,849 |   |      | $ | 9,096  |  
|                                                                        |  |                             |        |   |      |   |        |  
|                                                                        |  |                            
|Supplemental disclosures of cash flow information                       |  |                             |        |   |      |   |        |  
|Cash paid during the period for interest                                |  | $                           | 806    |   |      | $ | 1,009  |  
|Non-cash activity                                                       |  |                             |        |   |      |   |        |  
|Loans transferred to real estate owned                                  |  |                             | 293    |   |      |   | 422    |  

See accompanying notes
to consolidated financial statements.



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PARK BANCORP, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY

Three months ended March 31, 2011 and 2010

(In thousands of
dollars, except share data)

(Unaudited)



|                                                                           |  |             |    |  |                          |   |        |                  |  |   |               |   |  |                    |         |   |                                            |   |     |                          |  |   |     |  |  |   |        |  
|-------------------------------------------------------------------------- |  | ----------- | -- |  | ------------------------ | - | ------ | ---------------- |  | - | ------------- | - |  | ------------------ | ------- | - | ------------------------------------------ | - | --- | ------------------------ |  | - | --- |  |  | - | ------ | -
|2010                                                                       |  | CommonStock |    |  | AdditionalPaid-inCapital |   |        | RetainedEarnings |  |   | TreasuryStock |   |  | UnearnedESOPShares |         |   | AccumulatedOtherComprehensiveIncome (Loss) |   |     | TotalStockholdersEquity | 
|                                                                           |  |             |    |  |                          |   |       
|Balance at January 1, 2010                                                 |  | $           | 29 |  |                          | $ | 32,097 |                  |  | $ | 21,828        |   |  | $                  | (31,043 | ) |                                            | $ | (99 | )                        |  | $ | 136 |  |  | $ | 22,948 |  
|Net loss                                                                   |  |             |   |  |                          |   |       |                  |  |   | (655          | ) |  |                    |        |   |                                            |   |    |                          |  |   |    |  |  |   | (655   | )
|Change in fair value of securities available for sale, net of income taxes |  |             |   |  |                          |   |       |                  |  |   |              |   |  |                    |        |   |                                            |   |    |                          |  |   | 279 |  |  |   | 279    |  
|                                                                           |  |             |    |  |                          |   |        |                  |  |   |               |   |  |                    |         |   |                                            |   |     |                          |  |   |     |  |  |   |        |  
|                                                                           |  |             |    |  |                          |   |       
|Total comprehensive (loss)                                                 |  |             |    |  |                          |   |        |                  |  |   |               |   |  |                    |         |   |                                            |   |     |                          |  |   |     |  |  |   | (376   | )
|Stock based compensation                                                   |  |             |   |  |                          |   | 17     |                  |  |   |              |   |  |                    |        |   |                                            |   |    |                          |  |   |    |  |  |   | 17     |  
|ESOP shares earned                                                         |  |             |   |  |                          |   | (11    | )                |  |   |              |   |  |                    |        |   |                                            |   | 25  |                          |  |   |    |  |  |   | 14     |  
|                                                                           |  |             |    |  |                          |   |        |                  |  |   |               |   |  |                    |         |   |                                            |   |     |                          |  |   |     |  |  |   |        |  
|                                                                           |  |             |    |  |                          |   |       
|Balance at March 31, 2010                                                  |  | $           | 29 |  |                          | $ | 32,103 |                  |  | $ | 21,173        |   |  | $                  | (31,043 | ) |                                            | $ | (74 | )                        |  | $ | 415 |  |  | $ | 22,603 |  
|                                                                           |  |             |    |  |                          |   |        |                  |  |   |               |   |  |                    |         |   |                                            |   |     |                          |  |   |     |  |  |   |        |  



|                                                                           |  |             |    |  |                          |   |        |                  |  |   |               |   |  |                                            |         |   |                          |   |      |   |  |   |        |  
|-------------------------------------------------------------------------- |  | ----------- | -- |  | ------------------------ | - | ------ | ---------------- |  | - | ------------- | - |  | ------------------------------------------ | ------- | - | ------------------------ | - | ---- | - |  | - | ------ | -
|                                                                           |  |             |    |  |                          |  
|2011                                                                       |  | CommonStock |    |  | AdditionalPaid-inCapital |   |        | RetainedEarnings |  |   | TreasuryStock |   |  | AccumulatedOtherComprehensiveIncome (Loss) |         |   | TotalStockholdersEquity |  
|                                                                           |  |             |    |  |                          |  
|Balance at January 1, 2011                                                 |  | $           | 29 |  |                          | $ | 32,095 |                  |  | $ | 16,473        |   |  | $                                          | (31,025 | ) |                          | $ | 451  |   |  | $ | 18,023 |  
|Net loss                                                                   |  |             |   |  |                          |   |       |                  |  |   | (790          | ) |  |                                            |        |   |                          |   |     |   |  |   | (790   | )
|Change in fair value of securities available for sale, net of income taxes |  |             |    |  |                          |   |       |                  |  |   |              |   |  |                                            |        |   |                          |   | (387 | ) |  |   | (387   | )
|                                                                           |  |             |    |  |                          |   |        |                  |  |   |               |   |  |                                            |         |   |                          |   |      |   |  |   |        |  
|                                                                           |  |             |    |  |                          |  
|Total comprehensive (loss)                                                 |  |             |    |  |                          |   |        |                  |  |   |               |   |  |                                            |         |   |                          |   |      |   |  |   | (1,177 | )
|Stock based compensation                                                   |  |             |   |  |                          |   | 6      |                  |  |   |              |   |  |                                            |        |   |                          |   |     |   |  |   | 6      |  
|                                                                           |  |             |    |  |                          |   |        |                  |  |   |               |   |  |                                            |         |   |                          |   |      |   |  |   |        |  
|                                                                           |  |             |    |  |                          |  
|Balance at March 31, 2011                                                  |  | $           | 29 |  |                          | $ | 32,101 |                  |  | $ | 15,683        |   |  | $                                          | (31,025 | ) |                          | $ | 64   |   |  | $ | 16,852 |  
|                                                                           |  |             |    |  |                          |   |        |                  |  |   |               |   |  |                                            |         |   |                          |   |      |   |  |   |        |  

See accompanying notes to consolidated financial statements.



6



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##### Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2011

(table amounts in thousands of dollars, except share data)

Note 1  Basis of
Presentation

The accompanying unaudited consolidated financial statements include the accounts of Park Bancorp, Inc.
(the Company, we or us) and its wholly owned subsidiaries, Park Federal Savings Bank (the Bank) and PBI Development Corporation (PBI), an inactive entity, and the Banks subsidiaries,
GPS Corporation which conducts limited insurance activities, and GPS Development Corporation (GPS) which conducts real estate development activities, as of March 31, 2011 and December 31, 2010 and for the three month periods
ended March 31, 2011 and 2010. Significant intercompany accounts and transactions have been eliminated in consolidation.

The accompanying unaudited interim consolidated financial statements have been prepared pursuant to the rules and regulations for
reporting on Form 10-Q. Accordingly, certain disclosures required by accounting principles generally accepted in the United States of America are not included herein. These interim statements should be read in conjunction with the consolidated
financial statements and notes thereto included in the Companys 2010 Annual Report on Form 10-K filed with the Securities and Exchange Commission. The December 31, 2010 balance sheet presented herein has been derived from the audited
financial statements included in the Companys 2010 Annual Report on Form 10-K filed with the Securities and Exchange Commission, but does not include all disclosures required by accounting principles generally accepted in the United States of
America.

Interim statements are subject to possible adjustment in connection with the annual audit of the Company for the
year ending December 31, 2011. In the opinion of management of the Company, the accompanying unaudited interim consolidated financial statements reflect all adjustments (consisting of normal recurring adjustments) necessary for a fair
presentation of the consolidated financial position and consolidated results of operations for the periods presented.

The
results of operations for the three months ended March 31, 2011 are not necessarily indicative of the results to be expected for the full year. In preparing the unaudited financial statements, we are required to make estimates and assumptions
that affect the reported amounts of assets, liabilities, revenues and expenses. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change relate to the determination of the allowance
for loan losses, the carrying value of securities, recognition of deferred tax assets and the valuation of real estate owned acquired in connection with foreclosures or in satisfaction of loans.

Certain amounts in the unaudited consolidated financial statements for prior periods have been reclassified to conform to the current
unaudited financial statement presentation. All financial information in the following tables is in thousands of dollars, except shares and per share data.

Adoption of New Accounting Standards

In January 2010, FASB issued
Accounting Standards Update (ASU) No. 2010-06, Fair Value Measurements and Disclosures (Topic 820)  Improving Disclosures About Fair Value Measurements. ASU 2010-06 requires expanded disclosures related to
fair value measurements including (i) the amounts of significant transfers of assets or liabilities between Levels 1 and 2 of the fair value hierarchy and the reasons for the transfers, (ii) the reasons for the transfers of assets or
liabilities in or out of Level 3 of the fair value hierarchy, with significant transfers disclosed separately, (iii) the policy for determining when transfers between levels of the fair value hierarchy are recognized and (iv) for recurring
fair value measurements of assets and liabilities in Level 3 of the fair value hierarchy, a gross presentation of information about purchases, sales, issuances and settlements. ASU 2010-06 further clarifies that (i) fair value measurement
disclosures should be provided for each class of assets and liabilities rather than major category), which would generally be a subset of assets or liabilities within a line item in the statement of financial position and (ii) companies should
provide disclosures about the valuation techniques and inputs used to measure fair value for both recurring and nonrecurring fair value measurements for each class of assets and liabilities included in Levels 2 and 3 of the fair value hierarchy. The
disclosures related to the gross presentation of purchases, sales, issuances and settlements of assets and liabilities included in Level 3 of the fair value hierarchy became effective January 1, 2011 and did not have a significant impact on our
consolidated financial statements.



7



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##### Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

March 31, 2011

(table amounts in thousands of dollars, except share data)



Note 1  Basis of Presentation (Continued)



In July 2010, the FASB issued an Accounting Standards Update, Receivables: Disclosure about the Credit Quality of Financing Receivables and the Allowance for Credit Losses. The objective of
this update is for an entity to provide disclosures that facilitate financial statement users evaluation of the nature of credit risk inherent in the entitys portfolio of financing receivables, how that risk is analyzed and assessed in
arriving at the allowance for credit losses, and the changes and reasons for those changes in the allowance for credit losses. An entity should provide disclosures on a disaggregated basis on two defined levels: (1) portfolio segment; and
(2) class of financing receivable. The update makes changes to existing disclosure requirements and includes additional disclosure requirements about financing receivables, including credit quality indicators of financing receivables at the end
of the reporting period by class of financing receivables and the aging of past due financing receivables at the end of the reporting period by class of financing receivables. For public entities, the disclosures as of the end of a reporting period
are effective for interim and annual reporting periods ending on or after December 15, 2010 and have been added to Note 4. The disclosures about activity that occurs during a reporting period are effective for interim and annual reporting
periods beginning on or after December 15, 2010. The effect of adopting this new guidance on December 31, 2010 was disclosure-related only and had no impact on its results of operations.

Newly Issued But Not Effective Accounting Standards

In April 2011, the FASB issued an accounting standard updated to amend previous guidance with respect to troubled debt restructurings.
This updated guidance is designed to assist creditors with determining whether or not a restructuring constitutes a troubled debt restructuring. In particular, additional guidance has been added to help creditors determine whether a concession has
been granted and whether a debtor is experiencing financial difficulties. Both of these conditions are required to be met for a restructuring to constitute a troubled debt restructuring. The amendments in the update are effective for the first
interim period beginning on or after June 15, 2011, and should be applied retrospectively to the beginning of the annual period of adoption. The provisions of this update are not expected to have a material impact on the Companys
financial position, results of operations or cash flows.

Note 2  Loss Per Share

The following table presents a reconciliation of the components used to compute basic and diluted loss per share for the three month
periods ended March 31, 2011 and 2010. Due to the Companys net loss in 2011 and 2010, all stock options were considered anti-dilutive and thus were excluded from the computation of diluted loss per share.



|                                                           |  |                                |           |   |                                |   |           |  
|---------------------------------------------------------- |  | ------------------------------ | --------- | - | ------------------------------ | - | --------- | -
|                                                           |  | Three MonthsEndedMarch 31,2011 |           |   | Three MonthsEndedMarch 31,2010 |  
|Basic loss per share                                       |  |                                |           |   |                                |   |           |  
|Net loss as reported                                       |  | $                              | (790      | ) |                                | $ | (655      | )
|Weighted average common shares outstanding                 |  |                                | 1,193,174 |   |                                |   | 1,187,309 |  
|                                                           |  |                                |           |   |                                |   |           |  
|                                                           |  |                               
|Basic loss per share                                       |  | $                              | (.66      | ) |                                | $ | (.55      | )
|                                                           |  |                                |           |   |                                |   |           |  
|                                                           |  |                               
|Diluted loss per share                                     |  |                                |           |   |                                |   |           |  
|Net loss as reported                                       |  | $                              | (790      | ) |                                | $ | (655      | )
|Weighted average common shares outstanding                 |  |                                | 1,193,174 |   |                                |   | 1,187,309 |  
|Dilutive effect of stock options                           |  |                                |          |   |                                |   |          |  
|                                                           |  |                                |           |   |                                |   |           |  
|                                                           |  |                               
|Average common shares and dilutive potential common shares |  |                                | 1,193,174 |   |                                |   | 1,187,309 |  
|                                                           |  |                                |           |   |                                |   |           |  
|                                                           |  |                               
|Diluted loss per share                                     |  | $                              | (.66      | ) |                                | $ | (.55      | )
|                                                           |  |                                |           |   |                                |   |           |  



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##### Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

March 31, 2011

(table amounts in thousands of dollars, except share data)



Note 3  Securities Available For Sale

Securities are summarized as
follows:



|                                 |  |               |        |  |                      |   |     |                       |  |   |           |   |  |   |        | 
|-------------------------------- |  | ------------- | ------ |  | -------------------- | - | --- | --------------------- |  | - | --------- | - |  | - | ------ | 
|                                 |  | AmortizedCost |        |  | GrossUnrealizedGains |   |     | GrossUnrealizedLosses |  |   | FairValue |  
|March 31, 2011                   |  |               |        |  |                      |   |     |                       |  |   |           |   |  |   |        | 
|Government sponsored enterprises |  | $             | 13,002 |  |                      | $ | 12  |                       |  | $ | (113      | ) |  | $ | 12,901 | 
|Municipal                        |  |               | 502    |  |                      |   | 30  |                       |  |   |          |   |  |   | 532    | 
|Corporate                        |  |               | 2,998  |  |                      |   | 9   |                       |  |   | 8         | ) |  |   | 2,999  | 
|Equity                           |  |               | 17     |  |                      |   |    |                       |  |   | (2        | ) |  |   | 15     | 
|GSE mortgage-backed-residential  |  |               | 9,151  |  |                      |   | 249 |                       |  |   | (43       | ) |  |   | 9,357  | 
|                                 |  |               |        |  |                      |   |     |                       |  |   |           |   |  |   |        | 
|                                 |  |               |        | 
|                                 |  | $             | 25,670 |  |                      | $ | 300 |                       |  | $ | (166      | ) |  | $ | 25,804 | 
|                                 |  |               |        |  |                      |   |     |                       |  |   |           |   |  |   |        | 
|                                 |  |               |        | 
|                                 |  | AmortizedCost |        |  | GrossUnrealizedGains |   |     | GrossUnrealizedLosses |  |   | FairValue |  
|December 31, 2010                |  |               |        |  |                      |   |     |                       |  |   |           |   |  |   |        | 
|Government sponsored enterprises |  | $             | 12,004 |  |                      | $ | 19  |                       |  | $ | (87       | ) |  | $ | 11,936 | 
|Corporate                        |  |               | 5,004  |  |                      |   | 77  |                       |  |   | (8        | ) |  |   | 5,073  | 
|Municipal                        |  |               | 502    |  |                      |   | 31  |                       |  |   |          |   |  |   | 533    | 
|Equity                           |  |               | 4,486  |  |                      |   | 261 |                       |  |   |          |   |  |   | 4,747  | 
|GSE mortgage-backed-residential  |  |               | 7,513  |  |                      |   | 235 |                       |  |   | (6        | ) |  |   | 7,742  | 
|                                 |  |               |        |  |                      |   |     |                       |  |   |           |   |  |   |        | 
|                                 |  |               |        | 
|                                 |  | $             | 29,509 |  |                      | $ | 623 |                       |  | $ | (101      | ) |  | $ | 30,031 | 
|                                 |  |               |        |  |                      |   |     |                       |  |   |           |   |  |   |        | 

Securities with unrealized losses at March 31, 2011 and December 31, 2010 by length of time that
individual securities have been in a continuous loss position, are as follows:



|                                 |  |                     |        |  |                   |   |      |           |  |   |                |  |  |           |    |   |                |   |        |  |  |   |      |  
|-------------------------------- |  | ------------------- | ------ |  | ----------------- | - | ---- | --------- |  | - | -------------- |  |  | --------- | -- | - | -------------- | - | ------ |  |  | - | ---- | -
|                                 |  | Less than 12 Months |        |  | 12 Months or More |   |      | Total     | 
|                                 |  | FairValue           |        |  | UnrealizedLoss    |   |      | FairValue |  |   | UnrealizedLoss |  |  | FairValue |    |   | UnrealizedLoss |  
|March 31, 2011                   |  |                     |        |  |                   |   |      |           |  |   |                |  |  |           |    |   |                |   |        |  |  |   |      |  
|Government sponsored enterprises |  | $                   | 9,888  |  |                   | $ | (113 | )         |  | $ |               |  |  | $         |   |   |                | $ | 9,888  |  |  | $ | (113 | )
|Corporate                        |  |                     |       |  |                   |   |     |           |  |   | 993            |  |  |           | (8 | ) |                |   | 993    |  |  |   | (8   | )
|Equity                           |  |                     | 15     |  |                   |   | (2   | )         |  |   |               |  |  |           |   |   |                |   | 15     |  |  |   | (2   | )
|GSE mortgage-backed residential  |  |                     | 3,004  |  |                   |   | (43  | )         |  |   |               |  |  |           |   |   |                |   | 3,004  |  |  |   | (43  | )
|                                 |  |                     |        |  |                   |   |      |           |  |   |                |  |  |           |    |   |                |   |        |  |  |   |      |  
|                                 |  |                     |        |  |                   |  
|Total temporarily impaired       |  | $                   | 12,907 |  |                   | $ | (158 | )         |  | $ | 993            |  |  | $         | (8 | ) |                | $ | 13,900 |  |  | $ | (166 | )
|                                 |  |                     |        |  |                   |   |      |           |  |   |                |  |  |           |    |   |                |   |        |  |  |   |      |  
|                                 |  |                     |        |  |                   |  
|December 31, 2010                |  |                     |        |  |                   |   |      |           |  |   |                |  |  |           |    |   |                |   |        |  |  |   |      |  
|Government sponsored enterprises |  | $                   | 8,917  |  |                   | $ | (87  | )         |  | $ |               |  |  | $         |   |   |                | $ | 8,917  |  |  | $ | (87  | )
|Corporate                        |  |                     |       |  |                   |   |     |           |  |   | 993            |  |  |           | (8 | ) |                |   | 993    |  |  |   | (8   | )
|GSE mortgage-backed residential  |  |                     | 982    |  |                   |   | (6   | )         |  |   |               |  |  |           |   |   |                |   | 982    |  |  |   | (6   | )
|                                 |  |                     |        |  |                   |   |      |           |  |   |                |  |  |           |    |   |                |   |        |  |  |   |      |  
|                                 |  |                     |        |  |                   |  
|Total temporarily impaired       |  | $                   | 9,899  |  |                   | $ | (93  | )         |  | $ | 993            |  |  | $         | (8 | ) |                | $ | 10,892 |  |  | $ | (101 | )
|                                 |  |                     |        |  |                   |   |      |           |  |   |                |  |  |           |    |   |                |   |        |  |  |   |      |  



9



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##### Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

March 31, 2011

(table amounts in thousands of dollars, except share data)



Note 3  Securities Available For Sale (Continued)



On a quarterly basis, management makes an assessment to determine whether there have been any events or economic circumstances to indicate
that any security in its securities available for sale portfolio on which there is an unrealized loss is impaired on an other-than-temporary basis. The amount of the OTTI recognized in earnings depends on whether the Company intends to sell the
security or whether it is more likely than not the Company will be required to sell the security before recovery of its amortized cost basis, less any current-period credit loss. If the Company intends to sell or it is more likely than not it will
be required to sell the security before recovery of its amortized cost basis, less any current-period credit loss, the OTTI is recognized in earnings in an amount equal to the entire difference between the investments amortized cost basis and
its fair value at the balance sheet date. If the Company does not intend to sell the security and it is not more likely than not that the Company will be required to sell the security before recovery of its amortized cost basis, less any
current-period loss, the OTTI is separated into the amount representing the credit loss and the amount related to all other factors. The amount of the total OTTI related to the credit loss is determined based on the present value of cash flows
expected to be collected and is recognized in earnings. The amount of the total OTTI related to other factors is recognized in other comprehensive income, net of applicable taxes. The previous amortized cost basis less the portion of the OTTI
recognized in earnings becomes the new amortized cost basis of the investment. For the three months ended March 31, 2011 and 2010, the Company had no impairment losses.

At March 31, 2011, the government enterprises portfolio was backed by securities issued by the Federal Home Loan Mortgage Corporation (FHLMC), the Federal National Mortgage Association
(FNMA), the Federal Home Loan Bank (FHLB) and the Federal Farm Credit Bureau (FFCB). The Municipal portfolio consists of an investment grade taxable municipal bond due October, 2015. The Corporate portfolio
includes investment grade medium term notes issued by financial services companies maturing between June 2011 and November 2018. We hold an equity security which is an investment in another financial institution; the security has been in a
continuous loss position for the past twelve months. We have previously taken an impairment charge on the security. During the three month period ended March 31, 2011, the market value of this security has fluctuated and is currently at an
unrealized loss of $1,700 which is a $1,700 decrease from the value at December 31, 2010. We had one corporate note from a financial institution that has been in a continuous loss position for twelve months or more, the security is rated A2
with a fair value of $993,000 and a maturity date of February 2012. The decline in fair value is less than 1% of the amortized book value of the security. Management has reviewed these securities and believes no impairment charge is required for
these securities at March 31, 2011.

Contractual maturities of securities at March 31, 2011 are listed below.
Securities not due at a single maturity date, primarily mortgage-backed and equity securities, are shown separately.



|                                |  |               |        |  |            |   |        | 
|------------------------------- |  | ------------- | ------ |  | ---------- | - | ------ | 
|                                |  | AmortizedCost |        |  | Fair Value |  
|Due within one year             |  | $             | 1,998  |  |            | $ | 1,993  | 
|Due one to five years           |  |               | 1,505  |  |            |   | 1,533  | 
|Due five years to ten years     |  |               | 9,999  |  |            |   | 9,922  | 
|Due after ten years             |  |               | 3,000  |  |            |   | 2,984  | 
|                                |  |               |        |  |            |   |        | 
|                                |  |              
|                                |  |               | 16,502 |  |            |   | 16,432 | 
|                                |  |              
|Equity                          |  |               | 17     |  |            |   | 15     | 
|GSE mortgage-backed-residential |  |               | 9,151  |  |            |   | 9,357  | 
|                                |  |               |        |  |            |   |        | 
|                                |  |              
|                                |  | $             | 25,670 |  |            | $ | 25,804 | 
|                                |  |               |        |  |            |   |        | 

Securities with a carrying value of $3.0 million and $8.0 million at March 31, 2011 and
December 31, 2010, respectively, were pledged to secure securities sold under repurchase agreements at March 31, 2011 and securities sold under repurchase agreements and public deposits at December 31, 2010, as required or permitted
by law.

During the quarter ended March 31, 2011, the Company sold its interest in an ultra short mortgage mutual fund.
Gross proceeds from the sale were $4.7 million and generated a gain on the sale of $270,000. The Company sold an additional security during the quarter with gross proceeds on the sale of $1.1 million and generated a gain of $47,000. There were no
losses recorded on any sales during the quarter ended March 31, 2011. There were no security sales during the quarter ended March 31, 2010.



10



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##### Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

March 31, 2011

(table amounts in thousands of dollars, except share data)



Note 4  Loans

The Company originates mortgage and installment loans
to 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.

Loans receivable are summarized as follows at the period end:



|                                          |  |               |         |   |                  |   |         |  
|----------------------------------------- |  | ------------- | ------- | - | ---------------- | - | ------- | -
|                                          |  | March 31,2011 |         |   | December 31,2010 |  
|                                          |  |              
|One-to-four-family residential            |  | $             | 97,925  |   |                  | $ | 98,179  |  
|Multi-family residential                  |  |               | 14,927  |   |                  |   | 15,135  |  
|Commercial, construction and land         |  |               | 15,606  |   |                  |   | 16,828  |  
|Consumer loans                            |  |               | 5,922   |   |                  |   | 5,738   |  
|Participations and loans purchased        |  |               | 6,072   |   |                  |   | 6,106   |  
|                                          |  |               |         |   |                  |   |         |  
|                                          |  |              
|Total loans, gross                        |  |               | 140,452 |   |                  |   | 141,986 |  
|Undisbursed portion of loans (LIP)        |  |               | (955    | ) |                  |   | (1,091  | )
|Net deferred loan origination fees        |  |               | (195    | ) |                  |   | (192    | )
|                                          |  |               |         |   |                  |   |         |  
|Total loans, net of LIP and deferred fees |  |               | 139,302 |   |                  |   | 140,703 |  
|Allowance for loan losses                 |  |               | (5,723  | ) |                  |   | (5,144  | )
|                                          |  |               |         |   |                  |   |         |  
|                                          |  |              
|Total loans, net                          |  | $             | 133,579 |   |                  | $ | 135,559 |  
|                                          |  |               |         |   |                  |   |         |  

During the quarter, the Bank participated in the Federal Home Loan Banks MPFXtra program. This program
is designed for financial institutions to generate liquidity and promote mortgage lending. Under this program, the Bank sold two performing one-to-four-family residential loans totaling $226,000 and generated a $2,000 gain on the sale. These loans
were sold with recourse, therefore the Federal Home Loan Bank has the right to return the loan to the Bank if underwriting guidelines do not meet their standards. Management intends to continue with this program to the extent that future loan
originations meet the guidelines for the program.

Loan Origination/Risk Management. Single family real estate
loans are originated using secondary market underwriting guidelines. We originate both fixed rate and adjustable rate loans in our residential lending program. We typically base our decision on whether to sell or retain secondary market quality
loans on the rate and fees for each loan, market conditions and liquidity needs.

Multi-family and commercial real estate
loans have higher loan balances, are more difficult to evaluate and monitor, and involve a greater degree of risk than one-to-four-family residential loans. Often payments on loans secured by multi-family or commercial properties are dependent on
the successful operation and management of the property; therefore, repayment of these loans may be affected by adverse conditions in the real estate market or the economy. We generally require and obtain loan guarantees from financially capable
parties based upon the review of personal financial statements. If the borrower is a corporation, we generally require and obtain personal guarantees from the corporate principals based upon a review of their personal financial statements, tax
returns and individual credit reports.

Multi-family and commercial real estate loans are originated with rates that generally
adjust after an initial period ranging from three to seven years. Adjustable rate multi-family residential and commercial real estate loans are generally fixed rate with terms of three to five years after which they adjust annually to an index tied
to the one year treasury rates plus an acceptable margin. These loans are typically amortized for up to 30 years with a prepayment penalty. The maximum loan to value ratio for multi-family and commercial real estate loans is generally 75% on
purchases and refinances. We require appraisals of all properties securing commercial and multi-family real estate loans, performed by independent appraisers designated by us. We require our multi-family and commercial real estate loan borrowers to
submit annual financial statements and rent rolls for the subject property. We generally require a minimum pro forma debt coverage ratio of 1.20 times for loans secured by multi-family and commercial properties.

We originate construction and site development loans to contractors and builders primarily to finance the construction of single-family
homes and subdivisions. Loans to finance the construction of single-family homes and subdivisions are generally offered to experienced builders in our primary market areas. All builders are qualified using the same standards as other commercial loan
credits, requiring minimum debt service coverage ratios and established cash reserves to carry projects through construction completion and sale of the project. The maximum loan-to-value limit on both pre-sold and speculative projects is generally
up to 75% of the appraised market value or sales price upon completion of the project. We may not require any cash equity from the borrower if there is sufficient equity in the land being used as collateral. Development plans are required from
builders prior to making the loan. We require that builders maintain adequate insurance coverage.



11



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##### Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

March 31, 2011

(table amounts in thousands of dollars, except share data)



Note 4  Loans (Continued)



We also originate land loans to individuals. Land loans are secured by a first lien on the property; generally have a maximum loan to value ratio of 70% at a fixed rate of interest on one to five
year balloon notes with a maximum amortization of thirty years.

Our consumer loans are risk priced based on credit score and
overall credit quality of the applicant. Home equity loans are made for, among other purposes, the improvement of residential properties, debt consolidation and education expenses. The majority of these loans are secured by a second mortgage on
residential property. Fixed rate terms are available up to 120 months, and our equity line of credit is generally a prime rate based loan. Maximum loan to values are dependent on credit worthiness and may be originated at up to 80% of collateral
value.

Concentrations of Credit. The Banks lending activity primarily occurs within the geographic areas which
we serve through our branch network, generally described as south and southwest Chicago, Illinois and the western suburbs of Chicago. Our loan portfolio mix includes 69.7% in one-to-four family mortgages, 10.7% in multifamily residential
mortgages, 11.1% in commercial real estate mortgages, construction loans and land loans, 4.2% in direct consumer loans, and 4.3% in participations and loans purchased which are split close to equally between one-to-four family and commercial real
estate as of March 31, 2011.

Outstanding commitments to borrowers for loans as of March 31, 2011 and
December 31, 2010 totaled $1.2 million and $1.7 million, respectively. Unfunded commitments under lines of credit as of March 31, 2011 and December 31, 2010 totaled $1.8 million and $2.0 million, respectively.

Credit Quality Indicators. Federal regulations provide for the classification of lower quality loans and other assets, such
as debt and equity securities, as substandard, doubtful or loss. An asset is considered substandard if it is inadequately protected by the current net worth and pay capacity of the borrower or of any collateral pledged. Substandard assets include
those characterized by the distinct possibility that we will sustain some loss if the deficiencies are not corrected. Assets classified as doubtful have all the weaknesses inherent in those classified substandard with the added characteristic that
the weaknesses present make collection or liquidation in full highly questionable and improbable, on the basis of currently existing facts, conditions and values. Assets classified as loss are those considered uncollectible and of such little value
that their continuance as assets without the establishment of a specific loss reserve is not warranted.

Senior Management
performs a quarterly review of the classification of all of the Banks assets. When we classify problem assets as either substandard or doubtful, we may consider the loans to be impaired and establish a specific allowance in an amount we deem
prudent and approved by Senior Management or the Audit Committee or we may allow the loss to be addressed in the general allowance. General allowances represent loss allowances which have been established to recognize the inherent risk associated
with lending activities, but which, unlike specific allowances, have not been specifically allocated to particular problem assets. When an insured institution classifies problem assets as a loss, it is required to charge off such assets in the
period in which they are deemed uncollectible. Assets that do not currently expose us to sufficient risk to warrant classification as substandard or doubtful but possess identified weaknesses are required to be classified as either watch or special
mention assets. Our determination as to the classification of our assets and the amount of our valuation allowances is subject to review by the OTS, which can order the establishment of additional loss allowances.

Early indicator loan grades are used by the Bank to identify and track potential problem loans which do not rise to the levels described
for substandard, doubtful or loss. The grades for watch and special mention are assigned to loans which have been criticized based upon known characteristics such as periodic payment delinquency or stale financial information from the borrower
and/or guarantors. Loans identified as criticized (watch and special mention) or classified (substandard, doubtful, or loss) are subject to problem loan reporting not less than every three months. At March 31, 2011 and December 31,
2010 the Bank had no loans classified as doubtful or loss.



12



---

##### Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

March 31, 2011

(table amounts in thousands of dollars, except share data)



Note 4  Loans (Continued)



The following tables present a summary of loans, net of LIP and deferred fees, by class and risk category at March 31, 2011 and December 31, 2010.



|                  |  |                   |        |  |              |   |        |                                 |  |   |          |  |  |                                  |       |  |       |   |       |  |  |   |         | 
|----------------- |  | ----------------- | ------ |  | ------------ | - | ------ | ------------------------------- |  | - | -------- |  |  | -------------------------------- | ----- |  | ----- | - | ----- |  |  | - | ------- | 
|March 31, 2011    | 
|                  |  |                   |        |  |              |  
|                  |  | One-to-FourFamily |        |  | Multi-Family |   |        | Commercial,Constructionand Land |  |   | Consumer |  |  | Participationsand LoansPurchased |       |  | Total |  
|                  |  |                   |        |  |              |  
|Grade:            |  |                   |        |  |              |   |        |                                 |  |   |          |  |  |                                  |       |  |       |   |       |  |  |   |         | 
|Pass              |  | $                 | 88,159 |  |              | $ | 12,858 |                                 |  | $ | 12,744   |  |  | $                                | 5,347 |  |       | $ | 5,437 |  |  | $ | 124,545 | 
|Special mention   |  |                   |       |  |              |   |       |                                 |  |   | 464      |  |  |                                  | 532   |  |       |   |      |  |  |   | 996     | 
|Substandard       |  |                   | 9,641  |  |              |   | 2,025  |                                 |  |   | 1,430    |  |  |                                  | 30    |  |       |   | 635   |  |  |   | 13,761  | 
|                  |  |                   |        |  |              |   |        |                                 |  |   |          |  |  |                                  |       |  |       |   |       |  |  |   |         | 
|                  |  |                   |        |  |              |  
|Total             |  | $                 | 97,800 |  |              | $ | 14,883 |                                 |  | $ | 14,638   |  |  | $                                | 5,909 |  |       | $ | 6,072 |  |  | $ | 139,302 | 
|                  |  |                   |        |  |              |   |        |                                 |  |   |          |  |  |                                  |       |  |       |   |       |  |  |   |         | 
|                 
|December 31, 2010 | 
|                  |  |                   |        |  |              |  
|                  |  | One-to-FourFamily |        |  | Multi-Family |   |        | Commercial,Constructionand Land |  |   | Consumer |  |  | Participationsand LoansPurchased |       |  | Total |  
|                  |  |                   |        |  |              |  
|Grade:            |  |                   |        |  |              |   |        |                                 |  |   |          |  |  |                                  |       |  |       |   |       |  |  |   |         | 
|Pass              |  | $                 | 90,084 |  |              | $ | 12,234 |                                 |  | $ | 14,018   |  |  | $                                | 4,968 |  |       | $ | 5,501 |  |  | $ | 126,805 | 
|Special mention   |  |                   |       |  |              |   | 675    |                                 |  |   | 147      |  |  |                                  | 770   |  |       |   |      |  |  |   | 1,592   | 
|Substandard       |  |                   | 7,950  |  |              |   | 2,195  |                                 |  |   | 1,556    |  |  |                                  |      |  |       |   | 605   |  |  |   | 12,306  | 
|                  |  |                   |        |  |              |   |        |                                 |  |   |          |  |  |                                  |       |  |       |   |       |  |  |   |         | 
|                  |  |                   |        |  |              |  
|Total             |  | $                 | 98,034 |  |              | $ | 15,104 |                                 |  | $ | 15,721   |  |  | $                                | 5,738 |  |       | $ | 6,106 |  |  | $ | 140,703 | 
|                  |  |                   |        |  |              |   |        |                                 |  |   |          |  |  |                                  |       |  |       |   |       |  |  |   |         | 

Nonperforming loans include both smaller dollar balance homogeneous loans that are collectively evaluated
for impairment and individually classified loans. The following tables present a summary of the loan portfolio, net of LIP and deferred fees, by class and credit quality at March 31, 2011 and December 31, 2010.

March 31, 2011



|              |  |                   |        |  |              |   |        |                                 |  |   |          |  |  |                                  |       |  |       |   |       |  |  |   |         | 
|------------- |  | ----------------- | ------ |  | ------------ | - | ------ | ------------------------------- |  | - | -------- |  |  | -------------------------------- | ----- |  | ----- | - | ----- |  |  | - | ------- | 
|              |  | One-to-FourFamily |        |  | Multi-Family |   |        | Commercial,Constructionand Land |  |   | Consumer |  |  | Participationsand LoansPurchased |       |  | Total |  
|              |  |                   |        |  |              |  
|Performing    |  | $                 | 88,159 |  |              | $ | 12,858 |                                 |  | $ | 13,208   |  |  | $                                | 5,879 |  |       | $ | 5,410 |  |  | $ | 125,514 | 
|Nonperforming |  |                   | 9,641  |  |              |   | 2,025  |                                 |  |   | 1,430    |  |  |                                  | 30    |  |       |   | 662   |  |  |   | 13,788  | 
|              |  |                   |        |  |              |   |        |                                 |  |   |          |  |  |                                  |       |  |       |   |       |  |  |   |         | 
|              |  |                   |        |  |              |  
|Total         |  | $                 | 97,800 |  |              | $ | 14,883 |                                 |  | $ | 14,638   |  |  | $                                | 5,909 |  |       | $ | 6,072 |  |  | $ | 139,302 | 
|              |  |                   |        |  |              |   |        |                                 |  |   |          |  |  |                                  |       |  |       |   |       |  |  |   |         | 



13



---

##### Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

March 31, 2011

(table amounts in thousands of dollars, except share data)



Note 4  Loans(Continued)



December 31, 2010



|              |  |                   |        |  |              |   |        |                                 |  |   |          |  |  |                                  |       |  |       |   |       |  |  |   |         | 
|------------- |  | ----------------- | ------ |  | ------------ | - | ------ | ------------------------------- |  | - | -------- |  |  | -------------------------------- | ----- |  | ----- | - | ----- |  |  | - | ------- | 
|              |  | One-to-FourFamily |        |  | Multi-Family |   |        | Commercial,Constructionand Land |  |   | Consumer |  |  | Participationsand LoansPurchased |       |  | Total |  
|              |  |                   |        |  |              |  
|Performing    |  | $                 | 89,452 |  |              | $ | 12,909 |                                 |  | $ | 14,165   |  |  | $                                | 5,738 |  |       | $ | 5,435 |  |  | $ | 127,699 | 
|Nonperforming |  |                   | 8,582  |  |              |   | 2,195  |                                 |  |   | 1,556    |  |  |                                  |      |  |       |   | 671   |  |  |   | 13,004  | 
|              |  |                   |        |  |              |   |        |                                 |  |   |          |  |  |                                  |       |  |       |   |       |  |  |   |         | 
|              |  |                   |        |  |              |  
|Total         |  | $                 | 98,034 |  |              | $ | 15,104 |                                 |  | $ | 15,721   |  |  | $                                | 5,738 |  |       | $ | 6,106 |  |  | $ | 140,703 | 
|              |  |                   |        |  |              |   |        |                                 |  |   |          |  |  |                                  |       |  |       |   |       |  |  |   |         | 

The following is a summary of information pertaining to nonaccrual loans, net of LIP and deferred fees:



|                                                  |  |               |        |  |                  |   |        | 
|------------------------------------------------- |  | ------------- | ------ |  | ---------------- | - | ------ | 
|                                                  |  | March 31,2011 |        |  | December 31,2010 |  
|Nonperforming loans:                              |  |               |        |  |                  |   |        | 
|Nonaccrual loans                                  |  | $             | 13,092 |  |                  | $ | 12,113 | 
|Nonaccrual troubled debt restructured loans       |  |               | 193    |  |                  |   | 193    | 
|                                                  |  |               |        |  |                  |   |        | 
|Total nonaccrual loans                            |  |               | 13,285 |  |                  |   | 12,306 | 
|Loans past due 90 days still on accrual           |  |               | 27     |  |                  |   | 698    | 
|Substandard loans less than 90 days nonperforming |  |               | 476    |  |                  |   |       | 
|                                                  |  |               |        |  |                  |   |        | 
|Total nonperforming loans                         |  | $             | 13,788 |  |                  | $ | 13,004 | 
|                                                  |  |               |        |  |                  |   |        | 
|                                                  |  |              
|Performing troubled debt restructured loans       |  | $             | 1,601  |  |                  |   | 1,413  | 
|Nonperforming troubled debt restructured loans    |  |               | 193    |  |                  |   | 193    | 
|                                                  |  |               |        |  |                  |   |        | 
|                                                  |  |              
|Total troubled debt restructured loans            |  | $             | 1,794  |  |                  | $ | 1,606  | 
|                                                  |  |               |        |  |                  |   |        | 

The Company has not committed additional funds to customers whose loans are classified as troubled debt
restructurings.

Nonaccrual and Past Due Loans. Loans are considered past due if the required principal and
interest payments have not been received as of the date such payments were due. Loans are placed on non-accrual when they become greater than 90 days past due, as well as when required by regulatory provisions.

The following table is a summary of nonaccrual loan balances, net of LIP and deferred fees, by class of loan at March 31, 2011 and
December 31, 2010.



|                                                  |  |               |        |  |                  |   |        | 
|------------------------------------------------- |  | ------------- | ------ |  | ---------------- | - | ------ | 
|                                                  |  | March 31,2011 |        |  | December 31,2010 |  
|                                                  |  |              
|One-to-four family                                |  | $             | 9,185  |  |                  | $ | 7,950  | 
|Multi-family                                      |  |               | 2,025  |  |                  |   | 2,195  | 
|Commercial, Construction and Land                 |  |               | 1,430  |  |                  |   | 1,556  | 
|Consumer                                          |  |               | 10     |  |                  |   |       | 
|Participations and Loans Purchased                |  |               | 635    |  |                  |   | 605    | 
|                                                  |  |               |        |  |                  |   |        | 
|Total nonaccrual loans                            |  |               | 13,285 |  |                  |   | 12,306 | 
|Loans past due 90 days still on accrual           |  |               | 27     |  |                  |   | 698    | 
|Substandard loans less than 90 days nonperforming |  |               | 476    |  |                  |   |       | 
|                                                  |  |               |        |  |                  |   |        | 
|                                                  |  |              
|Total nonperforming loans                         |  | $             | 13,788 |  |                  | $ | 13,004 | 
|                                                  |  |               |        |  |                  |   |        | 



14



---

##### Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

March 31, 2011

(table amounts in thousands of dollars, except share data)



Note 4  Loans(Continued)



The following tables summarize the aging of loans, net of LIP and deferred fees, by class at March 31, 2011 and December 31, 2010.



|                                   |  |                                                                                                                                                                                                                                                                        |       |            |  |   |                |  |  |                       |        |  |       |   |        |         |  |   |             |  |  |   |         |  |  | 
|---------------------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----- | ---------- |  | - | -------------- |  |  | --------------------- | ------ |  | ----- | - | ------ | ------- |  | - | ----------- |  |  | - | ------- |  |  | 
|March 31, 2011                     | 
|                                  
|Loans Past Due                     | 
|                                   |  |                                                                                                                                                                                                                                                                        |       | 30-59 Days |  |   | 60-89 
Days(2) |  |  | 90 Days andGreater(1) |        |  | Total |   |        | Current |  |   | Total Loans | 
|                                   |  |                                                                                                                                                                                                                                                                        |       |            |  |  
|Real estate:                       |  |                                                                                                                                                                                                                                                                        |       |            |  |   |                |  |  |                       |        |  |       |   |        |         |  |   |             |  |  |   |         | 
|One-to-four family                 |  | $                                                                                                                                                                                                                                                                      | 1,746 |            |  | $ | 731            |  |  | $                     | 9,185  |  |       | $ | 11,662 |         |  | $ | 86,138      |  |  | $ | 97,800  | 
|Multi-family                       |  |                                                                                                                                                                                                                                                                        |      |            |  |   |               |  |  |                       | 2,025  |  |       |   | 2,025  |         |  |   | 12,858      |  |  |   | 14,883  | 
|Commercial, Construction and Land  |  |                                                                                                                                                                                                                                                                        |      |            |  |   |               |  |  |                       | 1,430  |  |       |   | 1,430  |         |  |   | 13,208      |  |  |   | 14,638  | 
|                                   |  |                                                                                                                                                                                                                                                                        |       |            |  |   |                |  |  |                       |        |  |       |   |        |         |  |   |             |  |  |   |         | 
|Total real estate                  |  |                                                                                                                                                                                                                                                                        | 1,746 |            |  |   | 731            |  |  |                       | 12,640 |  |       |   | 15,117 |         |  |   | 112,204     |  |  |   | 127,321 | 
|                                   |  |                                                                                                                                                                                                                                                                        |       |            |  |  
|Consumer                           |  |                                                                                                                                                                                                                                                                        | 556   |            |  |   |               |  |  |                       | 10     |  |       |   | 566    |         |  |   | 5,343       |  |  |   | 5,909   | 
|Participations and Loans Purchased |  |                                                                                                                                                                                                                                                                        | 113   |            |  |   | 11             |  |  |                       | 662    |  |       |   | 786    |         |  |   | 5,286       |  |  |   | 6,072   | 
|                                   |  |                                                                                                                                                                                                                                                                        |       |            |  |   |                |  |  |                       |        |  |       |   |        |         |  |   |             |  |  |   |         | 
|                                   |  |                                                                                                                                                                                                                                                                        |       |            |  |  
|Total                              |  | $                                                                                                                                                                                                                                                                      | 2,415 |            |  | $ | 742            |  |  | $                     | 13,312 |  |       | $ | 16,469 |         |  | $ | 122,833     |  |  | $ | 139,302 | 
|                                   |  |                                                                                                                                                                                                                                                                        |       |            |  |   |                |  |  |                       |        |  |       |   |        |         |  |   |             |  |  |   |         |  |  | 
|                                   | 
|(1)                                |  | Includes $27,000 of loans that are 90 days past due and still accruing interest. There were no loans over 90 days past due and still accruing interest.                                                                                                                |      
|(2)                                |  | Loans of $456,000 and $20,000 performing under a payment plan classified as substandard because they do not have enough payment history to remove them from the
nonperforming classification are included in the 60-89 day and current aging categories, respectively. |      
|                                  
|December 31, 2010                  | 
|                                  
|Loans Past Due                     | 
|                                   |  |                                                                                                                                                                                                                                                                        |       | 30-59 Days |  |   | 60-89 Days     |  |  | 90 Days andGreater(1) |        |  | Total |   |        | Current |  |   | Total Loans | 
|                                   |  |                                                                                                                                                                                                                                                                        |       |            |  |  
|Real estate:                       |  |                                                                                                                                                                                                                                                                        |       |            |  |   |                |  |  |                       |        |  |       |   |        |         |  |   |             |  |  |   |         | 
|One-to-four family                 |  | $                                                                                                                                                                                                                                                                      | 2,062 |            |  | $ | 732            |  |  | $                     | 8,582  |  |       | $ | 11,376 |         |  | $ | 86,658      |  |  | $ | 98,034  | 
|Multi-family                       |  |                                                                                                                                                                                                                                                                        | 359   |            |  |   | 204            |  |  |                       | 2,195  |  |       |   | 2,758  |         |  |   | 12,346      |  |  |   | 15,104  | 
|Commercial, Construction and Land  |  |                                                                                                                                                                                                                                                                        | 363   |            |  |   |               |  |  |                       | 1,556  |  |       |   | 1,919  |         |  |   | 13,802      |  |  |   | 15,721  | 
|                                   |  |                                                                                                                                                                                                                                                                        |       |            |  |   |                |  |  |                       |        |  |       |   |        |         |  |   |             |  |  |   |         | 
|Total real estate                  |  |                                                                                                                                                                                                                                                                        | 2,784 |            |  |   | 936            |  |  |                       | 12,333 |  |       |   | 16,053 |         |  |   | 112,819     |  |  |   | 128,872 | 
|                                   |  |                                                                                                                                                                                                                                                                        |       |            |  |  
|Consumer                           |  |                                                                                                                                                                                                                                                                        | 109   |            |  |   | 20             |  |  |                       |       |  |       |   | 129    |         |  |   | 5,609       |  |  |   | 5,738   | 
|Participations and Loans Purchased |  |                                                                                                                                                                                                                                                                        | 14    |            |  |   | 84             |  |  |                       | 671    |  |       |   | 769    |         |  |   | 5,337       |  |  |   | 6,106   | 
|                                   |  |                                                                                                                                                                                                                                                                        |       |            |  |   |                |  |  |                       |        |  |       |   |        |         |  |   |             |  |  |   |         | 
|                                   |  |                                                                                                                                                                                                                                                                        |       |            |  |  
|Total                              |  | $                                                                                                                                                                                                                                                                      | 2,907 |            |  | $ | 1,040          |  |  | $                     | 13,004 |  |       | $ | 16,951 |         |  | $ | 123,752     |  |  | $ | 140,703 | 
|                                   |  |                                                                                                                                                                                                                                                                        |       |            |  |   |                |  |  |                       |        |  |       |   |        |         |  |   |             |  |  |   |         | 
|                                   | 
|(1)                                |  | Includes $698,000 of loans that are 90 days past due and still accruing interest. There were no other loans over 90 days past due and still accruing
interest.                                                                                                         |      



15



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##### Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

March 31, 2011

(table amounts in thousands of dollars, except share data)



Note 4  Loans(Continued)



A loan is considered impaired when we have determined that we may be unable to collect payments of principal or interest when due under the terms of the loan. In the process of identifying loans as
impaired, management takes into consideration factors which include payment history and status, collateral value, financial condition of the borrower, and the probability of collecting scheduled payments in the future. Minor payment delays and
insignificant payment shortfalls typically do not result in a loan being classified as impaired. The significance of payment delays and shortfalls is considered by management on a case by case basis, after taking into consideration the totality of
circumstances surrounding the loans and the borrowers, including payment history and amounts of any payment shortfall, length and reason for delay, and likelihood of return to stable performance. Impairment is measured on a loan by loan basis for
all loans in the portfolio except for the smaller groups of homogeneous consumer loans in the portfolio.

The following tables
present loans individually evaluated for impairment by class of loan, net of LIP and deferred fees, as of March 31, 2011 and December 31, 2010. The recorded investment included in the following tables represent loan principal net of
any partial charge-offs recognized on the loans. The unpaid principal balance represents the recorded balance prior to any partial charge-offs.



|                                   |  |                        | $15,363 |  |                              |   | $15,363 |                  |  |   | $15,363 | 
|---------------------------------- |  | ---------------------- | ------- |  | ---------------------------- | - | ------- | ---------------- |  | - | ------- | 
|March 31, 2011                     | 
|                                   |  |                        |        
|                                   |  | RecordedInvestment (1) |         |  | Unpaid PrincipalBalance 
(1) |   |         | RelatedAllowance | 
|                                   |  |                        |        
|Loans with no related allowance:   |  |                        |         |  |                              |   |         |                  |  |   |         | 
|One-to-four family                 |  | $                      | 1,669   |  |                              | $ | 1,669   |                  |  | $ |        | 
|Multi-family                       |  |                        | 1,113   |  |                              |   | 1,113   |                  |  |   |        | 
|Commercial, Construction and Land  |  |                        | 757     |  |                              |   | 757     |                  |  |   |        | 
|Consumer                           |  |                        | 10      |  |                              |   | 10      |                  |  |   |        | 
|                                   |  |                        |         |  |                              |   |         |                  |  |   |         | 
|                                   |  |                        |        
|Total                              |  | $                      | 3,549   |  |                              | $ | 3,549   |                  |  | $ |        | 
|                                   |  |                        |         |  |                              |   |         |                  |  |   |         | 
|                                   |  |                        |        
|Loans with an allowance:           |  |                        |         |  |                              |   |         |                  |  |   |         | 
|One-to-four family                 |  | $                      | 9,574   |  |                              | $ | 9,574   |                  |  | $ | 3,074   | 
|Multi-family                       |  |                        | 912     |  |                              |   | 912     |                  |  |   | 161     | 
|Commercial, Construction and Land  |  |                        | 673     |  |                              |   | 673     |                  |  |   | 301     | 
|Consumer                           |  |                        | 20      |  |                              |   | 20      |                  |  |   | 20      | 
|Participations and purchased loans |  |                        | 635     |  |                              |   | 635     |                  |  |   | 14      | 
|                                   |  |                        |         |  |                              |   |         |                  |  |   |         | 
|                                   |  |                        |        
|Total                              |  | $                      | 11,814  |  |                              | $ | 11,814  |                  |  | $ | 3,570   | 
|                                   |  |                        |         |  |                              |   |         |                  |  |   |         | 
|Total impaired loans:              |  |                        |         |  |                              |   |         |                  |  |   |         | 
|One-to-four family                 |  | $                      | 11,243  |  |                              | $ | 11,243  |                  |  | $ | 3,074   | 
|Multi-family                       |  |                        | 2,025   |  |                              |   | 2,025   |                  |  |   | 161     | 
|Commercial, Construction and Land  |  |                        | 1,430   |  |                              |   | 1,430   |                  |  |   | 301     | 
|Consumer                           |  |                        | 30      |  |                              |   | 30      |                  |  |   | 20      | 
|Participations and purchased loans |  |                        | 635     |  |                              |   | 635     |                  |  |   | 14      | 
|                                   |  |                        |         |  |                              |   |         |                  |  |   |         | 
|                                   |  |                        |        
|Total                              |  | $                      | 15,363  |  |                              | $ | 15,363  |                  |  | $ | 3,570   | 
|                                   |  |                        |         |  |                              |   |         |                  |  |   |         | 



|(1) | Based on the methods utilized by the Company related to impaired loans, the Recorded Investment and the Unpaid Principal Balance in the above table are the same.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------



16



---

##### Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

March 31, 2011

(table amounts in thousands of dollars, except share data)



Note 4  Loans(Continued)





|                                   |  |                        | $15,363 |  |                              |   | $15,363 |                  |  |   | $15,363 | 
|---------------------------------- |  | ---------------------- | ------- |  | ---------------------------- | - | ------- | ---------------- |  | - | ------- | 
|December 31, 2010                  | 
|                                   |  |                        |        
|                                   |  | RecordedInvestment (1) |         |  | Unpaid PrincipalBalance 
(1) |   |         | RelatedAllowance | 
|                                   |  |                        |        
|Loans with no related allowance:   |  |                        |         |  |                              |   |         |                  |  |   |         | 
|One-to-four family                 |  | $                      | 1,250   |  |                              | $ | 1,250   |                  |  | $ |        | 
|Multi-family                       |  |                        | 913     |  |                              |   | 913     |                  |  |   |        | 
|Commercial, Construction and Land  |  |                        | 760     |  |                              |   | 760     |                  |  |   |        | 
|                                   |  |                        |         |  |                              |   |         |                  |  |   |         | 
|                                   |  |                        |        
|Total                              |  | $                      | 2,923   |  |                              | $ | 2,923   |                  |  | $ |        | 
|                                   |  |                        |         |  |                              |   |         |                  |  |   |         | 
|                                   |  |                        |        
|Loans with an allowance:           |  |                        |         |  |                              |   |         |                  |  |   |         | 
|One-to-four family                 |  | $                      | 8,279   |  |                              | $ | 8,279   |                  |  | $ | 2,518   | 
|Multi-family                       |  |                        | 1,285   |  |                              |   | 1,285   |                  |  |   | 263     | 
|Commercial, Construction and Land  |  |                        | 733     |  |                              |   | 733     |                  |  |   | 392     | 
|Participations and purchased loans |  |                        | 605     |  |                              |   | 605     |                  |  |   | 13      | 
|                                   |  |                        |         |  |                              |   |         |                  |  |   |         | 
|                                   |  |                        |        
|Total                              |  | $                      | 10,902  |  |                              | $ | 10,902  |                  |  | $ | 3,186   | 
|                                   |  |                        |         |  |                              |   |         |                  |  |   |         | 
|                                   |  |                        |        
|Total impaired loans:              |  |                        |         |  |                              |   |         |                  |  |   |         | 
|One-to-four family                 |  | $                      | 9,529   |  |                              | $ | 9,529   |                  |  | $ | 2,518   | 
|Multi-family                       |  |                        | 2,198   |  |                              |   | 2,198   |                  |  |   | 263     | 
|Commercial, Construction and Land  |  |                        | 1,493   |  |                              |   | 1,493   |                  |  |   | 392     | 
|Participations and purchased loans |  |                        | 605     |  |                              |   | 605     |                  |  |   | 13      | 
|                                   |  |                        |         |  |                              |   |         |                  |  |   |         | 
|                                   |  |                        |        
|Total                              |  | $                      | 13,825  |  |                              | $ | 13,825  |                  |  | $ | 3,186   | 
|                                   |  |                        |         |  |                              |   |         |                  |  |   |         | 



|(1) | Based on the methods utilized by the Company related to impaired loans, the Recorded Investment and the Unpaid Principal Balance in the above table are the same.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------

The following table is a summary of interest recognized and cash-basis interest income on impaired loans:



|                                            |  |                                   |        |  |              |   |       |              |  |   |          |  |  |               |    |  |       |   |     |          |  |   |        |  |  |   |        | 
|------------------------------------------- |  | --------------------------------- | ------ |  | ------------ | - | ----- | ------------ |  | - | -------- |  |  | ------------- | -- |  | ----- | - | --- | -------- |  | - | ------ |  |  | - | ------ | 
|                                            |  | Three Months Ended March 31, 2011 |        |  | Three Months |  
|                                            |  |                                   |        |  |              |   |       |              |  |   |          |  |  |               |    |  |       |   |     | Ended    | 
|                                            |  |                                   |        |  |              |   |       | Commercial,  |  |   |          |  |  | Participation |    |  |       |   |     | March 31 | 
|                                            |  | One-to-four                       |        |  |              |   |       | Construction |  |   |          |  |  | and Loans     |    |  |       |   |     | 2010     | 
|                                            |  | Family                            |        |  | Multifamily  |   |       | and Land     |  |   | Consumer |  |  | Purchased     |    |  | Total |   |     | Total    | 
|                                            |  |                                   |        |  |              |   |      
|Average of impaired loans during the period |  | $                                 | 10,303 |  |              | $ | 2,110 |              |  | $ | 1,493    |  |  | $             | 15 |  |       | $ | 620 |          |  | $ | 14,541 |  |  | $ | 11,540 | 
|                                            |  |                                   |        |  |              |   |      
|Interest income during the impairment       |  |                                   | 61     |  |              |   | 12    |              |  |   | 2        |  |  |               |   |  |       |   |    |          |  |   | 75     |  |  |   | 54     | 
|                                            |  |                                   |        |  |              |   |      
|Cash basis interest earned                  |  |                                   | 61     |  |              |   | 12    |              |  |   | 2        |  |  |               |   |  |       |   |    |          |  |   | 75     |  |  |   | 54     | 



17



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##### Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

March 31, 2011

(table amounts in thousands of dollars, except share data)



Note 4  Loans(Continued)



Allowance for Possible Loan Losses. Management recognizes that loan losses may occur over the life of a loan and that the allowance for loan losses must be maintained at a level necessary to
absorb specific losses on impaired loans and probable losses inherent in the loan portfolio. The assessment includes analysis of several different factors, including delinquency, charge-off rates and the changing risk profile of our loan portfolio,
as well as local economic conditions such as unemployment rates, bankruptcies and vacancy rates of business and residential properties.

Our methodology for analyzing the allowance for loan losses consists of two components: formula and specific allowances. The formula allowance is determined by applying an estimated loss percentage to
various groups of loans. The loss percentages are generally based on various historical measures such as the amount and class of classified loans, past due ratios and loss experience, which could affect the collectability of the respective loan
classes.

The specific allowance component is created when management believes that the collectability of a specific large
loan, such as a real estate, multi-family or commercial real estate loan, has been impaired and a loss is probable. The allowance is increased by the provision for loan losses, which is charged against current period earnings and decreased
by the amount of actual loan charge-offs, net of recoveries.

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



|                          |  |                                   |       |  |             |   |      |              |  |   |          |   |  |               |    |  |       |   |     |                |  |   |       |   |  |   |       |  
|------------------------- |  | --------------------------------- | ----- |  | ----------- | - | ---- | ------------ |  | - | -------- | - |  | ------------- | -- |  | ----- | - | --- | -------------- |  | - | ----- | - |  | - | ----- | -
|                          |  | Three Months Ended March 31, 2011 |       |  |             |  
|                          |  |                                   |       |  |             |   |      |              |  |   |          |   |  |               |    |  |       |   |     | Three          | 
|                          |  |                                   |       |  |             |   |      | Commercial,  |  |   |          |   |  | Participation |    |  |       |   |     | Months Ended   | 
|                          |  | One-to-four                       |       |  |             |   |      | Construction |  |   |          |   |  | and Loans     |    |  |       |   |     | March 31, 2010 | 
|                          |  | Family                            |       |  | Multifamily |   |      | and Land     |  |   | Consumer |   |  | Purchased     |    |  | Total |   |     | Total          | 
|                          |  |                                   |       |  |             |   |     
|Beginning balance         |  | $                                 | 3,839 |  |             | $ | 410  |              |  | $ | 720      |   |  | $             | 52 |  |       | $ | 123 |                |  | $ | 5,144 |   |  | $ | 2,851 |  
|Provision for loan losses |  |                                   | 737   |  |             |   | 6    |              |  |   | 11       |   |  |               | 21 |  |       |   | 32  |                |  |   | 807   |   |  |   | 444   |  
|Recoveries                |  |                                   |      |  |             |   |     |              |  |   |         |   |  |               |   |  |       |   | 3   |                |  |   | 3     |   |  |   |      |  
|Loans charged off         |  |                                   |      |  |             |   | (106 | )            |  |   | (103     | ) |  |               |   |  |       |   | (22 | )              |  |   | (231  | ) |  |   | (160  | )
|                          |  |                                   |       |  |             |   |      |              |  |   |          |   |  |               |    |  |       |   |     |                |  |   |       |   |  |   |       |  
|                          |  |                                   |       |  |             |   |     
|Ending balance            |  | $                                 | 4,576 |  |             | $ | 310  |              |  | $ | 628      |   |  | $             | 73 |  |       | $ | 136 |                |  | $ | 5,723 |   |  | $ | 3,135 |  
|                          |  |                                   |       |  |             |   |      |              |  |   |          |   |  |               |    |  |       |   |     |                |  |   |       |   |  |   |       |  

The following tables present a summary of our allowance for loan losses and loan portfolio, net of LIP and
deferred fees, by loan class and impairment method at March 31, 2011 and December 31, 2010.

March 31,
2011



|                                                |  |                   |        |  |              |   |        |                                 |  |   |          |  |  |                                 |       |  |       |   |       |  |  |   |         | 
|----------------------------------------------- |  | ----------------- | ------ |  | ------------ | - | ------ | ------------------------------- |  | - | -------- |  |  | ------------------------------- | ----- |  | ----- | - | ----- |  |  | - | ------- | 
|                                                |  | One-to-fourFamily |        |  | Multi-family |   |        | Commercial,Constructionand Land |  |   | Consumer |  |  | Participationand LoansPurchased |       |  | Total |  
|Ending allowance balance attributable to loans: |  |                   |        |  |              |   |        |                                 |  |   |          |  |  |                                 |       |  |       |   |       |  |  |   |         | 
|Individually evaluated for impairment           |  | $                 | 3,074  |  |              | $ | 161    |                                 |  | $ | 301      |  |  | $                               | 20    |  |       | $ | 14    |  |  | $ | 3,570   | 
|Collectively evaluated for impairment           |  |                   | 1,502  |  |              |   | 149    |                                 |  |   | 327      |  |  |                                 | 53    |  |       |   | 122   |  |  |   | 2,153   | 
|                                                |  |                   |        |  |              |   |        |                                 |  |   |          |  |  |                                 |       |  |       |   |       |  |  |   |         | 
|                                                |  |                   |        |  |              |  
|Total ending allowance balance                  |  | $                 | 4,576  |  |              | $ | 310    |                                 |  | $ | 628      |  |  | $                               | 73    |  |       | $ | 136   |  |  | $ | 5,723   | 
|                                                |  |                   |        |  |              |   |        |                                 |  |   |          |  |  |                                 |       |  |       |   |       |  |  |   |         | 
|                                                |  |                   |        |  |              |  
|Loans:                                          |  |                   |        |  |              |   |        |                                 |  |   |          |  |  |                                 |       |  |       |   |       |  |  |   |         | 
|Individually evaluated for impairment           |  | $                 | 11,243 |  |              | $ | 2,025  |                                 |  | $ | 1,430    |  |  | $                               | 30    |  |       | $ | 635   |  |  | $ | 15,363  | 
|Collectively evaluated for impairment           |  |                   | 86,557 |  |              |   | 12,858 |                                 |  |   | 13,208   |  |  |                                 | 5,879 |  |       |   | 5,437 |  |  |   | 123,939 | 
|                                                |  |                   |        |  |              |   |        |                                 |  |   |          |  |  |                                 |       |  |       |   |       |  |  |   |         | 
|                                                |  |                   |        |  |              |  
|Total ending allowance balance                  |  | $                 | 97,800 |  |              | $ | 14,883 |                                 |  | $ | 14,638   |  |  | $                               | 5,909 |  |       | $ | 6,072 |  |  | $ | 139,302 | 
|                                                |  |                   |        |  |              |   |        |                                 |  |   |          |  |  |                                 |       |  |       |   |       |  |  |   |         | 



18



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##### Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

March 31, 2011

(table amounts in thousands of dollars, except share data)



Note 4  Loans(Continued)



December 30, 2010



|                                                |  |                   |        |  |              |   |        |                                  |  |   |          |  |  |                                  |       |  |       |   |       |  |  |   |         | 
|----------------------------------------------- |  | ----------------- | ------ |  | ------------ | - | ------ | -------------------------------- |  | - | -------- |  |  | -------------------------------- | ----- |  | ----- | - | ----- |  |  | - | ------- | 
|                                                |  | One-to-fourFamily |        |  | Multi-family |   |        | Commercial,Construction
and Land |  |   | Consumer |  |  | Participationand 
LoansPurchased |       |  | Total |  
|Ending allowance balance attributable to loans: |  |                   |        |  |              |   |        |                                  |  |   |          |  |  |                                  |       |  |       |   |       |  |  |   |         | 
|Individually evaluated for impairment           |  | $                 | 2,518  |  |              | $ | 263    |                                  |  | $ | 392      |  |  | $                                |      |  |       | $ | 13    |  |  | $ | 3,186   | 
|Collectively evaluated for impairment           |  |                   | 1,321  |  |              |   | 147    |                                  |  |   | 328      |  |  |                                  | 52    |  |       |   | 110   |  |  |   | 1,958   | 
|                                                |  |                   |        |  |              |   |        |                                  |  |   |          |  |  |                                  |       |  |       |   |       |  |  |   |         | 
|                                                |  |                   |        |  |              |  
|Total ending allowance balance                  |  | $                 | 3,839  |  |              | $ | 410    |                                  |  | $ | 720      |  |  | $                                | 52    |  |       | $ | 123   |  |  | $ | 5,144   | 
|                                                |  |                   |        |  |              |   |        |                                  |  |   |          |  |  |                                  |       |  |       |   |       |  |  |   |         | 
|                                                |  |                   |        |  |              |  
|Loans:                                          |  |                   |        |  |              |   |        |                                  |  |   |          |  |  |                                  |       |  |       |   |       |  |  |   |         | 
|Individually evaluated for impairment           |  | $                 | 9,529  |  |              | $ | 2,198  |                                  |  | $ | 1,493    |  |  | $                                |      |  |       | $ | 605   |  |  | $ | 13,825  | 
|Collectively evaluated for impairment           |  |                   | 88,513 |  |              |   | 12,907 |                                  |  |   | 14,232   |  |  |                                  | 5,725 |  |       |   | 5,501 |  |  |   | 126,878 | 
|                                                |  |                   |        |  |              |   |        |                                  |  |   |          |  |  |                                  |       |  |       |   |       |  |  |   |         | 
|                                                |  |                   |        |  |              |  
|Total ending allowance balance                  |  | $                 | 98,042 |  |              | $ | 15,105 |                                  |  | $ | 15,725   |  |  | $                                | 5,725 |  |       | $ | 6,106 |  |  | $ | 140,703 | 
|                                                |  |                   |        |  |              |   |        |                                  |  |   |          |  |  |                                  |       |  |       |   |       |  |  |   |         | 

Note 5  Income Taxes

Realization of deferred tax assets is dependent upon generating sufficient future taxable income to utilize the deferred tax assets, and for net operating losses or other tax credits, prior to their
expiration. Based on forecasted earnings and available tax strategies, a valuation allowance to reflect managements estimate of the temporary deductible differences that may expire prior to their utilization has been recorded since the first
quarter of 2009. In making this determination, management considered all evidence currently available, both positive and negative, including forecasts of future income, applicable tax planning strategies, and assessments of the current and future
economic and business conditions. Positive evidence includes the Companys ability to carry-back losses to prior years and other tax planning strategies that, if needed, would enable the Company to realize deferred tax assets associated with
capital loss carryforwards. Negative evidence includes the cumulative losses in the current year and the immediately preceding three fiscal years, the generally downward economic and business trends, the volatility of earnings in the current
economic environment relative to additions to the provision for loan losses and the fact the Company has a three year cumulative loss for financial reporting purposes.

During the three months ended March 31, 2011, the Company continued to recognize a full valuation allowance against net deferred taxes recognized from operating losses. On a quarterly basis, the
Company will determine whether this valuation allowance is necessary and whether the allowance should be adjusted based on then available evidence.

To the extent that the Company has a three year cumulative loss for financial reporting purposes, projections of future taxable income are generally not permitted to be utilized in determining that a
valuation allowance related to deferred tax assets is not necessary. Therefore, the effective tax rate or benefit in future quarters may be higher or lower than expected due to future adjustments to the valuation allowance associated with deferred
tax assets.

Note 6  Employee Benefit Plans

Employee Stock Ownership Plan

The Employee Stock Ownership Plan
(ESOP) terminated at December 31, 2010. There were 167,264 allocated shares held by the ESOP at December 31, 2010.



19



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##### Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

March 31, 2011

(table amounts in thousands of dollars, except share data)



Note 6  Employee Benefit Plans(Continued)



Stock Option Plans

The Company adopted an Incentive Compensation Plan during 2003, which is in addition to the original stock option plan of 1997. Of the shares authorized for issuance under the plan, up to 40,000 shares
may be issued with respect to awards of restricted stock and restricted units and up to 40,000 shares 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 Internal Revenue 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.

As of March 31, 2011 and December 31, 2010, there were 93,320 shares
and 79,320 shares, respectively, available for future grants, of which up to 35,000 shares may be available for future restricted stock awards under the 2003 Plan. The table below is a summary of the status of all options under the 2003 Plan.



|                                                 |  |        |        |  |                              |   |       |                                         |  |  |                         |  |  |   |   | 
|------------------------------------------------ |  | ------ | ------ |  | ---------------------------- | - | ----- | --------------------------------------- |  |  | ----------------------- |  |  | - | - | 
|                                                 |  | Shares |        |  | WeightedAverageExercisePrice |   |       | WeightedAverageRemainingContractualTerm |  |  | AggregateIntrinsicValue | 
|Outstanding at January 1, 2011                   |  |        | 73,237 |  |                              | $ | 11.83 |                                         |  |  |                         |  |  |   |   | 
|                                                 |  |        |        | 
|Granted                                          |  |        |       |  |                              |   |      |                                         |  |  |                         |  |  |   |   | 
|Exercised                                        |  |        |       |  |                              |   |      |                                         |  |  |                         |  |  |   |   | 
|Expired/forfeitures                              |  |        | 10,000 |  |                              |   | 6.01  |                                         |  |  |                         |  |  |   |   | 
|                                                 |  |        |        |  |                              |   |       |                                         |  |  |                         |  |  |   |   | 
|                                                 |  |        |        | 
|Vested and expected to vest at December 31, 2011 |  |        | 63,237 |  |                              | $ | 12.75 |                                         |  |  | 5.5                     |  |  | $ |  | 
|                                                 |  |        |        |  |                              |   |       |                                         |  |  |                         |  |  |   |   | 
|                                                 |  |        |        | 
|Options exercisable at March 31, 2011            |  |        | 36,037 |  |                              | $ | 19.36 |                                         |  |  | 3.1                     |  |  | $ |  | 
|                                                 |  |        |        |  |                              |   |       |                                         |  |  |                         |  |  |   |   | 

As of March 31, 2011 and December 31, 2010, there was $48,000 and $70,000, respectively, of total
unrecognized compensation costs related to nonvested stock options granted under the 2003 Plan. The cost is expected to be recognized over the remaining weighted-average vesting period of 3.9 years.

Restricted Stock Awards

The Company granted 5,000 shares of its common stock on April 21, 2009. The grant price was $5.68. Under the terms of the agreement, 20% of the restricted shares will vest each year. The fair value
of the stock award at the grant date was $28,000. Only 1,000 shares vested and the remaining 4,000 shares were forfeited due to the resignation of the director who was granted the stock awards.

Note 7  Fair Value of Assets and Liabilities

Fair value is the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly
transaction between market participants on the measurement date. There are three levels of inputs that may be used to measure fair values:

Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.

Level 2: Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted
prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

Level 3: Significant unobservable inputs that reflect a reporting entitys own assumptions about the assumptions that market
participants would use in pricing and asset or liability.



20



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##### Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

March 31, 2011

(table amounts in thousands of dollars, except share data)



Note 7  Fair Value of Assets and Liabilities(Continued)



Assets and Liabilities Measured on a Recurring Basis

The fair values of securities available for sale are determined by obtaining quoted prices on nationally recognized securities exchanges
(Level 1 inputs) or matrix pricing, which is a mathematical technique widely used in the industry to value debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the securities
relationship to other benchmark quoted securities (Level 2 inputs).

Assets measured at fair value on a recurring basis are summarized below:



|                                 |  |         |        |  |                                                              |   |       |                                              |  |   |                                         |  |  |   |   | 
|-------------------------------- |  | ------- | ------ |  | ------------------------------------------------------------ | - | ----- | -------------------------------------------- |  | - | --------------------------------------- |  |  | - | - | 
|                                 |  |         |        |  | Fair Value Measurements Using                                |  
|                                 |  | Balance |        |  | Quoted Prices 
inActive Markets forIdentical Assets(Level 1) |   |       | Significant 
OtherObservableInputs(Level 
2) |  |   | SignificantUnobservable
Inputs(Level 3) | 
|Available for Sale Securities    |  |         |        |  |                                                              |   |       |                                              |  |   |                                         |  |  |   |   | 
|                                 |  |         |        | 
|March 31, 2011                   |  |         |        |  |                                                              |   |       |                                              |  |   |                                         |  |  |   |   | 
|Government sponsored enterprises |  | $       | 12,901 |  |                                                              | $ |      |                                              |  | $ | 12,901                                  |  |  | $ |  | 
|Corporate                        |  |         | 2,999  |  |                                                              |   |      |                                              |  |   | 2,999                                   |  |  |   |  | 
|Municipal                        |  |         | 532    |  |                                                              |   |      |                                              |  |   | 532                                     |  |  |   |  | 
|Equity                           |  |         | 15     |  |                                                              |   |      |                                              |  |   | 15                                      |  |  |   |  | 
|GSE mortgage-backed residential  |  |         | 9,357  |  |                                                              |   |      |                                              |  |   | 9,357                                   |  |  |   |  | 
|                                 |  |         |        |  |                                                              |   |       |                                              |  |   |                                         |  |  |   |   | 
|                                 |  |         |        | 
|                                 |  | $       | 25,804 |  |                                                              | $ |      |                                              |  | $ | 25,804                                  |  |  | $ |  | 
|                                 |  |         |        |  |                                                              |   |       |                                              |  |   |                                         |  |  |   |   | 
|                                 |  |         |        | 
|December 31, 2010                |  |         |        |  |                                                              |   |       |                                              |  |   |                                         |  |  |   |   | 
|Government sponsored enterprises |  | $       | 11,936 |  |                                                              | $ |      |                                              |  | $ | 11,936                                  |  |  | $ |  | 
|Corporate                        |  |         | 5,073  |  |                                                              |   |      |                                              |  |   | 5,073                                   |  |  |   |  | 
|Municipal                        |  |         | 533    |  |                                                              |   |      |                                              |  |   | 533                                     |  |  |   |  | 
|Equity                           |  |         | 4,747  |  |                                                              |   | 4,730 |                                              |  |   | 17                                      |  |  |   |  | 
|GSE mortgage-backed residential  |  |         | 7,742  |  |                                                              |   |      |                                              |  |   | 7,742                                   |  |  |   |  | 
|                                 |  |         |        |  |                                                              |   |       |                                              |  |   |                                         |  |  |   |   | 
|                                 |  |         |        | 
|                                 |  | $       | 30,031 |  |                                                              | $ | 4,730 |                                              |  | $ | 25,301                                  |  |  | $ |  | 
|                                 |  |         |        |  |                                                              |   |       |                                              |  |   |                                         |  |  |   |   | 

The Companys mutual fund investment, classified as an equity security, is determined using Level 1
inputs. All other equity securities and the other types of the securities portfolio are determined using Level 2 inputs.

Assets Measured on a Non-Recurring Basis

The fair value of impaired loans and real estate owned is generally based on recent real estate appraisals. These appraisals may utilize a single valuation approach or a combination of approaches
including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are typically
significant and result in a Level 3 classification of the inputs for determining fair value.



21



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##### Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

March 31, 2011

(table amounts in thousands of dollars, except share data)



Note 7  Fair Value of Assets and Liabilities(Continued)



Assets and liabilities measured at fair value on a non-recurring basis are summarized below:



|                                   |  |         | $6,500 |  |                                                              |   | $6,500 |                                              |  |   | $6,500                                  |  |  |   | $6,500 | 
|---------------------------------- |  | ------- | ------ |  | ------------------------------------------------------------ | - | ------ | -------------------------------------------- |  | - | --------------------------------------- |  |  | - | ------ | 
|                                   |  |         |        |  | Fair Value Measurements Using                                |  
|                                   |  | Balance |        |  | Quoted Prices 
inActive Markets forIdentical Assets(Level 1) |   |        | Significant 
OtherObservableInputs(Level 
2) |  |   | SignificantUnobservable
Inputs(Level 3) | 
|Assets:                            |  |         |        |  |                                                              |   |        |                                              |  |   |                                         |  |  |   |        | 
|                                   |  |         |        | 
|March 31, 2011                     |  |         |        |  |                                                              |   |        |                                              |  |   |                                         |  |  |   |        | 
|Impaired loans, net                |  |         |        |  |                                                              |   |        |                                              |  |   |                                         |  |  |   |        | 
|One-to-four family                 |  | $       | 6,500  |  |                                                              | $ |       |                                              |  | $ |                                        |  |  | $ | 6,500  | 
|Multi-family                       |  |         | 751    |  |                                                              |   |       |                                              |  |   |                                        |  |  |   | 751    | 
|Commercial, Construction and Land  |  |         | 372    |  |                                                              |   |       |                                              |  |   |                                        |  |  |   | 372    | 
|Participations and purchased loans |  |         | 621    |  |                                                              |   |       |                                              |  |   |                                        |  |  |   | 621    | 
|                                   |  |         |        |  |                                                              |   |        |                                              |  |   |                                         |  |  |   |        | 
|                                   |  |         |        | 
|                                   |  | $       | 8,244  |  |                                                              | $ |       |                                              |  | $ |                                        |  |  | $ | 8,244  | 
|                                   |  |         |        |  |                                                              |   |        |                                              |  |   |                                         |  |  |   |        | 
|                                   |  |         |        | 
|Real estate owned                  |  |         |        |  |                                                              |   |        |                                              |  |   |                                         |  |  |   |        | 
|One-to-four residential            |  | $       | 723    |  |                                                              | $ |       |                                              |  | $ |                                        |  |  | $ | 723    | 
|Multi-family                       |  |         | 922    |  |                                                              |   |       |                                              |  |   |                                        |  |  |   | 922    | 
|Commercial, construction and land  |  |         | 414    |  |                                                              |   |       |                                              |  |   |                                        |  |  |   | 414    | 
|                                   |  |         |        |  |                                                              |   |        |                                              |  |   |                                         |  |  |   |        | 
|                                   |  |         |        | 
|                                   |  | $       | 2,059  |  |                                                              | $ |       |                                              |  | $ |                                        |  |  | $ | 2,059  | 
|                                   |  |         |        |  |                                                              |   |        |                                              |  |   |                                         |  |  |   |        | 
|December 31, 2010                  |  |         |        |  |                                                              |   |        |                                              |  |   |                                         |  |  |   |        | 
|Impaired loans, net:               |  |         |        |  |                                                              |   |        |                                              |  |   |                                         |  |  |   |        | 
|One-to-four residential            |  | $       | 5,761  |  |                                                              | $ |       |                                              |  | $ |                                        |  |  | $ | 5,761  | 
|Multi-family                       |  |         | 1,022  |  |                                                              |   |       |                                              |  |   |                                        |  |  |   | 1,022  | 
|Commercial, construction and land  |  |         | 341    |  |                                                              |   |       |                                              |  |   |                                        |  |  |   | 341    | 
|Participation and purchased loans  |  |         | 592    |  |                                                              |   |       |                                              |  |   |                                        |  |  |   | 592    | 
|                                   |  |         |        |  |                                                              |   |        |                                              |  |   |                                         |  |  |   |        | 
|                                   |  |         |        | 
|                                   |  | $       | 7,716  |  |                                                              | $ |       |                                              |  | $ |                                        |  |  | $ | 7,716  | 
|                                   |  |         |        |  |                                                              |   |        |                                              |  |   |                                         |  |  |   |        | 
|                                   |  |         |        | 
|Real estate owned                  |  |         |        |  |                                                              |   |        |                                              |  |   |                                         |  |  |   |        | 
|One-to-four residential            |  | $       | 1,120  |  |                                                              | $ |       |                                              |  | $ |                                        |  |  | $ | 1,120  | 
|Multi-family                       |  |         | 652    |  |                                                              |   |       |                                              |  |   |                                        |  |  |   | 652    | 
|Commercial, construction and land  |  |         | 22     |  |                                                              |   |       |                                              |  |   |                                        |  |  |   | 22     | 
|                                   |  |         |        |  |                                                              |   |        |                                              |  |   |                                         |  |  |   |        | 
|                                   |  |         |        | 
|                                   |  | $       | 1,794  |  |                                                              | $ |       |                                              |  | $ |                                        |  |  | $ | 1,794  | 
|                                   |  |         |        |  |                                                              |   |        |                                              |  |   |                                         |  |  |   |        | 

Impaired loans, which are measured primarily for impairment using the fair market value of collateral or the
present value of future cash flows, were $11.8 million, with an allowance for loan losses of $3.6 million at March 31, 2011, compared to $10.9 million with an allowance for loan losses of $3.2 million at December 31, 2010. Changes in
specific allowance allocations during the three months ended March 31, 2011 on impaired loans carried at fair value resulted in an additional provision for loan losses of $384,000.

Real estate owned, which is carried at lower of cost or fair value, was written down to a fair value of $2.1 million as of March 31,
2011. An impairment charge of $28,000 was included in earnings for the three months ended March 31, 2011.



22



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##### Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

March 31, 2011

(table amounts in thousands of dollars, except share data)



Note 7  Fair Value of Assets and Liabilities(Continued)



The carrying amount and estimated fair value of financial instruments, not previously presented, are as follows:



|                                                |  |                |         |   |                    |   |         |                |  |   |                    |   |  |   |         |  
|----------------------------------------------- |  | -------------- | ------- | - | ------------------ | - | ------- | -------------- |  | - | ------------------ | - |  | - | ------- | -
|                                                |  | March 31, 2011 |         |   | December 31, 2010  |  
|                                                |  | CarryingAmount |         |   | EstimatedFairValue |   |         | CarryingAmount |  |   | EstimatedFairValue |  
|                                                |  |                |         |  
|Financial assets                                |  |                |         |   |                    |   |         |                |  |   |                    |   |  |   |         |  
|Cash and cash equivalents                       |  | $              | 20,849  |   |                    | $ | 20,849  |                |  | $ | 19,018             |   |  | $ | 19,018  |  
|Loans receivable, net*                          |  |                | 133,579 |   |                    |   | 135,363 |                |  |   | 135,559            |   |  |   | 137,379 |  
|FHLB stock                                      |  |                | 5,423   |   |                    |   | NA      |                |  |   | 5,423              |   |  |   | NA      |  
|Accrued interest receivable                     |  |                | 709     |   |                    |   | 709     |                |  |   | 761                |   |  |   | 761     |  
|                                                |  |                |         |  
|Financial liabilities                           |  |                |         |   |                    |   |         |                |  |   |                    |   |  |   |         |  
|Deposits with no fixed maturity dates           |  | $              | (59,354 | ) |                    | $ | (59,354 | )              |  | $ | (58,042            | ) |  | $ | (58,042 | )
|Deposits with fixed maturity dates              |  |                | (86,981 | ) |                    |   | (88,348 | )              |  |   | (90,755            | ) |  |   | (92,323 | )
|Securities sold under repurchase agreements     |  |                | (2,600  | ) |                    |   | (2,600  | )              |  |   | (2,600             | ) |  |   | (2,600  | )
|Advances from borrowers for taxes and insurance |  |                | (1,261  | ) |                    |   | (1,261  | )              |  |   | (1,932             | ) |  |   | (1,932  | )
|FHLB advances                                   |  |                | (39,800 | ) |                    |   | (43,195 | )              |  |   | (39,800            | ) |  |   | (43,277 | )
|Accrued interest payable                        |  |                | (141    | ) |                    |   | (141    | )              |  |   | (151               | ) |  |   | (151    | )



|* | Includes impaired loans
|- | -----------------------

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, accrued interest receivable and payable, demand deposits, short-term debt, and variable rate loans or deposits that reprice frequently and fully. 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. The fair value of FHLB advances is based on current rates for similar financing. It
was not practicable to determine the fair value of FHLB stock due to restrictions placed on its transferability. 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.

Note 8  Regulatory Agreements

On January 24, 2011, the Company entered into a Memorandum of Understanding (MOU) with the Office of Thrift Supervision (OTS). Under the terms of the MOU, the Company agreed
with the OTS to, among other things:



| |  |  | Provide the OTS with periodic cash flow plans;
| | - |  | ----------------------------------------------



| |  |  | Not incur or redeem any debt or declare or pay dividends without prior OTS approval;
| | - |  | ------------------------------------------------------------------------------------



| |  |  | Submit any proposed Board or management changes to the OTS for prior approval; and
| | - |  | ----------------------------------------------------------------------------------



| |  |  | Not enter into, revise or renew any existing compensation or employment agreements without OTS approval.
| | - |  | --------------------------------------------------------------------------------------------------------

Prior to the issuance of the MOU, the Company already undertaken a number of the steps specified in the MOU including, but not limited
to, the Companys prior suspension of dividends and redemption of stock. The Company believes that it is currently in compliance with the MOU.

The MOU requires that a number of the above items be completed over various time frames. Failure to meet these time deadlines or comply with the MOU could result in the initiation of a formal enforcement
action by the OTS. The MOU will remain in effect until terminated, modified, or suspended in writing by the OTS.



23



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##### Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

March 31, 2011

(table amounts in thousands of dollars, except share data)



Note 8  Regulatory Agreements(Continued)



On January 24, 2011, the Bank entered into a Stipulation and Consent to Issuance of an Order to Cease and Desist (Order) with the OTS. Under the terms of the Order, the Bank cannot
declare dividends without the prior written approval of the OTS. Other material provisions of the Order require the Bank to:



| |  |  | Submit a revised Capital and Business Plan;
| | - |  | -------------------------------------------



| |  |  | Revise its policy with respect to the allowance for loan losses;
| | - |  | ----------------------------------------------------------------



| |  |  | Revise its internal asset review and classification program;
| | - |  | ------------------------------------------------------------



| |  |  | Develop a plan for the resolution of all REO properties and any adversely classified loans in excess of $500,000;
| | - |  | -----------------------------------------------------------------------------------------------------------------



| |  |  | Not extend additional credit to borrowers whose loan had been charged off or classified as loss and is uncollected;
| | - |  | ---------------------------------------------------------------------------------------------------------------------



| |  |  | Revise its Credit Concentration Program;
| | - |  | ----------------------------------------



| |  |  | Limit its quarterly growth of average assets to net interest credited on deposits;
| | - |  | ----------------------------------------------------------------------------------



| |  |  | Revise its lending and collection policies and practices;
| | - |  | ---------------------------------------------------------



| |  |  | Enhance its written funds management and liquidity policy;
| | - |  | ----------------------------------------------------------



| |  |  | Obtain an independent study of management and the personnel structure of the Bank; and
| | - |  | --------------------------------------------------------------------------------------



| |  |  | Prepare and submit progress reports to the OTS.
| | - |  | -----------------------------------------------

The Order requires that a number of the above items be completed over various time frames. Failure to meet these time deadlines or comply with the Order could result in the initiation of further
enforcement actions by the OTS. The Order will remain in effect until terminated, modified, or suspended in writing by the OTS. The Supervisory Agreement between the Bank and OTS effective February 26, 2007, has been superseded by the Order.



|Item 2. | Managements Discussion and Analysis of Financial Condition and Results of Operations.
|------- | --------------------------------------------------------------------------------------

Executive Summary

The following discussion compares the financial condition of Park Bancorp, Inc. (Company) and its wholly owned subsidiaries, Park Federal Savings Bank (Bank) and PBI Development
Corporation, an inactive entity, and the Banks subsidiaries, GPS Corporation, which conducts limited insurance activities, and GPS Development Corporation (GPS) which conducts real estate development activities, at March 31,
2011 to its financial condition at December 31, 2010 and the results of operations for the three months ended March 31, 2011 to the same period in 2010. This discussion should be read in conjunction with the interim financial statements
and footnotes included herein.

Financial Condition

Total assets at March 31, 2011 decreased $4.1 million or 1.9% to $207.7 million from $211.8 million at
December 31, 2010. The primary reasons for the change from December 31, 2010 were an increase of $1.8 million in cash and cash equivalents primarily in interest-bearing deposits with other financial institutions, offset by decreases of
$4.2 million in securities available for sale and $2.0 million in loans receivable, net during the three month period ended March 31, 2011.

The securities portfolio is primarily government sponsored enterprise debt securities and residential mortgage-backed securities issued by government sponsored enterprises. The total portfolio decreased
$4.2 million from December 31, 2010 to March 31, 2011 primarily as a result of security sales of $5.5 million, which included the sale of the Companys interest in an ultra short mortgage mutual fund with a fair value of $4.5 million,
debt security maturities and calls of $1.4 million and a $387,000 decrease in the market value of existing investments, partially offset by $3.0 million in securities purchases. Excess liquidity generated from the securities portfolio was invested
in interest-bearing deposits with other financial institutions.

Loans receivable, net decreased $2.0 million to $133.6
million at March 31, 2011 from $135.6 million at December 31, 2010. During the period, loan originations and advances were $3.1 million, which were offset by $4.5 million of loan repayments and payoffs, net of $228,000 in net charge offs,
a net increase in allowance for loan losses of $579,000, loan sales of $226,000 and transfers to real estate owned of $293,000.



24



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##### Table of Contents

The allowance for loan loss was $5.7 million at March 31, 2011 compared to $5.1 million
at December 31, 2010, while nonperforming loans were $13.7 million and $13.0 million for the comparable periods. The establishment of the allowance for loan losses is determined based on general factors such as the economy, charge off history,
geographic loan concentrations, underwriting, the turnover in the Banks management and staff and specific reserves required due to anticipated losses on certain loans. During the first three months of 2011, the factor for historical charge
offs was increased due to the average charge off experience of the Company over the last twenty-four months. The other general factors remained the same compared to December 31, 2010. The portion of the allowance that pertains to these general
factors at March 31, 2011 was $2.1 million or 1.74% of total loans, excluding those designated as specific, with the remaining $3.6 million pertaining to specific loans which represents 23.24% of the impaired loans. Impaired loans, which are
measured primarily for impairment using the fair market value of collateral or the present value of future cash flows, were $11.8 million, with an allowance for loan losses of $3.6 million at March 31, 2011, compared to $10.9 million with an
allowance for loan losses of $3.2 million at December 31, 2010. Changes in specific allowance allocations during the three months ended March 31, 2011 on impaired loans carried at fair value resulted in an additional provision for loan
losses of $384,000.

The Company believes that the increase in the allowance for loan losses is consistent with the
performance of the loan portfolio during the three months ended March 31, 2011 and the related credit risks inherent in the portfolio. Approximately 69.1% of the Companys nonperforming loans are one-to-four family loans. Approximately
27.0% of the nonperforming one-to-four family loans were related to rental investment properties owned by investment companies controlled by two individuals. Multi-family loans represent 15.2% of nonperforming loans, commercial, construction and
land loans comprise 10.8% on nonperforming loans and participations and loans purchased represent approximately 4.9% of the nonperforming loans at March 31, 2011. Total nonperforming loans as a percentage of total loans net of LIP and deferred
fees were 9.54% at March 31, 2011 compared to 8.75% at December 31, 2010.

Real estate owned (REO)
increased $265,000 to $2.1 million at March 31, 2011 from $1.8 million at December 31, 2010 predominately due to $293,000 of loans transferred into REO. The values of the properties in the Companys REO inventory were written-down
$28,000 as a result of a decline in property values during the first three months of 2011. Based on recent appraisals and sales contract negotiations, management believes the properties are recorded at fair value, less cost to sell, as of
March 31, 2011.

The following table sets forth information regarding nonaccrual loans, net of LIP and deferred fees, and
other real estate owned at the dates indicated. It is the policy of the Bank to cease accruing interest on loans more than 90 days past due.



|                                                  |  |                |        |  |                   |   |        | 
|------------------------------------------------- |  | -------------- | ------ |  | ----------------- | - | ------ | 
|                                                  |  | March 31, 2011 |        |  | December 31, 2010 |  
|Nonaccrual loans                                  |  |                |        |  |                   |   |        | 
|One-to-four-family                                |  | $              | 9,185  |  |                   | $ | 7,950  | 
|Multi-family                                      |  |                | 2,025  |  |                   |   | 2,195  | 
|Commercial, construction and land                 |  |                | 1,430  |  |                   |   | 1,556  | 
|Consumer                                          |  |                | 10     |  |                   |   |       | 
|Participations and loans purchased                |  |                | 635    |  |                   |   | 605    | 
|                                                  |  |                |        |  |                   |   |        | 
|                                                  |  |               
|Total nonaccrual loans                            |  |                | 13,285 |  |                   |   | 12,306 | 
|Loans past due 90 days still on accrual           |  |                | 27     |  |                   |   | 698    | 
|Substandard loans less than 90 days nonperforming |  |                | 476    |  |                   |   |       | 
|                                                  |  |                |        |  |                   |   |        | 
|Total nonperforming loans                         |  |                | 13,788 |  |                   |   | 13,004 | 
|Real estate owned                                 |  |                | 2,059  |  |                   |   | 1,794  | 
|                                                  |  |                |        |  |                   |   |        | 
|                                                  |  |               
|Total nonperforming assets                        |  | $              | 15,847 |  |                   | $ | 14,798 | 
|                                                  |  |                |        |  |                   |   |        | 



25



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##### Table of Contents

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



|                                  |  |                |       |  |                                          |  |        |                                              |  |  |        |   |  |                                          |       |  |                                              |  |        |   |  |  |        |  
|--------------------------------- |  | -------------- | ----- |  | ---------------------------------------- |  | ------ | -------------------------------------------- |  |  | ------ | - |  | ---------------------------------------- | ----- |  | -------------------------------------------- |  | ------ | - |  |  | ------ | -
|                                  |  | March 31, 2011 |       |  | December 31, 2010                        | 
|                                  |  | Amount         |       |  | Percentageof 
Allowanceto TotalAllowance |  |        | Percentage ofNet 
Loans toTotal 
NetLoans(1) |  |  | Amount |   |  | Percentageof 
Allowanceto TotalAllowance |       |  | Percentage ofNet 
Loans toTotal 
NetLoans(1) | 
|One-to-four-family                |  | $              | 4,576 |  |                                          |  | 79.96  | %                                            |  |  | 70.21  | % |  | $                                        | 3,825 |  |                                              |  | 74.36  | % |  |  | 69.68  | %
|Multi-family                      |  |                | 310   |  |                                          |  | 5.42   |                                              |  |  | 10.68  |   |  |                                          | 410   |  |                                              |  | 7.97   |   |  |  | 10.74  |  
|Commercial, construction and land |  |                | 628   |  |                                          |  | 10.97  |                                              |  |  | 10.51  |   |  |                                          | 720   |  |                                              |  | 14.00  |   |  |  | 11.17  |  
|Consumer                          |  |                | 73    |  |                                          |  | 1.27   |                                              |  |  | 4.24   |   |  |                                          | 52    |  |                                              |  | 1.01   |   |  |  | 4.07   |  
|Participation and loans purchased |  |                | 136   |  |                                          |  | 2.38   |                                              |  |  | 4.36   |   |  |                                          | 137   |  |                                              |  | 2.66   |   |  |  | 4.34   |  
|                                  |  |                |       |  |                                          |  |        |                                              |  |  |        |   |  |                                          |       |  |                                              |  |        |   |  |  |        |  
|                                  |  |                |       |  |                                          | 
|Total allowance for loan losses   |  | $              | 5,723 |  |                                          |  | 100.00 | %                                            |  |  | 100.00 | % |  | $                                        | 5,144 |  |                                              |  | 100.00 | % |  |  | 100.00 | %
|                                  |  |                |       |  |                                          |  |        |                                              |  |  |        |   |  |                                          |       |  |                                              |  |        |   |  |  |        |  



|(1) | Net loans are net of LIP and deferred fees before allowance for loan losses.
|--- | ----------------------------------------------------------------------------

Total liabilities at March 31, 2011 were $190.8 million, a decrease of $3.0 million, or 1.5%, from $193.8 million at December 31, 2010. The change was due primarily to a decrease in deposits of
$2.5 million, or 1.7%, from December 31, 2010 and a decrease in advances from borrowers for taxes and insurance of $671,000, or 34.7%, during the three months ended March 31, 2011. Deposits decreased as the Company continued to follow its
interest rate risk strategy of allowing higher rate deposits to mature. The decrease in the advances from borrowers was due to the timing of the payment of local real estate taxes.

Stockholders equity decreased $1.2 million, or 6.5%, to $16.8 million at March 31, 2011 from $18.0 million at
December 31, 2010. The decrease was primarily attributable to the net loss for the three months ended March 31, 2011 of $790,000 and a decrease of $387,000 in accumulated other comprehensive income due to gains realized on security sales
during the quarter and a decrease in the market value of investments included in securities available for sale.

Results
of Operations

The net loss for the quarter ended March 31, 2011 was $790,000, or $(0.66) per diluted share, an
increase of $135,000 compared to a net loss of $655,000, or $(0.55) per diluted share, for the first quarter of 2010. The change was due to a decrease in net interest income of $106,000 and an increase in the provision for loan loss of $363,000,
offset by an increase in non-interest income of $326,000 and a decrease in non-interest expense of $8,000.

Net interest
income for the quarter ended March 31, 2011 decreased $106,000, or 7.2%, to $1.4 million compared to $1.5 million for the first quarter in 2010. The average yield on interest-earning assets decreased 57 basis points to 4.61% for the quarter
ended March 31, 2011 compared to 5.18% for the same period in 2010, while average interest-earning assets decreased $2.8 million during the same time period. The average yield decreased partially as a result of the net increase in foregone
interest on nonaccrual loans of approximately $154,000 during the quarter ended March 31, 2011 compared to the quarter ended March 31, 2010. Also, the average yield on interest-earning assets decreased due to the decline in the average
yield on adjustable rate investments and lower reinvestment rates in the securities available for sale portfolio. The average cost of interest-bearing liabilities decreased 43 basis points to 1.73% compared to 2.16% for the quarters ended
March 31, 2011 and 2010, respectively. Average interest-bearing liabilities increased $606,000 during the first quarter of 2011 compared to the first quarter of 2010. The interest rate spread decreased 14 basis points to 2.88% for the quarter
ended March 31, 2011 compared to 3.02% for the first quarter in 2010 while the net interest margin decreased to 2.91% compared to 3.09% for the same period. The decreases in the interest rate spread and margin were primarily due to the decrease
in average interest-earning assets, the reallocation of interest-earning assets between asset categories and the decreases in the yield on those assets during the quarter ended March 31, 2011 compared to the same quarter in 2010.

Management establishes provisions for loan losses, which are charged to operations, to maintain the allowance for loan losses 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 classes 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. Based on managements estimates, a $807,000 provision for loan loss was established for the quarter ended
March 31, 2011 compared to $444,000 for the same quarter in 2010.



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##### Table of Contents

Management assesses the allowance for loan losses on a quarterly basis and makes provisions
for loan losses as necessary in order to maintain 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 March 31, 2011 is maintained at a level that represents managements best estimate of incurred losses in the loan portfolio, and such losses were both probable and reasonably
estimable.

Non-interest income increased $326,000 to $463,000 for the quarter ended March 31, 2011 compared to $137,000
for the quarter ended March 31, 2010. The increase was primarily due to a $317,000 gains on the sale of securities during the quarter. During the quarter ended March 31, 2011, the Company sold its interest in an ultra short mortgage mutual
fund. Gross proceeds from the sale were $4.7 million and generated a gain on the sale of $270,000. The Company sold an additional security during the quarter with gross proceeds on the sale of $1.1 million and generated a gain of $47,000. These
securities were sold to recognize into income the significant unrealized gains that were carried as other comprehensive gains on the balance sheet. There were no losses recorded on any sales during the quarter ended March 31, 2011. There were
no securities sales during the first quarter of 2010.

Non-interest expense decreased $8,000 during the quarter ended
March 31, 2011 and remained at $1.8 million for the three month periods ended March 31, 2011 and 2010, respectively.

There was no federal income tax benefit recorded for the three months ended March 31, 2011 and 2010, respectively due to the
deferred tax asset valuation allowance which was established in 2009. The Company began recognizing a deferred tax asset valuation allowance, due to uncertainty as to whether the deferred tax assets would be fully utilized in future periods.

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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. Management believes the
Bank maintains sufficient liquidity to ensure a safe and sound operation.

The Companys cash flows are comprised of
three primary classifications: cash flows from operating activities, investing activities, and financing activities. Net cash provided by (used in) operating activities were $(73,000) and $821,000 for the three months ended March 31, 2011 and
2010, respectively. Net cash from investing activities consisted primarily of disbursements for the purchase of securities, offset by proceeds from the sale of securities, principal collections on loans, and proceeds from maturing securities, and
repayments on mortgage-backed securities. Net cash provided by investing activities were $5.0 million and $1.7 million for the three months ended March 31, 2011 and 2010, respectively. Net cash from financing activities consisted
primarily of the activity in deposit accounts. The net cash provided by (used in) financing activities was $(3.1) million and $(5.4) million for the three months ended March 31, 2011 and 2010, respectively.

At March 31, 2011, the Bank exceeded all of the minimum regulatory capital adequacy requirements with a Tier 1 (core) capital level
of $16.3 million, or 7.85% of adjusted total assets and total risk-based capital of $17.8 million, or 15.37% of risk-weighted assets.

At March 31, 2011, the Bank had outstanding commitments to originate mortgage loans of $1.2 million, commitments under unused lines of credit of $1.8 million and undisbursed portions of construction
loans of $955,000. 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 March 31, 2011 totaled $47.3
million. Management expects that a substantial portion of the maturing certificate accounts will be renewed at the Bank. However, if a substantial portion of these deposits is 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.



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|Item 3. | Quantitative and Qualitative Disclosures About Market Risk.
|------- | -----------------------------------------------------------

The Banks interest rate sensitivity is monitored by management through the use of a model which estimates the change in net portfolio value (NPV) over a range of interest rate scenarios. NPV is the
present value of expected cash flows from assets, liabilities, and off-balance-sheet contracts. An NPV Ratio, in any interest rate scenario, is defined as the NPV in that scenario divided by the market value of assets in the same scenario. The
Sensitivity Measure is the decline in the NPV Ratio, in basis points, caused by a 2% increase or decrease in rates, whichever produces a larger decline. The higher an institutions Sensitivity Measure is, the greater its exposure to interest
rate risk is considered to be. The OTS has incorporated an interest rate risk component into its regulatory capital rule. Under the rule, an institution whose sensitivity measure exceeds 2% would be required to deduct an interest rate risk component
in calculating its total capital for purposes of the risk-based capital requirement. As of December 31, 2010 the latest date for which information is available, the Banks sensitivity measure, as measured by the OTS, resulting from a 200
basis point increase in interest rates was (13)% and would result in a $3.4 million decrease in the NPV of the Bank. Accordingly, increases in interest rates would be expected to have a negative impact on the Banks operating results. The NPV
Ratio sensitivity measure is below the threshold at which the Bank could be required to hold additional risk-based capital under OTS regulations.

Certain shortcomings are inherent in the methodology used in the above interest rate risk measurements. Modeling changes in NPV requires 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 remains 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 table shows the NPV and projected change in the NPV of the Bank at December 31, 2010, the
latest date for which information is available, assuming an instantaneous and sustained change in market interest rates of 100, 200 and 300 basis points and a decline of 100 basis points. Due to the current economic conditions and level of interest
rates, a 200 and 300 basis point decline would not apply.

Interest Rate Sensitivity of Net Portfolio Value (NPV)



|                |  |                     | $18,683 |  |                           |   | $18,683 |          |  |  | $18,683   |    |  |        | $18,683 |   |  |  | $18,683 |    
|--------------- |  | ------------------- | ------- |  | ------------------------- | - | ------- | -------- |  |  | --------- | -- |  | ------ | ------- | - |  |  | ------- | ---
|                |  | Net Portfolio Value |         |  | NPV as a % of PV ofAssets |  
|Change in Rates |  | $ Amount            |         |  | $ Change                  |   |         | % Change |  |  | NPV Ratio |    |  | Change |        
|+ 300 bp        |  | $                   | 18,683  |  |                           | $ | (6,670  | )        |  |  | (26       | )% |  |        | 8.82    | % |  |  | (242    | )bp
|+ 200 bp        |  |                     | 21,966  |  |                           |   | (3,387  | )        |  |  | (13       | )  |  |        | 10.11   |   |  |  | (112    | )bp
|+ 100 bp        |  |                     | 24,354  |  |                           |   | (999    | )        |  |  | (4        | )  |  |        | 10.97   |   |  |  | (26     | )bp
|0 bp            |  |                     | 25,353  |  |                           |   |        |          |  |  |          |    |  |        | 11.24   |   |  |  |        |    
| 100 bp        |  |                     | 24,951  |  |                           |   | (401    | )        |  |  | (2        | )  |  |        | 10.95   |   |  |  | (29     | )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.

Management is in the process of completing the computation of NPV as of March 31, 2011, but estimates that
the results would not be materially different than those presented above.



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|Item 4. | 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, as amended, 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, we carried out an evaluation, under the supervision, and with the participation of
our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as contemplated by Exchange Act Rule 13a-15. Based upon, and as of the date
of that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Companys disclosure controls and procedures are effective, in all material respects, in timely alerting them to material information relating to the
Company (and its consolidated subsidiaries) required to be included in the periodic reports the Company is required to file and submit to the SEC under the Exchange Act.

There was no change in the Companys internal control over financial reporting that occurred during the Companys fiscal quarter ended March 31, 2011, that materially affected, or is
reasonably likely to materially affect, the Companys internal control over financial reporting.



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##### Table of Contents

PART II  OTHER INFORMATION



|Item 1. | Legal Proceedings.
|------- | ------------------

From
time to time, we may be party to various legal proceedings arising in the normal course of our business. Since we act as a depository of funds, we may also be named as a defendant in various lawsuits (such as garnishment proceedings) involving
claims to the ownership of funds in particular accounts. We are not a party to any legal proceedings that we currently believe will have, individually or in the aggregate, a material adverse effect on our business, results of operations, financial
condition or cash flows.



|Item 1A. | Risk Factors.
|-------- | -------------

In
addition to the other information set forth in this report, you should carefully consider the risk factors discussed in response to Item 1A to Part I in our Annual Report on Form 10-K for the year ended December 31, 2010 which could
materially affect our business, financial condition or future results. There have been no material changes from the risk factors as disclosed in our Annual Report on Form 10-K for the year ended December 31, 2010.



|Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds.
|------- | ------------------------------------------------------------

Issuer Repurchases of Equity Securities

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 July 31, 2008. No shares were repurchased in the first three months of 2011 under the
program. A total of 43,682 shares remain available for repurchase under the program.



|Item 3. | Defaults Upon Senior Securities.
|------- | --------------------------------

None.



|Item 4. | [Removed and Reserved.]
|------- | -----------------------



|Item 5. | Other Information.
|------- | ------------------

None.



|Item 6. | Exhibits.
|------- | ---------



|(a) | Exhibits.
|--- | ---------



|     |  |                                                                                                                                                                                                                        
|---- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|31.1 |  | Rule 13(a)-14(a) Certification (Chief Executive Officer) (attached as an exhibit and incorporated herein by reference).                                                                                                
|     | 
|31.2 |  | Rule 13(a)-14(a) Certification (Chief Financial Officer) (attached as an exhibit and incorporated herein by reference).                                                                                                
|     | 
|32.1 |  | Certification Pursuant to 18 U.S.C. Section 1350, as adopted to Section 906 of the Sarbanes-Oxley Act of 2002 from the Companys Chief Executive Officer (attached
as an exhibit and incorporated herein by reference).
|     | 
|32.2 |  | Certification Pursuant to 18 U.S.C. Section 1350, as adopted to Section 906 of the Sarbanes-Oxley Act of 2002 from the Companys Financial Officer (attached as an
exhibit and incorporated herein by reference).      



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SIGNATURES

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



|                   |  |                                      
|------------------ |  | -------------------------------------
|                   |  | PARK BANCORP, INC.                   
|                   | 
|Date: May 16, 2011 |  | /S/    DAVID A.
REMIJAS              
|                   |  | David A. Remijas                     
|                   |  | Chairman and Chief Executive Officer 
|                   | 
|Date: May 16, 2011 |  | /S/    VICTOR E.
CAPUTO              
|                   |  | Victor E. Caputo                     
|                   |  | Treasurer and Chief Financial Officer



31