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**UNITED        STATES**

**SECURITIES        AND EXCHANGE COMMISSION**

**Washington,        D.C. 20549**

**FORM        10-Q**

| R | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)                  OF THE                  SECURITIES EXCHANGE ACT OF 1934 |
|---|---------------------------------------------------------------------------------------------------------------------------|

**OR**

| £ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)                  OF THE                  SECURITIES EXCHANGE ACT OF 1934 |
|--------|----------------------------------------------------------------------------------------------------------------------------|

|   | Indiana                                            |   | 35-2042093                           |   |
|--------|----------------------------------------------------|--------|--------------------------------------|--------|
|   | (State                  or other jurisdiction      |   | (I.R.S.                  Employer    |   |
|   | of                  incorporation or organization) |   | Identification                  No.) |   |

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**CFS        BANCORP, INC.**

**TABLE        OF        CONTENTS**

|                                                                                                                                                                                                                      |                                                                                                                    | Page   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                                                                                                                                      | **PART                  I - FINANCIAL INFORMATION**                                                                     |   |
|                                                                                                                                                                                                                      |                                                                                                                    |   |
| Item                  1.                                                                                                                                                                                                  | Financial                  Statements (Unaudited)                                                                       |   |
|                                                                                                                                                                                                                      | Condensed                  Consolidated Statements of Condition                                                         | 3      |
|                                                                                                                                                                                                                      | Condensed                  Consolidated Statements of Income                                                            | 4      |
|                                                                                                                                                                                                                      | Condensed                  Consolidated Statements of Changes in Stockholders’                  Equity            | 5      |
|                                                                                                                                                                                                                      | Condensed                  Consolidated Statements of Cash Flows                                                        | 6      |
|                                                                                                                                                                                                                      | Notes                  to Condensed Consolidated Financial Statements                                                   | 7      |
|                                                                                                                                                                                                                      |                                                                                                                    |   |
| Item                  2.                                                                                                                                                                                                  | Management's                  Discussion and Analysis of Financial Condition and                  Results of Operations | 11     |
|                                                                                                                                                                                                                      |                                                                                                                    |   |
| Item                  3.                                                                                                                                                                                                  | Quantitative                  and Qualitative Disclosures about Market                  Risk                            | 34     |
|                                                                                                                                                                                                                      |                                                                                                                    |   |
| Item                  4.                                                                                                                                                                                                  | Controls                  and Procedures                                                                                | 36     |
|                                                                                                                                                                                                                      |                                                                                                                    |   |
|                                                                                                                                                                                                                      |                                                                                                                    |   |
|                                                                                                                                                                                                                      | **PART                  II - OTHER INFORMATION**                                                                        |   |
|                                                                                                                                                                                                                      |                                                                                                                    |   |
| Item                  1.                                                                                                                                                                                                  | Legal                  Proceedings                                                                                      | 37     |
|                                                                                                                                                                                                                      |                                                                                                                    |   |
| Item                  1A.                                                                                                                                                                                                 | Risk                  Factors                                                                                           | 37     |
|                                                                                                                                                                                                                      |                                                                                                                    |   |
| Item                  2.                                                                                                                                                                                                  | Unregistered                  Sales of Equity Securities and Use of                  Proceeds                           | 37     |
|                                                                                                                                                                                                                      |                                                                                                                    |   |
| Item                  3.                                                                                                                                                                                                  | Defaults                  upon Senior Securities                                                                        | 37     |
|                                                                                                                                                                                                                      |                                                                                                                    |   |
| Item                  4.                                                                                                                                                                                                  | Submission                  of Matters to a Vote of Security Holders                                                    | 38     |
|                                                                                                                                                                                                                      |                                                                                                                    |   |
| Item                  5.                                                                                                                                                                                                  | Other                  Information                                                                                      | 38     |
|                                                                                                                                                                                                                      |                                                                                                                    |   |
| Item                  6.                                                                                                                                                                                                  | Exhibits                                                                                                                | 39     |
|                                                                                                                                                                                                                      |                                                                                                                    |   |
| Signature                  Page                                                                                                                                                                                           | 40                                                                                                                      |
|                                                                                                                                                                                                                      |                                                                                                                    |   |
| Certifications                  for Principal Executive Officer and Principal                  Financial Officer                                                                                                          |                                                                                                                    |
| Exhibit                  31.1                                                                                                                                                                                             |                                                                                                                    |
|                                              Exhibit                31.2 |                                                                                                                    |
|                                              Exhibit                32.0 |                                                                                                                    |

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table        of contents

**CFS        BANCORP, INC.**

**Condensed        Consolidated Statements of        Condition**

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   | **June                  30, 2007**      |      |   | **December                  31, 2006** |       |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------|-----------|--------|----------------------------------------|------------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   | (Unaudited)                             |      |   |                                   |       |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   | (Dollars                  in thousands) |      |
| **ASSETS**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |                                    |      |   |                                   |       |
| Cash                  and amounts due from depository                  institutions                                                                                      |   | $                                       | 19,614    |   |                                   | $          | 33,194 |   |
| Interest-bearing                  deposits                                                                                                                               |   |                                    | 8,617     |   |                                   |       | 20,607 |   |
| Federal                  funds                  sold                                                                                                                     |   |                                    | 8,796     |   |                                   |       | 13,366 |   |
| Cash                  and cash                  equivalents                                                                                                                        |   |                                    | 37,027    |   |                                   |       | 67,167 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |                                    |      |   |                                   |       |   |   |
| Securities                  available-for-sale, at fair                  value                                                                                           |   |                                    | 270,404   |   |                                   |       | 298,925 |   |
| Investment                  in Federal Home Loan Bank stock, at cost                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |                                    | 23,944    |   |                                   |       | 23,944 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |                                    |      |   |                                   |       |   |   |
| Loans                  receivable                                                                                                                                        |   |                                    | 808,132   |   |                                   |       | 802,383 |   |
| Allowance                  for losses on                  loans                                                                                                                    |   |                                    | (10,624   | )      |                                   |       | (11,184 | ) |
| Net                  loans                                                                                                                                                                        |   |                                    | 797,508   |   |                                   |       | 791,199 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |                                    |      |   |                                   |       |   |   |
| Interest                  receivable                                                                                                                                     |   |                                    | 7,106     |   |                                   |       | 7,523 |   |
| Other                  real estate                  owned                                                                                                                |   |                                    | 632       |   |                                   |       | 321 |   |
| Office                  properties and                  equipment                                                                                                        |   |                                    | 19,008    |   |                                   |       | 17,797 |   |
| Investment                  in bank-owned life                  insurance                                                                                                |   |                                    | 35,652    |   |                                   |       | 35,876 |   |
| Other                  assets                                                                                                                                            |   |                                    | 10,344    |   |                                   |       | 10,339 |   |
| Goodwill                  and intangible                  assets                                                                                                         |   |                                    | 1,267     |   |                                   |       | 1,299 |   |
| Total                  assets                                                                                                                                                                     |   | $                                       | 1,202,892 |   |                                   | $          | 1,254,390 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |                                    |      |   |                                   |       |   |   |
| **LIABILITIES                  AND STOCKHOLDERS’ EQUITY**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |                                    |      |   |                                   |       |   |   |
| Deposits                                                                                                                                                                 |   | $                                       | 887,814   |   |                                   | $          | 907,095 |   |
| Borrowed                  money                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |                                    | 170,952   |   |                                   |       | 202,275 |   |
| Advance                  payments by borrowers for taxes and insurance                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |                                    | 6,619     |   |                                   |       | 4,194 |   |
| Other                  liabilities                                                                                                                                            |   |                                    | 9,217     |   |                                   |       | 9,020 |   |
| Total                  liabilities                                                                                                                                                                |   |                                    | 1,074,602 |   |                                   |       | 1,122,584 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |                                    |      |   |                                   |       |   |   |
| Stockholders’                  equity:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |                                    |      |   |                                   |       |   |   |
| Preferred                  stock, $0.01 par value; 15,000,000 shares authorized                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |                                    | –   |   |                                   | ** ** | **–** |   |
| Common                  stock, $0.01 par value; 85,000,000 shares authorized; 23,423,306                  shares                  issued; 10,845,740 and 11,134,331 shares outstanding                                                                                                                                                                                                                                                                                                                                                                                                                            |   |                                    | 234       |   |                                   |       | 234 |   |
| Additional                  paid-in                  capital                                                                                                             |   |                                    | 191,054   |   |                                   |       | 190,825 |   |
| Retained                  earnings                                                                                                                                       |   |                                    | 95,616    |   |                                   |       | 94,344 |   |
| Treasury                  stock, at cost; 12,450,364 and 12,164,754 shares                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |                                    | (152,752  | )      |                                   |       | (148,108 | ) |
| Treasury                  stock held in Rabbi Trust, at cost; 127,202 and 124,221                  shares                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |                                    | (1,672    | )      |                                   |       | (1,627 | ) |
| Unallocated                  common stock held by Employee Stock Ownership Plan                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |                                    | (3,282    | )      |                                   |       | (3,564 | ) |
| Accumulated                  other comprehensive loss, net of                  tax                                                                                       |   |                                    | (908      | )      |                                   |       | (298 | ) |
| Total                  stockholders’                  equity                                                                                                                 |   |                                    | 128,290   |   |                                   |       | 131,806 |   |
| Total                  liabilities and                  stockholders’                  equity                                                                                               |   | $                                       | 1,202,892 |   |                                   | $          | 1,254,390 |   |

*See        accompanying notes.*

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table        of contents

**CFS        BANCORP, INC.**

**Condensed        Consolidated Statements of Income**

|                                                                           |   | **Three                  Months Ended****June                  30,**     |       |   | **Six                  Months Ended****June                  30,** |   |
|--------------------------------------------------------------------------------|--------|--------------------------------------------------------------------------|------------|--------|--------------------------------------------------------------------|--------|
|                                                                           |   | **2007**                                                                 |       |   | **2006**                                                           |   |   | **2007** |   |   | **2006** |   |
|                                                                           |   | (Unaudited)                                                              |       |
|                                                                           |   | (Dollars                  in thousands, except share and per share data) |       |
| Interest                  income:                                              |   |                                                                     |       |   |                                                               |   |   |   |   |   |   |   |
| Loans                                                                          |   | $                                                                        | 14,404     |   |                                                               | $      | 15,326 |   |   | $ | 28,456 |   |   | $ | 30,229 |   |
| Securities                                                                     |   |                                                                     | 3,475      |   |                                                               |   | 3,150 |   |   |   | 6,998 |   |   |   | 5,641 |   |
| Other                                                                          |   |                                                                     | 605        |   |                                                               |   | 486 |   |   |   | 1,681 |   |   |   | 1,049 |   |
| Total                  interest                  income                        |   |                                                                     | 18,484     |   |                                                               |   | 18,962 |   |   |   | 37,135 |   |   |   | 36,919 |   |
| Interest                  expense:                                             |   |                                                                     |       |   |                                                               |   |   |   |   |   |   |   |   |   |   |   |
| Deposits                                                                       |   |                                                                     | 6,619      |   |                                                               |   | 5,009 |   |   |   | 13,313 |   |   |   | 9,557 |   |
| Borrowed                  money                                                |   |                                                                     | 3,227      |   |                                                               |   | 5,221 |   |   |   | 6,660 |   |   |   | 10,394 |   |
| Total                  interest                  expense                       |   |                                                                     | 9,846      |   |                                                               |   | 10,230 |   |   |   | 19,973 |   |   |   | 19,951 |   |
| Net                  interest income                                           |   |                                                                     | 8,638      |   |                                                               |   | 8,732 |   |   |   | 17,162 |   |   |   | 16,968 |   |
| Provision                  for losses on loans                                 |   |                                                                     | 126        |   |                                                               |   | 173 |   |   |   | 313 |   |   |   | 558 |   |
| Net                  interest income after provision for losses on loans       |   |                                                                     | 8,512      |   |                                                               |   | 8,559 |   |   |   | 16,849 |   |   |   | 16,410 |   |
| Non-interest                  income:                                          |   |                                                                     |       |   |                                                               |   |   |   |   |   |   |   |   |   |   |   |
| Service                  charges and other                  fees               |   |                                                                     | 1,670      |   |                                                               |   | 1,710 |   |   |   | 3,239 |   |   |   | 3,312 |   |
| Card-based                  fees                                               |   |                                                                     | 380        |   |                                                               |   | 335 |   |   |   | 722 |   |   |   | 653 |   |
| Commission                  income                                             |   |                                                                     | 36         |   |                                                               |   | 55 |   |   |   | 67 |   |   |   | 117 |   |
| Security                  gains (losses),                  net            |   |                                                                     | (1         | )      |                                                               |   | – |   |   |   | 10 |   |   |   | (127 | ) |
| Other                  asset gains (losses), net                  other assets |   |                                                                     | (1         | )      |                                                               |   | 47 |   |   |   | 10 |   |   |   | 48 |   |
| Income                  from bank-owned life                  insurance        |   |                                                                     | 403        |   |                                                               |   | 396 |   |   |   | 808 |   |   |   | 788 |   |
| Other                  income                                                  |   |                                                                     | 206        |   |                                                               |   | 286 |   |   |   | 446 |   |   |   | 475 |   |
| Total                  non-interest                  income                    |   |                                                                     | 2,693      |   |                                                               |   | 2,829 |   |   |   | 5,302 |   |   |   | 5,266 |   |
| Non-interest                  expense:                                         |   |                                                                     |       |   |                                                               |   |   |   |   |   |   |   |   |   |   |   |
| Compensation                  and employee                  benefits           |   |                                                                     | 4,407      |   |                                                               |   | 5,196 |   |   |   | 9,662 |   |   |   | 10,219 |   |
| Net                  occupancy                  expense                        |   |                                                                     | 694        |   |                                                               |   | 652 |   |   |   | 1,447 |   |   |   | 1,314 |   |
| Professional                  fees                                             |   |                                                                     | 390        |   |                                                               |   | 413 |   |   |   | 960 |   |   |   | 764 |   |
| Data                  processing                                               |   |                                                                     | 566        |   |                                                               |   | 678 |   |   |   | 1,129 |   |   |   | 1,351 |   |
| Furniture                  and equipment                  expense              |   |                                                                     | 566        |   |                                                               |   | 541 |   |   |   | 1,100 |   |   |   | 968 |   |
| Marketing                                                                      |   |                                                                     | 190        |   |                                                               |   | 391 |   |   |   | 401 |   |   |   | 589 |   |
| Amortization                  of core deposit                  intangibles     |   |                                                                     | 17         |   |                                                               |   | 17 |   |   |   | 33 |   |   |   | 33 |   |
| Other                  general and                  administrative expenses    |   |                                                                     | 1,239      |   |                                                               |   | 1,353 |   |   |   | 2,604 |   |   |   | 2,730 |   |
| Total                  non-interest                  expense                   |   |                                                                     | 8,069      |   |                                                               |   | 9,241 |   |   |   | 17,336 |   |   |   | 17,968 |   |
| Income                  before income taxes                                    |   |                                                                     | 3,136      |   |                                                               |   | 2,147 |   |   |   | 4,815 |   |   |   | 3,708 |   |
| Income                  tax expense                                            |   |                                                                     | 855        |   |                                                               |   | 526 |   |   |   | 1,221 |   |   |   | 778 |   |
| Net                  income                                                    |   | $                                                                        | 2,281      |   |                                                               | $      | 1,621 |   |   | $ | 3,594 |   |   | $ | 2,930 |   |
|                                                                           |   |                                                                     |       |   |                                                               |   |   |   |   |   |   |   |   |   |   |   |
| Per                  share data:                                               |   |                                                                     |       |   |                                                               |   |   |   |   |   |   |   |   |   |   |   |
| Basic                  earnings per                  share                     |   | $                                                                        | 0.22       |   |                                                               | $      | 0.15 |   |   | $ | 0.34 |   |   | $ | 0.26 |   |
| Diluted                  earnings per                  share                   |   |                                                                     | 0.21       |   |                                                               |   | 0.14 |   |   |   | 0.33 |   |   |   | 0.25 |   |
| Cash                  dividends declared per                  share            |   |                                                                     | 0.12       |   |                                                               |   | 0.12 |   |   |   | 0.24 |   |   |   | 0.24 |   |
| Weighted-average                  shares outstanding                           |   |                                                                     | 10,591,194 |   |                                                               |   | 11,128,443 |   |   |   | 10,658,477 |   |   |   | 11,254,182 |   |
| Weighted-average                  diluted shares outstanding                   |   |                                                                     | 10,903,740 |   |                                                               |   | 11,482,560 |   |   |   | 10,969,991 |   |   |   | 11,615,231 |   |

*See        accompanying notes.*

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*table of contents*

**CFS        BANCORP, INC.**

**Condensed        Consolidated Statements of Changes in        Stockholders' Equity**

|                                                                                                                                                                                                                                                                                                                                                 |   | **Common                  Stock**                              |    |   | **Additional                  Paid-In Capital** |   |    | **Retained                  Earnings** |   |   | **Treasury                  Stock** |   |   | **Unallocated                  Common****Stock                  Held****By                  ESOP** |     |   | **Unearned****Common                  Stock Acquired****By                  RRP** |   |    | **Accumulated                  Other Compre-hensive****Loss** |   |   | **Total** |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------------------|---------|--------|-------------------------------------------------|--------|---------|----------------------------------------|--------|--------|-------------------------------------|--------|--------|----------------------------------------------------------------------------------------------------|----------|--------|-----------------------------------------------------------------------------------|--------|---------|---------------------------------------------------------------|--------|--------|-----------|--------|
|                                                                                                                                                                                                                                                                                                                                                 |   | (Unaudited)                                                    |    |
|                                                                                                                                                                                                                                                                                                                                                 |   | (Dollars                  in thousands, except per share data) |    |
| Balance                  at January                  1, 2006                                                                            |   | $                                                              | 234     |   |                                            | $      | 190,402 |                                   |   | $      | 94,379                              |   |   | $                                                                                                  | (136,229 | )      |                                                                              | $      | (4,762  | )                                                             |   | $      | (111      | )      |   | $ | (1,546 | ) |   | $ | 142,367 |   |
| Net                  income                                                                                         |   |                                                           | – |   |                                            |   | – |                                   |   |   | 2,930                               |   |   |                                                                                               | –  |   |                                                                              |   | – |                                                          |   |   | –   |   |   |   | – |   |   |   | 2,930 |   |
| Other                  comprehensive loss, net of tax:                          Change in unrealized loss on available-for-sale securities, net                  of                  reclassification adjustment                                                                                                  |   |                                                           |    |   |                                            |   |    |                                   |   |   |                                |   |   |                                                                                               |     |   |                                                                              |   |    |                                                          |   |   |      |   |   |   | (1,814 | ) |   |   | (1,814 | ) |
| Total                  comprehensive                  income                                                        |   |                                                           |    |   |                                            |   |    |                                   |   |   |                                |   |   |                                                                                               |     |   |                                                                              |   |    |                                                          |   |   |      |   |   |   |   |   |   |   | 1,116 |   |
| Purchase                  of treasury                  stock                                                        |   |                                                           | – |   |                                            |   | – |                                   |   |   | –                             |   |   |                                                                                               | (10,406  | )      |                                                                              |   | – |                                                          |   |   | –   |   |   |   | – |   |   |   | (10,406 | ) |
| Cumulative                  effect of change in accounting for Rabbi                         Trust shares                                                                                                                                                                                                    |   |                                                           | – |   |                                            |   | – |                                   |   |   | (92                                 | )      |   |                                                                                               | (1,609   | )      |                                                                              |   | – |                                                          |   |   | –   |   |   |   | – |   |   |   | (1,701 | ) |
| Net                  purchases of Rabbi Trust shares                                                                                                                                                                                                                                                                                                 |   |                                                           | – |   |                                            |   | – |                                   |   |   | –                             |   |   |                                                                                               | (46      | )      |                                                                              |   | – |                                                          |   |   | –   |   |   |   | – |   |   |   | (46 | ) |
| Shares                  earned under                  ESOP                                                          |   |                                                           | – |   |                                            |   | 278     |                                   |   |   | –                             |   |   |                                                                                               | –  |   |                                                                              |   | 599     |                                                          |   |   | –   |   |   |   | – |   |   |   | 877 |   |
| Reclassification                  of unearned compensation to                          additional paid-in capital upon the adoption of                          SAFS 123(R)                                                                                               |   |                                                           | – |   |                                            |   | (111    | )                                      |   |   | –                             |   |   |                                                                                               | –  |   |                                                                              |   | – |                                                          |   |   | 111       |   |   |   | – |   |   |   | – |   |
| Amortization                  of award under RRP                                                                                                                                                                                                                                                                                                     |   |                                                           | – |   |                                            |   | 48      |                                   |   |   | –                             |   |   |                                                                                               | –  |   |                                                                              |   | – |                                                          |   |   | –   |   |   |   | – |   |   |   | 48 |   |
| Exercise                  of stock                  options                                                         |   |                                                           | – |   |                                            |   | (393    | )                                      |   |   | –                             |   |   |                                                                                               | 2,476    |   |                                                                              |   | – |                                                          |   |   | –   |   |   |   | – |   |   |   | 2,083 |   |
| Tax                  benefit related to stock options exercised                                                                                                                                                                                                                                                                                      |   |                                                           | – |   |                                            |   | 298     |                                   |   |   | –                             |   |   |                                                                                               | –  |   |                                                                              |   | – |                                                          |   |   | –   |   |   |   | – |   |   |   | 298 |   |
| Dividends                  declared on common stock ($0.24 per share)                                                                                                                                                                                                                                                                                |   |                                                           | – |   |                                            |   | – |                                   |   |   | (2,694                              | )      |   |                                                                                               | –  |   |                                                                              |   | – |                                                          |   |   | –   |   |   |   | – |   |   |   | (2,694 | ) |
| Balance                  at June 30,                  2006                                                          |   | $                                                              | 234     |   |                                            | $      | 190,522 |                                   |   | $      | 94,523                              |   |   | $                                                                                                  | (145,814 | )      |                                                                              | $      | (4,163  | )                                                             |   | $      | –   |   |   | $ | (3,360 | ) |   | $ | 131,942 |   |
|                                                                                                                                                                                                                                                                                                                                                 |   |                                                           |    |   |                                            |   |    |                                   |   |   |                                |   |   |                                                                                               |     |   |                                                                              |   |    |                                                          |   |   |      |   |   |   |   |   |   |   |   |   |
| Balance                  at January 1,                  2007                                                        |   | $                                                              | 234     |   |                                            | $      | 190,825 |                                   |   | $      | 94,344                              |   |   | $                                                                                                  | (149,735 | )      |                                                                              | $      | (3,564  | )                                                             |   | $      | –   |   |   | $ | (298 | ) |   | $ | 131,806 |   |
| Net                  income                                                                                         |   |                                                           | – |   |                                            |   | – |                                   |   |   | 3,594                               |   |   |                                                                                               | –  |   |                                                                              |   | – |                                                          |   |   | –   |   |   |   | – |   |   |   | 3,594 |   |
| Other                  comprehensive loss, net of tax:                          Change in unrealized loss on available-for-sale securities, net                  of                  reclassification adjustment                                                                                                  |   |                                                           |    |   |                                            |   |    |                                   |   |   |                                |   |   |                                                                                               |     |   |                                                                              |   |    |                                                          |   |   |      |   |   |   | (610 | ) |   |   | (610 | ) |
| Total                  comprehensive                  income                                                        |   |                                                           |    |   |                                            |   |    |                                   |   |   |                                |   |   |                                                                                               |     |   |                                                                              |   |    |                                                          |   |   |      |   |   |   |   |   |   |   | 2,984 |   |
| Purchase                  of treasury                  stock                                                        |   |                                                           | – |   |                                            |   | – |                                   |   |   | –                             |   |   |                                                                                               | (6,493   | )      |                                                                              |   | – |                                                          |   |   | –   |   |   |   | – |   |   |   | (6,493 | ) |
| Net                  purchases of Rabbi Trust shares                                                                                                                                                                                                                                                                                                 |   |                                                           | – |   |                                            |   | – |                                   |   |   | –                             |   |   |                                                                                               | (45      | )      |                                                                              |   | – |                                                          |   |   | –   |   |   |   | – |   |   |   | (45 | ) |
| Shares                  earned under                  ESOP                                                          |   |                                                           | – |   |                                            |   | 135     |                                   |   |   | –                             |   |   |                                                                                               | –  |   |                                                                              |   | 282     |                                                          |   |   | –   |   |   |   | – |   |   |   | 417 |   |
| Amortization                  of award under RRP                                                                                                                                                                                                                                                                                                     |   |                                                           | – |   |                                            |   | 48      |                                   |   |   | –                             |   |   |                                                                                               | –  |   |                                                                              |   | – |                                                          |   |   | –   |   |   |   | – |   |   |   | 48 |   |
| Cumulative                  change in accounting principle under the                          adoption of FIN48                                                                                                                                                                                              |   |                                                           | – |   |                                            |   | – |                                   |   |   | 240                                 |   |   |                                                                                               | –  |   |                                                                              |   | – |                                                          |   |   | –   |   |   |   | – |   |   |   | 240 |   |
| Exercise                  of stock                  options                                                         |   |                                                           | – |   |                                            |   | (157    | )                                      |   |   | –                             |   |   |                                                                                               | 1,849    |   |                                                                              |   | – |                                                          |   |   | –   |   |   |   | – |   |   |   | 1,692 |   |
| Tax                  benefit related to stock options exercised                                                                                                                                                                                                                                                                                      |   |                                                           | – |   |                                            |   | 203     |                                   |   |   | –                             |   |   |                                                                                               | –  |   |                                                                              |   | – |                                                          |   |   | –   |   |   |   | – |   |   |   | 203 |   |
| Dividends                  declared on common stock ($0.24 per share)                                                                                                                                                                                                                                                                                |   |                                                           | – |   |                                            |   | – |                                   |   |   | (2,562                              | )      |   |                                                                                               | –  |   |                                                                              |   | – |                                                          |   |   | –   |   |   |   | – |   |   |   | (2,562 | ) |
| Balance                  at June 30,                  2007                                                |   | $                                                              | 234     |   |                                            | $      | 191,054 |                                   |   | $      | 95,616                              |   |   | $                                                                                                  | (154,424 | )      |                                                                              | $      | (3,282  | )                                                             |   | $      | –   |   |   | $ | (908 | ) |   | $ | 128,290 |   |

*See        accompanying notes.*

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*table of contents*

**CFS        BANCORP, INC.**

**Condensed        Consolidated Statements of Cash        Flows**

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   | **Six Months                    Ended****June                    30,** |    |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------------|---------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   | **2007**                                                                    |    |   | **2006** |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   | (Unaudited)                                                                 |    |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   | (Dollars                    in thousands)                                   |    |
| OPERATING                    ACTIVITIES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   |                                                                        |    |   |   |   |
| Net                    income                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   | $                                                                           | 3,594   |   |   | $ | 2,930 |   |
| Adjustments                    to reconcile net                    income to net cash provided by operating activities:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |                                                                        |    |   |   |   |   |   |
| Provision                    for losses on                    loans                                                                                                                                                          |   |                                                                        | 313     |   |   |   | 558 |   |
| Depreciation                    and                    amortization                                                                                                                                                          |   |                                                                        | 834     |   |   |   | 734 |   |
| Premium                    amortization on the                    early extinguishment of debt                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |                                                                        | 2,628   |   |   |   | 5,123 |   |
| Net                    premium amortization on                    securities available-for-sale                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |                                                                        | (327    | ) |   |   | (188 | ) |
| Deferred                    income tax                    expense                                                                                                                                                            |   |                                                                        | 1,307   |   |   |   | 5 |   |
| Amortization                    of cost of stock                    benefit                    plans                                                                                                                         |   |                                                                        | 465     |   |   |   | 925 |   |
| Proceeds                    from sale of loans                    held-for-sale                                                                                                                                              |   |                                                                        | 4,309   |   |   |   | 4,895 |   |
| Origination                    of loans                    held-for-sale                                                                                                                                                     |   |                                                                        | (5,849  | ) |   |   | (5,081 | ) |
| Net                    realized (gains)                    losses on sale of securities available-for-sale                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |                                                                        | (10     | ) |   |   | 127 |   |
| Net                    realized gains on sale                    of other                    assets                                                                                                                     |   |                                                                        | (10     | ) |   |   | (48 | ) |
| Increase                    in cash surrender                    value of bank-owned life insurance                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |                                                                        | (808    | ) |   |   | (788 | ) |
| Increase in                    other                    assets                                                                                                                                                          |   |                                                                        | (1,628  | ) |   |   | (2,492 | ) |
| Increase                    in other                    liabilities                                                                                                                                                          |   |                                                                        | 2,021   |   |   |   | 17,041 |   |
| Net                    cash provided by operating                    activities                                                                                                                                                             |   |                                                                        | 6,839   |   |   |   | 23,741 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |                                                                        |    |   |   |   |   |   |
| INVESTING                    ACTIVITIES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   |                                                                        |    |   |   |   |   |   |
| Securities:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |                                                                        |    |   |   |   |   |   |
| Proceeds                    from                    sales                                                                                                                                                          |   |                                                                        | 20,341  |   |   |   | 21,067 |   |
| Proceeds                    from maturities and                    paydowns                                                                                                                                        |   |                                                                        | 48,438  |   |   |   | 9,736 |   |
| Purchases                                                                                                                                                                                                          |   |                                                                        | (40,919 | ) |   |   | (115,766 | ) |
| Net                    loan (fundings) and                    principal payments received                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |                                                                        | (6,495  | ) |   |   | 61,543 |   |
| Proceeds                    from sale of loans and                    loan                    participations                                                                                        |   |                                                                        | 414     |   |   |   | 5,776 |   |
| Proceeds                    from sale of other                    real estate                    owned                                                                                              |   |                                                                        | 442     |   |   |   | 291 |   |
| Proceeds                    from bank-owned life                    insurance                                                                                                                       |   |                                                                        | 1,032   |   |   |   | – |   |
| Purchases                    of property and                    equipment                                                                                                                           |   |                                                                        | (2,013  | ) |   |   | (1,333 | ) |
| Disposal                    of property and                    equipment                                                                                                                            |   |                                                                        | – |   |   |   | 98 |   |
| Net                    cash provided by (used for)                    investing activities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |                                                                        | 21,240  |   |   |   | (18,588 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |                                                                        |    |   |   |   |   |   |
| FINANCING                    ACTIVITIES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   |                                                                        |    |   |   |   |   |   |
| Proceeds                    from exercises of                    stock                    options                                                                                                   |   |                                                                        | 1,692   |   |   |   | 2,083 |   |
| Tax                    benefit from exercises of                    nonqualified stock options                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |                                                                        | 203     |   |   |   | 298 |   |
| Dividends                    paid on common                    stock                                                                                                                                |   |                                                                        | (2,689  | ) |   |   | (2,871 | ) |
| Purchase                    of treasury                    stock                                                                                                                                    |   |                                                                        | (6,493  | ) |   |   | (10,406 | ) |
| Net                    purchase of Rabbi Trust                    shares                                                                                                                            |   |                                                                        | (45     | ) |   |   | (46 | ) |
| Net                    (decrease) increase in                    deposit                    accounts                                                                                           |   |                                                                        | (19,361 | ) |   |   | 9,794 |   |
| Net                    increase (decrease) in                    advance payments by borrowers for taxes and insurance                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |                                                                        | 2,425   |   |   |   | (454 | ) |
| Net                    increase in other                    short-term                    borrowings                                                                                                |   |                                                                        | 1,120   |   |   |   | 28,584 |   |
| Repayments                    of  Federal Home Loan Bank                    debt                                                                                                          |   |                                                                        | (35,071 | ) |   |   | (10,067 | ) |
| Net                    cash flows (used for)                    provided by financing activities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |                                                                        | (58,219 | ) |   |   | 16,915 |   |
| Net                    (decrease) increase in                    cash and cash equivalents                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |                                                                        | (30,140 | ) |   |   | 22,068 |   |
| Cash                    and cash equivalents at beginning of                    period                                                                                                    |   |                                                                        | 67,167  |   |   |   | 24,177 |   |
| Cash                    and cash equivalents at end of                    period                                                                                                          |   | $                                                                           | 37,027  |   |   | $ | 46,245 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |                                                                        |    |   |   |   |   |   |
| Supplemental                    disclosures:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |                                                                        |    |   |   |   |   |   |
| Loans                    transferred to real                    estate                    owned                                                                                                     |   | $                                                                           | 783     |   |   | $ | 5,316 |   |
| Cash                    paid for interest on                    deposits                                                                                                                            |   |                                                                        | 13,304  |   |   |   | 9,582 |   |
| Cash                    paid for interest on                    borrowings                                                                                                                          |   |                                                                        | 6,740   |   |   |   | 5,314 |   |
| Cash                    paid for                    taxes                                                                                                                                           |   |                                                                        | 300     |   |   |   | 520 |   |

*See        accompanying notes.*

----

*table of contents*

**CFS        BANCORP, INC.**

**NOTES        TO CONDENSED CONSOLIDATED FINANCIAL        STATEMENTS**

**(Unaudited)**

**1.  Basis        of Financial Statements        Presentation**

*Company*

**2.  Share-Based        Compensation**

*Share-Based Payment**SFAS 123(R)*

----

*table            of            contents*

*RRP*

|                                                    |   | **Number                  of****Shares** |    |   | **Weighted-Average****Exercise                  Price** |   |
|---------------------------------------------------------|--------|------------------------------------------|---------|--------|---------------------------------------------------------|--------|
| Options                  outstanding at January 1, 2007 |   |                                     | 1,496   |   |                                                    | $      | 12.09 |   |
| Granted                                                 |   |                                     | – |   |                                                    |   | – |   |
| Exercised                                               |   |                                     | (152    | )      |                                                    |   | 11.16 |   |
| Forfeited                                               |   |                                     | – |   |                                                    |   | – |   |
| Options                  outstanding at June 30, 2007   |   |                                     | 1,344   |   |                                                    |   | 12.20 |   |
| Options                  exercisable at June 30, 2007   |   |                                     | 1,344   |   |                                                    |   | 12.20 |   |

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*table of contents*

|                                           |   | **Number                  of****Shares** |    |   | **Weighted-Average****Grant-Date                  Fair Value** |   |
|------------------------------------------------|--------|------------------------------------------|---------|--------|----------------------------------------------------------------|--------|
| Unvested                  at December 31, 2006 |   |                                     | 7,115   |   |                                                           | $      | 13.84 |   |
| Granted                                        |   |                                     | – |   |                                                           |   | – |   |
| Vested                                         |   |                                     | (3,505  | )      |                                                           |   | 13.83 |   |
| Forfeited                                      |   |                                     | – |   |                                                           |   | – |   |
| Unvested                  as of June 30, 2007  |   |                                     | 3,610   |   |                                                           | $      | 13.85 |   |

**3.  Other        Comprehensive Loss**

|                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   | **Six                  Months Ended****June                  30,** |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   | **2007**                                                           |   |   | **2006** |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   | (Dollars                  in thousands)                            |   |
| Unrealized                  holding losses arising during the period:                                                                                                                                                                                                                                                                                                                                                                                |   |                                                               |   |   |   |   |
| Unrealized                  net securities                  losses                                                                            |   | $                                                                  | (989   | ) |   | $ | (3,051 | ) |
| Related                  tax                  benefit                                                                                         |   |                                                               | 386    |   |   |   | 1,159 |   |
| Net                                                                                                                                           |   |                                                               | (603   | ) |   |   | (1,892 | ) |
| Less:  reclassification                  adjustment for net gains(losses)                  realized during the                  period:                                                                                                                                                                                                                                                                                                    |   |                                                               |   |   |   |   |   |   |
| Realized                  net securities gains                  (losses)                                                                                                                                                                                                                                                                                                                                                                             |   |                                                               | 10     |   |   |   | (127 | ) |
| Related                  tax (expense)                  benefit                                                                               |   |                                                               | (3     | ) |   |   | 49 |   |
| Net                                                                                                                                           |   |                                                               | 7      |   |   |   | (78 | ) |
| Total                  other comprehensive                  loss                                                               |   | $                                                                  | (610   | ) |   | $ | (1,814 | ) |

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*table of contents*

**4.  Earnings        Per Share**

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   | **Three                  Months Ended****June                  30,** |       |   | **Six                  Months Ended****June                  30,** |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------------------------|------------|--------|--------------------------------------------------------------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   | **2007**                                                             |       |   | **2006**                                                           |   |   | **2007** |   |   | **2006** |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   | (Dollars                  in thousands, except per share data)       |       |
| Net                  income                                                                                                                                                   |   | $                                                                    | 2,281      |   |                                                               | $      | 1,621 |   |   | $ | 3,594 |   |   | $ | 2,930 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |                                                                 |       |   |                                                               |   |   |   |   |   |   |   |   |   |   |   |
| Weighted-average                  common shares outstanding                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |                                                                 | 10,591,194 |   |                                                               |   | 11,128,443 |   |   |   | 10,658,477 |   |   |   | 11,254,182 |   |
| Weighted-average                  common share equivalents (1)                                                                                                                                                                                                                                                                                                                                                                                                                                                |   |                                                                 | 312,546    |   |                                                               |   | 354,117 |   |   |   | 311,514 |   |   |   | 361,049 |   |
| Weighted-average                  common shares and commonshare                  equivalents                  outstanding                                                               |   |                                                                 | 10,903,740 |   |                                                               |   | 11,482,560 |   |   |   | 10,969,991 |   |   |   | 11,615,231 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |                                                                 |       |   |                                                               |   |   |   |   |   |   |   |   |   |   |   |
| Basic                  earnings per                  share                                                                                                                    |   | $                                                                    | 0.22       |   |                                                               | $      | 0.15 |   |   | $ | 0.34 |   |   | $ | 0.26 |   |
| Diluted                  earnings per                  share                                                                                                                  |   |                                                                 | 0.21       |   |                                                               |   | 0.14 |   |   |   | 0.33 |   |   |   | 0.25 |   |

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

|   | (1)                   Assumes exercise of dilutive stock options, a portion of the unearned                  awards under the RRP and treasury shares held in Rabbi Trust                  accounts. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**5.  Change in Accounting Principle**

*FASB**FIN 48**Accounting for Uncertainty in        Income Taxes - an interpretation of FASB Statement No. 109*

----

*table            of            contents*

**6.  Recent Accounting Pronouncements**

*SFAS**Fair Value Measurements*

*The Fair Value Option for Financial Assets and        Financial Liabilities – Including an Amendment of FASB Statement No. 115**Fair Value Option**Fair Value Measurements*

**Item        2.  Management's Discussion        and Analysis of Financial Condition and Results of Operations**

**Forward        Looking Statements**

*Certain        statements contained in this Form 10-Q, in other filings made by the Company        with the U.S. Securities and Exchange Commission (SEC), and in the Company’s        press releases or other stockholder communications, are forward-looking        statements, as that term is defined in U.S. federal securities        laws.  Generally, these statements relate to business plans or        strategies, projections involving anticipated revenues, earnings, profitability        or other aspects of operating results or other future developments in the        Company’s affairs or the industry in which it conducts business. Forward-looking        statements may be identified by reference to a future period or periods or        by        the use of forward-looking terminology such as “anticipate,” “believe,”“expect,” “intend,” “plan,” “estimate,” “would be,” “will,” “intends to,”“project”  or similar expressions or the negative thereof.*

*The        Company        wishes to caution readers not to place undue reliance on any such        forward-looking statements, which speak only as of the date made.  The        Company also advises readers that various factors, including regional and        national economic conditions, changes in levels of market interest rates,        credit        and other risks which are inherent in the Company’s lending and investment*

----

*table            of            contents*

*activities,        legislative changes, changes in the cost of funds,        changes in the demand for loan products and financial services, unexpected        legal        developments, changes in accounting principles, and competitive and regulatory        factors, could affect the Company’s financial performance and could cause the        Company’s actual results for future periods to differ materially from those        anticipated or projected.  For further discussion of risks and        uncertainties that could cause actual results and events to differ materially        from such forward-looking statements see “Part II. Item 1A.  Risk        Factors” of this Form 10-Q as well as “Part I. Item 1A.  Risk Factors”of the Company’s Annual Report on Form 10-K for the year ended December 31,        2006.  Such forward-looking statements are not guarantees of future        performance.  The Company does not undertake, and specifically        disclaims any obligation, to update any forward-looking statements to reflect        occurrences or unanticipated events or circumstances after the date of such        statements.*

**Overview**

*FHLB**Premium Amortization*

----

*table            of            contents*

**Critical        Accounting Policies**

*GAAP*

*Allowance        for        Losses on Loans.*

*SFAS**Accounting for Contingencies.  *

----

*table            of            contents*

*Accounting        by Creditors for Impairment of a        Loan.*

*Income        Tax        Accounting.  *

**Average        Balances, Net Interest Income, Yields Earned and        Rates Paid**

----

*table of contents*

|                                                                                                                                                                                                                                                                                                                                                                                         |   | **Three                  Months Ended June 30,** |      |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------|-----------|
|                                                                                                                                                                                                                                                                                                                                                                                         |   | **2007**                                         |      |   | **2006** |   |
|                                                                                                                                                                                                                                                                                                                                                                                         |   | **Average                  Balance**             |      |   | **Interest** |   |   | **Average****Yield/Cost** |   |   | **Average                  Balance** |   |   | **Interest** |   |   | **Average****Yield/Cost** |   |
|                                                                                                                                                                                                                                                                                                                                                                                         |   | (Dollars                  in thousands)          |      |
| Interest-earning                  assets:                                                                                                                                                                                                                                                                                                                                                    |   |                                             |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loans                  receivable                  (1)                                                                                                 |   | $                                                | 808,331   |   |   | $ | 14,404 |   |   |   | 7.15 | % |   | $ | 861,407 |   |   | $ | 15,326 |   |   |   | 7.14 | % |
| Securities                  (2)                                                                                                                        |   |                                             | 293,424   |   |   |   | 3,475 |   |   |   | 4.69 |   |   |   | 292,112 |   |   |   | 3,150 |   |   |   | 4.27 |   |
| Other                  interest-earning assets                  (3)                                                                                                                                                                                                                                                                                                                          |   |                                             | 49,971    |   |   |   | 605 |   |   |   | 4.86 |   |   |   | 39,802 |   |   |   | 486 |   |   |   | 4.90 |   |
| Total                  interest-earning                  assets                                                                                                                                                                                                                                                                                                                              |   |                                             | 1,151,726 |   |   |   | 18,484 |   |   |   | 6.44 |   |   |   | 1,193,321 |   |   |   | 18,962 |   |   |   | 6.37 |   |
|                                                                                                                                                                                                                                                                                                                                                                                         |   |                                             |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Non-interest                  earning                  assets                                                                                |   |                                             | 78,389    |   |   |   |   |   |   |   |   |   |   |   | 73,007 |   |   |   |   |   |   |   |   |   |
| Total                  assets                                                                                                                |   | $                                                | 1,230,115 |   |   |   |   |   |   |   |   |   |   | $ | 1,266,328 |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                         |   |                                             |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing                  liabilities:                                                                                                                                                                                                                                                                                                                                               |   |                                             |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Deposits:                                                                                                                                                                                                                                                                                                                                                                                    |   |                                             |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Checking                  accounts                                                                                                                                    |   | $                                                | 102,351   |   |   |   | 262 |   |   |   | 1.03 |   |   | $ | 104,306 |   |   |   | 262 |   |   |   | 1.01 |   |
| Money                  market                  accounts                                                                                                               |   |                                             | 176,660   |   |   |   | 1,489 |   |   |   | 3.38 |   |   |   | 137,076 |   |   |   | 897 |   |   |   | 2.62 |   |
| Savings                  accounts                                                                                                                                     |   |                                             | 148,469   |   |   |   | 243 |   |   |   | 0.66 |   |   |   | 165,265 |   |   |   | 140 |   |   |   | 0.34 |   |
| Certificates                  of                  deposit                                                                                                             |   |                                             | 401,987   |   |   |   | 4,625 |   |   |   | 4.61 |   |   |   | 378,084 |   |   |   | 3,710 |   |   |   | 3.94 |   |
| Total                  deposits                                                                                                                                                      |   |                                             | 829,467   |   |   |   | 6,619 |   |   |   | 3.20 |   |   |   | 784,731 |   |   |   | 5,009 |   |   |   | 2.56 |   |
|                                                                                                                                                                                                                                                                                                                                                                                         |   |                                             |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|     Borrowed                  money:                                                                                                                                                                                                                                                                                                                                     |   |                                             |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|        Other                  short-term borrowings (4)                                                                                                                                                                                                                                                                                                   |   |                                             | 18,343    |   |   |   | 197 |   |   |   | 4.31 |   |   |   | 8,361 |   |   |   | 92 |   |   |   | 4.41 |   |
|        FHLB                  debt                  (5)(6)                                                 |   |                                             | 171,302   |   |   |   | 3,030 |   |   |   | 7.00 |   |   |   | 257,759 |   |   |   | 5,129 |   |   |   | 7.87 |   |
|        Total                  borrowed money                                                                                                                                                                                                                                                                                                              |   |                                             | 189,645   |   |   |   | 3,227 |   |   |   | 6.73 |   |   |   | 266,120 |   |   |   | 5,221 |   |   |   | 7.76 |   |
| Total                  interest-bearing                  liabilities                                                                                                                                                                                                                                                                                                                         |   |                                             | 1,019,112 |   |   |   | 9,846 |   |   |   | 3.88 |   |   |   | 1,050,851 |   |   |   | 10,230 |   |   |   | 3.90 |   |
| Non-interest                  bearing deposits                                                                                                                                                                                                                                                                                                                                               |   |                                             | 64,717    |   |   |   |   |   |   |   |   |   |   |   | 63,357 |   |   |   |   |   |   |   |   |   |
| Non-interest                  bearing liabilities                                                                                                                                                                                                                                                                                                                                            |   |                                             | 16,423    |   |   |   |   |   |   |   |   |   |   |   | 16,678 |   |   |   |   |   |   |   |   |   |
| Total                  liabilities                                                                                                           |   |                                             | 1,100,252 |   |   |   |   |   |   |   |   |   |   |   | 1,130,886 |   |   |   |   |   |   |   |   |   |
| Stockholders'                  equity                                                                                                        |   |                                             | 129,863   |   |   |   |   |   |   |   |   |   |   |   | 135,442 |   |   |   |   |   |   |   |   |   |
| Total                  liabilities and stockholders' equity                                                                                                                                                                                                                                                                                                                             |   | $                                                | 1,230,115 |   |   |   |   |   |   |   |   |   |   | $ | 1,266,328 |   |   |   |   |   |   |   |   |   |
| Net                  interest-earning                  assets                                                                                |   | $                                                | 132,614   |   |   |   |   |   |   |   |   |   |   | $ | 142,470 |   |   |   |   |   |   |   |   |   |
| Net                  interest income / interest rate spread                                                                                                                                                                                                                                                                                                                             |   |                                             |      |   |   | $ | 8,638 |   |   |   | 2.56 | % |   |   |   |   |   | $ | 8,732 |   |   |   | 2.47 | % |
| Net                  interest                  margin                                                                                        |   |                                             |      |   |   |   |   |   |   |   | 3.01 | % |   |   |   |   |   |   |   |   |   |   | 2.93 | % |
| Ratio                  of average interest-earning assetsto                  average interest-bearing                  liabilities                                                                                                                                                                                                                                                           |   |                                             |      |   |   |   |   |   |   |   | 113.01 | % |   |   |   |   |   |   |   |   |   |   | 113.56 | % |

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

| (1) | The                  average balance of loans receivable includes non-performing loans,                  interest on which is recognized on a cash                  basis. |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | Average                  balances of securities are based on amortized                  cost. |
|-----|-----------------------------------------------------------------------------------------------|

| (3) | Includes                  FHLB stock, money market accounts, federal funds sold and interest-earning                  bank deposits. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------|

| (4) | Includes                  federal funds purchased and repurchase agreements (*Repo                  Sweeps*). |
|-----|---------------------------------------------------------------------------------------------------------------|

| (5) | The                  2007 period includes an average of $175.5 million of contractual                  FHLB                  borrowings reduced by an average of $4.2 million of unamortized                  deferred                  premium on the early extinguishment of debt.  Interest expense                  on borrowed money includes $1.3 million of amortization of the                  deferred                  premium on the early extinguishment of debt.  The amortization                  of the deferred premium increased the average cost of borrowed                  money as                  reported to 6.73% compared to an average contractual rate of                  4.03%. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (6) | The                  2006 period includes an average of $269.9 million of contractual                  FHLB                  borrowings reduced by an average of $12.1 million of unamortized                  deferred                  premium on the early extinguishment of debt.  Interest expense                  on borrowed money includes $2.6 million of amortization of the                  deferred                  premium on early extinguishment of debt.  The amortization of                  the deferred premium increased the average cost of borrowed money                  as                  reported to 7.76% compared to an average contractual rate of                  3.88%. |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

*table of contents*

|                                                                                                                                                                                                                                                                                                                                                                                         |   | **Six                  Months Ended June 30,** |      |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------------------|-----------|
|                                                                                                                                                                                                                                                                                                                                                                                         |   | **2007**                                       |      |   | **2006** |   |
|                                                                                                                                                                                                                                                                                                                                                                                         |   | **Average****Balance**                         |      |   | **Interest** |   |   | **Average****Yield/Cost** |   |   | **Average****Balance** |   |   | **Interest** |   |   | **Average****Yield/Cost** |   |
|                                                                                                                                                                                                                                                                                                                                                                                         |   | (Dollars                  in thousands)        |      |
| Interest-earning                  assets:                                                                                                                                                                                                                                                                                                                                                    |   |                                           |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loans                  receivable                  (1)                                                                                                      |   | $                                              | 801,132   |   |   | $ | 28,456 |   |   |   | 7.16 | % |   | $ | 877,860 |   |   | $ | 30,229 |   |   |   | 6.94 | % |
| Securities                  (2)                                                                                                                             |   |                                           | 297,890   |   |   |   | 6,998 |   |   |   | 4.67 |   |   |   | 266,571 |   |   |   | 5,641 |   |   |   | 4.21 |   |
| Other                  interest-earning assets                  (3)                                                                                                                                                                                                                                                                                                                          |   |                                           | 66,453    |   |   |   | 1,681 |   |   |   | 5.10 |   |   |   | 44,154 |   |   |   | 1,049 |   |   |   | 4.79 |   |
| Total                  interest-earning                  assets                                                                                                                                                                                                                                                                                                                              |   |                                           | 1,165,475 |   |   |   | 37,135 |   |   |   | 6.43 |   |   |   | 1,188,585 |   |   |   | 36,919 |   |   |   | 6.26 |   |
|                                                                                                                                                                                                                                                                                                                                                                                         |   |                                           |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Non-interest                  earning                  assets                                                                                |   |                                           | 77,685    |   |   |   |   |   |   |   |   |   |   |   | 71,260 |   |   |   |   |   |   |   |   |   |
| Total                  assets                                                                                                                |   | $                                              | 1,243,160 |   |   |   |   |   |   |   |   |   |   | $ | 1,259,845 |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                         |   |                                           |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing                  liabilities:                                                                                                                                                                                                                                                                                                                                               |   |                                           |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Deposits:                                                                                                                                                                                                                                                                                                                                                                                    |   |                                           |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Checking                  accounts                                                                                                                                    |   | $                                              | 101,684   |   |   |   | 511 |   |   |   | 1.01 |   |   | $ | 104,559 |   |   |   | 511 |   |   |   | 0.99 |   |
| Money                  market                  accounts                                                                                                               |   |                                           | 183,937   |   |   |   | 3,159 |   |   |   | 3.46 |   |   |   | 132,008 |   |   |   | 1,639 |   |   |   | 2.50 |   |
| Savings                  accounts                                                                                                                                     |   |                                           | 149,089   |   |   |   | 476 |   |   |   | 0.64 |   |   |   | 166,391 |   |   |   | 285 |   |   |   | 0.35 |   |
| Certificates                  of                  deposit                                                                                                             |   |                                           | 402,748   |   |   |   | 9,167 |   |   |   | 4.59 |   |   |   | 376,266 |   |   |   | 7,122 |   |   |   | 3.82 |   |
| Total                  deposits                                                                                                                                                      |   |                                           | 837,458   |   |   |   | 13,313 |   |   |   | 3.21 |   |   |   | 779,224 |   |   |   | 9,557 |   |   |   | 2.47 |   |
|                                                                                                                                                                                                                                                                                                                                                                                         |   |                                           |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|     Borrowed                  money:                                                                                                                                                                                                                                                                                                                                     |   |                                           |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|        Other                  short-term borrowings (4)                                                                                                                                                                                                                                                                                                   |   |                                           | 21,602    |   |   |   | 455 |   |   |   | 4.25 |   |   |   | 6,214 |   |   |   | 130 |   |   |   | 4.22 |   |
|        FHLB                  debt                  (5)(6)                                                 |   |                                           | 175,489   |   |   |   | 6,205 |   |   |   | 7.03 |   |   |   | 257,801 |   |   |   | 10,264 |   |   |   | 7.92 |   |
|        Total                  borrowed money                                                                                                                                                                                                                                                                                                              |   |                                           | 197,091   |   |   |   | 6,660 |   |   |   | 6.72 |   |   |   | 264,015 |   |   |   | 10,394 |   |   |   | 7.83 |   |
| Total                  interest-bearing                  liabilities                                                                                                                                                                                                                                                                                                                         |   |                                           | 1,034,549 |   |   |   | 19,973 |   |   |   | 3.89 |   |   |   | 1,043,239 |   |   |   | 19,951 |   |   |   | 3.86 |   |
| Non-interest                  bearing deposits                                                                                                                                                                                                                                                                                                                                               |   |                                           | 62,114    |   |   |   |   |   |   |   |   |   |   |   | 62,207 |   |   |   |   |   |   |   |   |   |
| Non-interest                  bearing liabilities                                                                                                                                                                                                                                                                                                                                            |   |                                           | 16,018    |   |   |   |   |   |   |   |   |   |   |   | 16,639 |   |   |   |   |   |   |   |   |   |
| Total                  liabilities                                                                                                           |   |                                           | 1,112,681 |   |   |   |   |   |   |   |   |   |   |   | 1,122,085 |   |   |   |   |   |   |   |   |   |
| Stockholders'                  equity                                                                                                        |   |                                           | 130,479   |   |   |   |   |   |   |   |   |   |   |   | 137,760 |   |   |   |   |   |   |   |   |   |
| Total                  liabilities and stockholders' equity                                                                                                                                                                                                                                                                                                                             |   | $                                              | 1,243,160 |   |   |   |   |   |   |   |   |   |   | $ | 1,259,845 |   |   |   |   |   |   |   |   |   |
| Net                  interest-earning                  assets                                                                                |   | $                                              | 130,926   |   |   |   |   |   |   |   |   |   |   | $ | 145,346 |   |   |   |   |   |   |   |   |   |
| Net                  interest income / interest rate spread                                                                                                                                                                                                                                                                                                                             |   |                                           |      |   |   | $ | 17,162 |   |   |   | 2.54 | % |   |   |   |   |   | $ | 16,968 |   |   |   | 2.40 | % |
| Net                  interest                  margin                                                                                        |   |                                           |      |   |   |   |   |   |   |   | 2.97 | % |   |   |   |   |   |   |   |   |   |   | 2.88 | % |
| Ratio                  of average interest-earning assets                        to average interest-bearing liabilities                                                                                                                                                                                                                                       |   |                                           |      |   |   |   |   |   |   |   | 112.66 | % |   |   |   |   |   |   |   |   |   |   | 113.93 | % |

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

| (1) | The                  average balance of loans receivable includes non-performing loans,                  interest on which is recognized on a cash                  basis. |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | Average                  balances of securities are based on amortized                  cost. |
|-----|-----------------------------------------------------------------------------------------------|

| (3) | Includes                  FHLB stock, money market accounts, federal funds sold and interest-earning                  bank deposits. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------|

| (4) | Includes                  federal funds purchased and repurchase agreements (*Repo                  Sweeps*). |
|-----|---------------------------------------------------------------------------------------------------------------|

| (5) | The                  2007 period includes an average of $180.4 million of contractual                  FHLB                  borrowings reduced by an average of $4.9 million of unamortized                  deferred                  premium on the early extinguishment of debt.  Interest expense                  on borrowed money includes $2.6 million of amortization of the                  deferred                  premium on the early extinguishment of debt.  The amortization                  of the deferred premium increased the average cost of borrowed                  money as                  reported to 6.72% compared to an average contractual rate of                  4.03%. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (6) | The                  2006 period includes an average of $271.2 million of contractual                  FHLB                  borrowings reduced by an average of $13.4 million of unamortized                  premium                  on the early extinguishment of debt.  Interest expense on                  borrowed money includes $5.1 million of amortization of the deferred                  premium on the early extinguishment of debt.  The amortization                  of the deferred premium increased the average cost of borrowed                  money as                  reported to 7.83% compared to an average contractual rate of                  3.88%. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

*table of contents*

|   | **Rate / Volume                  Analysis** |
|--------|---------------------------------------------|

|                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   | **Three                  Months Ended June 30,** |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   | **2007                  compared to 2006**       |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   | **Increase                  (decrease) due to**  |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   | **Rate**                                         |   |   | **Volume** |   |   | **Rate/****Volume** |   |   | **Total                  Net Increase / (Decrease)** |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   | (Dollars                  in thousands)          |   |
| Interest-earning                  assets:                                                                                                                                                                                                                                                                                                                                                                                                               |   |                                             |   |   |   |   |   |   |   |   |   |   |
| Loans                  receivable                                                                                                                                         |   | $                                                | 24     |   |   | $ | (945 | ) |   | $ | (1 | ) |   | $ | (922 | ) |
| Securities                                                                                                                                                                |   |                                             | 310    |   |   |   | 14 |   |   |   | 1 |   |   |   | 325 |   |
| Other                  interest-earning                  assets                                                                                                           |   |                                             | (4     | ) |   |   | 124 |   |   |   | (1 | ) |   |   | 119 |   |
| Total                  net change in income on                  interest-earning                  assets                                                                                                |   |                                             | 330    |   |   |   | (807 | ) |   |   | (1 | ) |   |   | (478 | ) |
| Interest-bearing                  liabilities:                                                                                                                                                                                                                                                                                                                                                                                                          |   |                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Deposits:                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Checking                  accounts                                                                                                                                                       |   |                                             | 5      |   |   |   | (5 | ) |   |   | – |   |   |   | – |   |
| Money                  market                  accounts                                                                                                                                  |   |                                             | 257    |   |   |   | 260 |   |   |   | 75 |   |   |   | 592 |   |
| Savings                  accounts                                                                                                                                                        |   |                                             | 130    |   |   |   | (14 | ) |   |   | (13 | ) |   |   | 103 |   |
| Certificates                  of                  deposit                                                                                                                                |   |                                             | 640    |   |   |   | 235 |   |   |   | 40 |   |   |   | 915 |   |
| Total                  deposits                                                                                                                                                                    |   |                                             | 1,032  |   |   |   | 476 |   |   |   | 102 |   |   |   | 1,610 |   |
|     Borrowed                  money:                                                                                                                                                                                                                                                                                                                                                                                                |   |                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|        Other                  short-term                  borrowings                                                         |   |                                             | (2     | ) |   |   | 110 |   |   |   | (3 | ) |   |   | 105 |   |
|        FHLB                  debt                                                                                            |   |                                             | (570   | ) |   |   | (1,720 | ) |   |   | 191 |   |   |   | (2,099 | ) |
|        Total                  borrowed                  money                                                                          |   |                                             | (572   | ) |   |   | (1,610 | ) |   |   | 188 |   |   |   | (1,994 | ) |
| Total                  net change in expense on                  interest-bearing                  liabilities                                                                           |   |                                             | 460    |   |   |   | (1,134 | ) |   |   | 290 |   |   |   | (384 | ) |
| Net                  change in net interest                  income                                                                                             |   | $                                                | (130   | ) |   | $ | 327 |   |   | $ | (291 | ) |   | $ | (94 | ) |

----

*table of contents*

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   | **Six                  Months Ended June 30,**  |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   | **2007                  compared to 2006**      |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   | **Increase                  (decrease) due to** |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   | **Rate**                                        |   |   | **Volume** |   |   | **Rate/****Volume** |   |   | **Total                  Net Increase / (Decrease)** |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   | (Dollars                  in thousands)         |   |
| Interest-earning                  assets:                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |                                            |   |   |   |   |   |   |   |   |   |   |
| Loans                  receivable                                                                                                                                                                                                  |   | $                                               | 952    |   |   | $ | (2,642 | ) |   | $ | (83 | ) |   | $ | (1,773 | ) |
| Securities                                                                                                                                                                                                                         |   |                                            | 621    |   |   |   | 663 |   |   |   | 73 |   |   |   | 1,357 |   |
| Other                  interest-earning                  assets                                                                                                                                                                    |   |                                            | 67     |   |   |   | 531 |   |   |   | 34 |   |   |   | 632 |   |
|                          Total net change in income on interest-                              earning                  assets                                               |   |                                            | 1,640  |   |   |   | (1,448 | ) |   |   | 24 |   |   |   | 216 |   |
| Interest-bearing                  liabilities:                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Deposits:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Checking                  accounts                                                                                                                                                                                                                |   |                                            | 14     |   |   |   | (14 | ) |   |   | – |   |   |   | – |   |
| Money                  market                  accounts                                                                                                                                                                                           |   |                                            | 627    |   |   |   | 646 |   |   |   | 247 |   |   |   | 1,520 |   |
| Savings                  accounts                                                                                                                                                                                                                 |   |                                            | 247    |   |   |   | (30 | ) |   |   | (26 | ) |   |   | 191 |   |
| Certificates                  of                  deposit                                                                                                                                                                                         |   |                                            | 1,442  |   |   |   | 501 |   |   |   | 102 |   |   |   | 2,045 |   |
| Total                  deposits                                                                                                                                                                                                                             |   |                                            | 2,330  |   |   |   | 1,103 |   |   |   | 323 |   |   |   | 3,756 |   |
|     Borrowed                  money:                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|        Other                  short-term                  borrowings                                                                                                                  |   |                                            | 1      |   |   |   | 322 |   |   |   | 2 |   |   |   | 325 |   |
|        FHLB                  debt                                                                                                                                                     |   |                                            | (1,149 | ) |   |   | (3,277 | ) |   |   | 367 |   |   |   | (4,059 | ) |
|        Total                  borrowed                  money                                                                                                                                   |   |                                            | (1,148 | ) |   |   | (2,955 | ) |   |   | 369 |   |   |   | (3,734 | ) |
|     Total                  net change in expense on interest-                        bearing                  liabilities                                                                                                |   |                                            | 1,182  |   |   |   | (1,852 | ) |   |   | 692 |   |   |   | 22 |   |
| Net                  change in net interest                  income                                                                                                                                                      |   | $                                               | 458    |   |   | $ | 404 |   |   | $ | (668 | ) |   | $ | 194 |   |

**Analysis        of Statements of Income**

*Net        Interest        Margin.*

*Interest        Income.**Wall Street Journal *

----

*table            of            contents*

*Interest        Expense.*

*Premium Amortization*

*Provision        for losses on loans.**Changes in Financial Condition – *

----

*table            of            contents*

*Allowance        for Losses on Loans**Management’s Discussion and Analysis of Financial Condition and Results of        Operations*

*Non-interest        income.  *

|                                                          |   | **Three                  Months Ended June 30,** |   |   | **Six                  Months Ended June 30,** |   |
|---------------------------------------------------------------|--------|--------------------------------------------------|--------|--------|------------------------------------------------|--------|
|                                                          |   | **2007**                                         |   |   | **2006**                                       |   |   | **%                  Change** |   |   | **2007** |   |   | **2006** |   |   | **%                  Change** |   |
|                                                          |   | (Dollars                  in thousands)          |   |
| Service                  charges and other fees               |   | $                                                | 1,670  |   |                                           | $      | 1,710 |   |   |   | (2.3 | )% |   | $ | 3,239 |   |   | $ | 3,312 |   |   |   | (2.2 | )% |
| Card-based                  fees                              |   |                                             | 380    |   |                                           |   | 335 |   |   |   | 13.4 |   |   |   | 722 |   |   |   | 653 |   |   |   | 10.6 |   |
| Commission                  income                            |   |                                             | 36     |   |                                           |   | 55 |   |   |   | (34.5 | ) |   |   | 67 |   |   |   | 117 |   |   |   | (42.7 | ) |
| Subtotal                  fee based                  revenues |   |                                             | 2,086  |   |                                           |   | 2,100 |   |   |   | (0.7 | ) |   |   | 4,028 |   |   |   | 4,082 |   |   |   | (1.3 | ) |
| Income                  from bank-owned life insurance        |   |                                             | 403    |   |                                           |   | 396 |   |   |   | 1.8 |   |   |   | 808 |   |   |   | 788 |   |   |   | 2.5 |   |
| Other                  income                                 |   |                                             | 206    |   |                                           |   | 286 |   |   |   | (28.0 | ) |   |   | 446 |   |   |   | 475 |   |   |   | (6.1 | ) |
| Subtotal                                                      |   |                                             | 2,695  |   |                                           |   | 2,782 |   |   |   | (3.1 | ) |   |   | 5,282 |   |   |   | 5,345 |   |   |   | (1.2 | ) |
| Security                  gains (losses), net                 |   |                                             | (1     | )      |                                           |   | – |   |   | NM |   |   |   | 10 |   |   |   | (127 | ) |   |   | 107.9 |   |
| Other                  asset gains (losses), net              |   |                                             | (1     | )      |                                           |   | 47 |   |   |   | (102.1 | ) |   |   | 10 |   |   |   | 48 |   |   |   | (79.2 | ) |
| Total                  non-interest                  income   |   | $                                                | 2,693  |   |                                           | $      | 2,829 |   |   |   | (4.8 | )% |   | $ | 5,302 |   |   | $ | 5,266 |   |   |   | 0.7 | % |

*Non-interest        expense.  *

|                                                                          |   | **Three                  Months Ended June 30,** |   |   | **Six                  Months Ended June 30,** |   |
|-------------------------------------------------------------------------------|--------|--------------------------------------------------|--------|--------|------------------------------------------------|--------|
|                                                                          |   | **2007**                                         |   |   | **2006**                                       |   |   | **%                  Change** |   |   | **2007** |   |   | **2006** |   |   | **%                  Change** |   |
|                                                                          |   | (Dollars                  in thousands)          |   |
| Compensation                  and mandatory benefits                          |   | $                                                | 3,950  |   |                                           | $      | 3,849 |   |   |   | 2.6 | % |   | $ | 8,612 |   |   | $ | 7,775 |   |   |   | 10.8 | % |
| Retirement                  and stock related compensation                    |   |                                             | 229    |   |                                           |   | 727 |   |   |   | (68.5 | ) |   |   | 566 |   |   |   | 1,448 |   |   |   | (60.9 | ) |
| Medical                  and life benefits                                    |   |                                             | 200    |   |                                           |   | 550 |   |   |   | (63.6 | ) |   |   | 425 |   |   |   | 850 |   |   |   | (50.0 | ) |
| Other                  employee benefits                                      |   |                                             | 28     |   |                                           |   | 70 |   |   |   | (60.0 | ) |   |   | 59 |   |   |   | 146 |   |   |   | (59.6 | ) |
| Subtotal                  compensation and employee                  benefits |   |                                             | 4,407  |   |                                           |   | 5,196 |   |   |   | (15.2 | ) |   |   | 9,662 |   |   |   | 10,219 |   |   |   | (5.5 | ) |
| Net                  occupancy expense                                        |   |                                             | 694    |   |                                           |   | 652 |   |   |   | 6.4 |   |   |   | 1,447 |   |   |   | 1,314 |   |   |   | 10.1 |   |
| Professional                  fees                                            |   |                                             | 390    |   |                                           |   | 413 |   |   |   | (5.6 | ) |   |   | 960 |   |   |   | 764 |   |   |   | 25.7 |   |
| Data                  processing                                              |   |                                             | 566    |   |                                           |   | 678 |   |   |   | (16.5 | ) |   |   | 1,129 |   |   |   | 1,351 |   |   |   | (16.4 | ) |
| Furniture                  and equipment expense                              |   |                                             | 566    |   |                                           |   | 541 |   |   |   | 4.6 |   |   |   | 1,100 |   |   |   | 968 |   |   |   | 13.6 |   |
| Marketing                                                                     |   |                                             | 190    |   |                                           |   | 391 |   |   |   | (51.4 | ) |   |   | 401 |   |   |   | 589 |   |   |   | (31.9 | ) |
| Other                  general and administrative expense                     |   |                                             | 1,256  |   |                                           |   | 1,370 |   |   |   | (8.3 | ) |   |   | 2,637 |   |   |   | 2,763 |   |   |   | (4.6 | ) |
| Total                  non-interest                  expense                  |   | $                                                | 8,069  |   |                                           | $      | 9,241 |   |   |   | (12.7 | )% |   | $ | 17,336 |   |   | $ | 17,968 |   |   |   | (3.5 | )% |

----

*table            of contents*

|   | • | reduced retirement and stock-related compensation                  expense pertaining to the Company’s 2007 ESOP loan modification totaling                  $267,000 and $292,000, respectively; |
|--------|---------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • | reduced pension expense totaling $230,000 and                  $590,000,                  respectively; |
|--------|---------|---------------------------------------------------------------------------------------------------------|

|   | • | decreased medical and life benefits expense                  of $350,000                  and $425,000, respectively, due to the realization of cost savings                  from                  switching the Company’s service provider during 2006 and a reduction in                  the number of large medical claims during                  2007; |
|--------|---------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • | decreased data processing expenses as a result                  of                  bringing the items processing in-house;                  and |
|--------|---------|--------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • | reduced marketing expenses due to the elimination                  of                  certain legacy marketing initiatives deemed no longer effective                  and the                  reassessment of current marketing strategies and outsourcing                  arrangements |
|--------|---------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • | increased compensation and mandatory benefits                  as a                  result of the hiring of additional commercial lenders since early                  2006 as                  well as severance expense incurred during the first quarter of                  2007                  related to the Company’s reduction in                  force; |
|--------|---------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • | increased professional fees primarily during                  the first                  quarter of 2007 that were associated with the implementation of                  the                  Company’s customer-centric relationship management program and legal                  expenses relating to modifications to the Bank’s ESOP loan and 401(k)                  benefit plan, the reduction in the workforce and new SEC proxy                  disclosure                  requirements; and |
|--------|---------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • | increased net occupancy expense and furniture                  and                  equipment expense primarily due to the opening of the Company’s Tinley                  Park, Illinois office during the first quarter of                  2007 |
|--------|---------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

*table of contents*

|                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   | **Three                  Months Ended****June                  30,** |   |   | **Six                  Months Ended****June                  30,** |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------------------------|--------|--------|--------------------------------------------------------------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   | **2007**                                                             |   |   | **2006**                                                           |   |   | **2007** |   |   | **2006** |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   | (Dollars                  in thousands)                              |   |
| Efficiency                  ratio:                                                                                                                                                                                                                                                                                                                                                                                                                      |   |                                                                 |   |   |                                                               |   |   |   |   |   |   |   |
| Non-interest                  expense                                                                                                                                                                                                                                                                                                                                                                                                              |   | $                                                                    | 8,069  |   |                                                               | $      | 9,241 |   |   | $ | 17,336 |   |   | $ | 17,968 |   |
| Net                  interest income before the provision for losses on loans plus                      non-interest income                                                                                                                                                                                                                                                                                                         |   | $                                                                    | 11,331 |   |                                                               | $      | 11,561 |   |   | $ | 22,464 |   |   | $ | 22,234 |   |
| Efficiency                  ratio                                                                                       |   |                                                                 | 71.21  | %      |                                                               |   | 79.93 | % |   |   | 77.17 | % |   |   | 80.81 | % |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |                                                                 |   |   |                                                               |   |   |   |   |   |   |   |   |   |   |   |
| Core                  efficiency ratio:                                                                                                                                                                                                                                                                                                                                                                                                                 |   |                                                                 |   |   |                                                               |   |   |   |   |   |   |   |   |   |   |   |
| Non-interest                  expense                                                                                   |   | $                                                                    | 8,069  |   |                                                               | $      | 9,241 |   |   | $ | 17,336 |   |   | $ | 17,968 |   |
| Net                  interest income before the provision for losses on loans plus                      non-interest income                                                                                                                                                                                                                                                                                                    |   | $                                                                    | 11,331 |   |                                                               | $      | 11,561 |   |   | $ | 22,464 |   |   | $ | 22,234 |   |
| Adjustments:                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |                                                                 |   |   |                                                               |   |   |   |   |   |   |   |   |   |   |   |
| Net                  realized (gains) losses on                  sale of securities                  available-for-sale                                                                                                                                                                                                                        |   |                                                                 | 1      |   |                                                               |   | – |   |   |   | (10 | ) |   |   | 127 |   |
| Net                  realized (gains) losses on                  sales of                  other assets                                                                                                                                                                                                                         |   |                                                                 | 1      |   |                                                               |   | (47 | ) |   |   | (10 | ) |   |   | (48 | ) |
| Amortization                  of deferred                  premium on the early extinguishment                        of debt                                                                                                                                                                                                                                                                                   |   |                                                                 | 1,276  |   |                                                               |   | 2,555 |   |   |   | 2,627 |   |   |   | 5,123 |   |
| Net                  interest income before the                  provision for losses on loans                        plus non-interest income - as adjusted                                                                                                                                                                                                                                                              |   | $                                                                    | 12,609 |   |                                                               | $      | 14,069 |   |   | $ | 25,071 |   |   | $ | 27,436 |   |
| Core                  efficiency                  ratio                                                                 |   |                                                                 | 63.99  | %      |                                                               |   | 65.68 | % |   |   | 69.15 | % |   |   | 65.49 | % |

----

*table            of            contents*

*Income        Tax        Expense.*

**Changes        in Financial Condition**

*Securities.  *

|                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   | **Amortized                  Cost**     |    |   | **Gross                  Unrealized Gains** |   |    | **Gross                  Unrealized Losses** |   |   | **Fair****Value** |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------|---------|--------|---------------------------------------------|--------|---------|----------------------------------------------|--------|--------|-------------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   | (Dollars                  in thousands) |    |
| At                  June 30, 2007:                                                                                                                                                                                                                                                                                                                                                                                                                              |   |                                    |    |   |                                        |   |    |                                         |   |   |              |   |
| Government                  sponsored entity                  (*GSE*) securities (1)                                                                                                                                                                                                                                                                                                                                                                            |   | $                                       | 250,810 |   |                                        | $      | 171     |                                         |   | $      | (1,348            | )      |   | $ | 249,633 |   |
| Mortgage-backed                  securities                                                                                          |   |                                    | 15,115  |   |                                        |   | – |                                         |   |   | (227              | )      |   |   | 14,888 |   |
| Collateralized                  mortgage                  obligations                                                                |   |                                    | 4,672   |   |                                        |   | 2       |                                         |   |   | (69               | )      |   |   | 4,605 |   |
| Equity                  securities                                                                                                   |   |                                    | 1,260   |   |                                        |   | 18      |                                         |   |   | –           |   |   |   | 1,278 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   | $                                       | 271,857 |   |                                        | $      | 191     |                                         |   | $      | (1,644            | )      |   | $ | 270,404 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |                                    |    |   |                                        |   |    |                                         |   |   |              |   |   |   |   |   |
| At                  December 31, 2006:                                                                                                                                                                                                                                                                                                                                                                                                                          |   |                                    |    |   |                                        |   |    |                                         |   |   |              |   |   |   |   |   |
| Government                  sponsored entity                  (*GSE*) securities (1)                                                                                                                                                                                                                                                                                                                                                                            |   | $                                       | 267,148 |   |                                        | $      | 905     |                                         |   | $      | (1,139            | )      |   | $ | 266,914 |   |
| Mortgage-backed                  securities                                                                                          |   |                                    | 20,234  |   |                                        |   | 8       |                                         |   |   | (254              | )      |   |   | 19,988 |   |
| Collateralized                  mortgage                  obligations                                                                |   |                                    | 10,612  |   |                                        |   | 22      |                                         |   |   | (112              | )      |   |   | 10,522 |   |
| Equity                  securities                                                                                                   |   |                                    | 1,385   |   |                                        |   | 116     |                                         |   |   | –           |   |   |   | 1,501 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   | $                                       | 299,379 |   |                                        | $      | 1,051   |                                         |   | $      | (1,505            | )      |   | $ | 298,925 |   |

----

*table            of            contents*

*OTTI**FSP**The Meaning        of Other-Than-Temporary Impairment and Its Application to Certain Investments        *

*Loans.  *

----

*table of contents*

|                                                                     |   | **June                  30, 2007**      |    |   | **December                  31, 2006** |   |   |       |   |
|--------------------------------------------------------------------------|--------|-----------------------------------------|---------|--------|----------------------------------------|--------|--------|------------|--------|
|                                                                     |   | **Amount**                              |    |   | **%                  of Total**        |   |   | **Amount** |   |   | **%                  of Total** |   |   | **%                  Change** |   |
|                                                                     |   | (Dollars                  in thousands) |    |
| Commercial                  and construction loans:                      |   |                                    |    |   |                                   |   |   |       |   |   |   |   |   |   |   |
| Commercial                  real                  estate                 |   | $                                       | 338,167 |   |                                   |   | 41.9   | %          |   | $ | 339,110 |   |   |   | 42.2 | % |   |   | (0.3 | )% |
| Construction                  and land                  development      |   |                                    | 126,193 |   |                                   |   | 15.6   |       |   |   | 128,529 |   |   |   | 16.0 |   |   |   | (1.8 | ) |
| Commercial                  and                  industrial              |   |                                    | 54,365  |   |                                   |   | 6.7    |       |   |   | 35,743 |   |   |   | 4.5 |   |   |   | 52.1 |   |
| Total                  commercial and                  constructionloans |   |                                    | 518,725 |   |                                   |   | 64.2   |       |   |   | 503,382 |   |   |   | 62.7 |   |   |   | 3.0 |   |
|                                                                     |   |                                    |    |   |                                   |   |   |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Retail                  loans:                                           |   |                                    |    |   |                                   |   |   |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Single-family                  residential                               |   |                                    | 222,902 |   |                                   |   | 27.6   |       |   |   | 225,007 |   |   |   | 28.1 |   |   |   | (0.9 | ) |
| Home                  equity lines of                  credit            |   |                                    | 63,465  |   |                                   |   | 7.8    |       |   |   | 70,527 |   |   |   | 8.8 |   |   |   | (10.0 | ) |
| Other                                                                    |   |                                    | 3,040   |   |                                   |   | 0.4    |       |   |   | 3,467 |   |   |   | 0.4 |   |   |   | (12.3 | ) |
| Total                  retail                  loans                     |   |                                    | 289,407 |   |                                   |   | 35.8   |       |   |   | 299,001 |   |   |   | 37.3 |   |   |   | (3.2 | ) |
|                                                                     |   |                                    |    |   |                                   |   |   |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                  loans receivable, net of unearnedfees             |   | $                                       | 808,132 |   |                                   |   | 100.0  | %          |   | $ | 802,383 |   |   |   | 100.0 | % |   |   | 0.7 | % |

*Allowance        for        Losses on Loans.*

----

*table of contents*

|                                                                                                                                                                                                                                                                                                                                                                                                                                           |   | **Three                  Months Ended****June                  30,** | ** ** | ** ** | **Six                  Months Ended****June                  30,** |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------------------------|------------|------------|--------------------------------------------------------------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                           |   | **2007**                                                             |       |       | **2006**                                                           |   |   | **2007** |   |   | **2006** |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                           |   | (Dollars                  in thousands)                              |       |
| Balance                  at beginning of                  period                                                              |   | $                                                                    | 11,400     |       |                                                               | $      | 13,337 |   |   | $ | 11,184 |   |   | $ | 12,939 |   |
| Provision                  for losses on                  loans                                                               |   |                                                                 | 126        |       |                                                               |   | 173 |   |   |   | 313 |   |   |   | 558 |   |
| Charge-offs                                                                                                                   |   |                                                                 | (915       | )          |                                                               |   | (1,837 | ) |   |   | (1,035 | ) |   |   | (1,984 | ) |
| Recoveries                                                                                                                    |   |                                                                 | 13         |       |                                                               |   | 17 |   |   |   | 162 |   |   |   | 177 |   |
| Balance                  at end of                  period                                                                    |   | $                                                                    | 10,624     |       |                                                               | $      | 11,690 |   |   | $ | 10,624 |   |   | $ | 11,690 |   |

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   | **June                  30,**** 2007** |   |   | **December                  31, 2006** |   |   | **June                  30,**** 2006** |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------|--------|--------|----------------------------------------|--------|--------|---------------------------------------------|--------|
| Allowance                  for losses on loans to total                  loans                                                                                 |   |                                        | 1.31   | %      |                                   |   | 1.39   | %                                           |   |   | 1.39 | % |
| Allowance                  for losses on loans to non-performing loans                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |                                        | 36.42  |   |                                   |   | 40.64  |                                        |   |   | 62.07 |   |

*Non-performing        Assets.  *

----

*table of contents*

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   | **June                    30,****2007**   |    |   | **December                    31,****2006** |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------|---------|--------|---------------------------------------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   | (Dollars                    in thousands) |    |
| Non-accrual                    loans:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |                                      |    |
| Commercial                    and construction                    loans:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |                                      |    |   |                                        |   |
| Commercial                    real                    estate                                                                                                                                                   |   | $                                         | 14,869  |   |                                        | $      | 15,863 |   |
| Construction                    and land                    development                                                                                                                                        |   |                                      | 9,850   |   |                                        |   | 7,192 |   |
| Commercial                    and                    industrial                                                                                                                                                |   |                                      | 510     |   |                                        |   | 455 |   |
| Total                    commercial and                    construction                    loans                                                                                                               |   |                                      | 25,229  |   |                                        |   | 23,510 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |                                      |    |   |                                        |   |   |   |
| Retail                    loans:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |                                      |    |   |                                        |   |   |   |
| Single-family                    residential                                                                                                                                                                   |   |                                      | 3,112   |   |                                        |   | 3,177 |   |
| Home                    equity lines of                    credit                                                                                                                                              |   |                                      | 737     |   |                                        |   | 772 |   |
| Other                                                                                                                                                                                                          |   |                                      | 94      |   |                                        |   | 58 |   |
| Total                    retail                    loans                                                                                                                                                       |   |                                      | 3,943   |   |                                        |   | 4,007 |   |
| Total                    non-accrual                    loans                                                                                                                                                  |   |                                      | 29,172  |   |                                        |   | 27,517 |   |
| Other                    real estate owned,                    net                                                                                                                    |   |                                      | 632     |   |                                        |   | 321 |   |
| Total                    non-performing                    assets                                                                                                                               |   |                                      | 29,804  |   |                                        |   | 27,838 |   |
| 90                    days past due and still accruing                    interest                                                                                                    |   |                                      | – |   |                                        |   | – |   |
| Total                    non-performing assets                    plus 90 days past due loans stillaccruing                    interest                                                                        |   | $                                         | 29,804  |   |                                        | $      | 27,838 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |                                      |    |   |                                        |   |   |   |
| Asset                    Quality Ratios:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |                                      |    |   |                                        |   |   |   |
| Non-performing                    assets to total                    assets                                                                                                                     |   |                                      | 2.48    | %      |                                        |   | 2.22 | % |
| Non-performing                    loans to total                    loans                                                                                                                       |   |                                      | 3.61    | %      |                                        |   | 3.43 | % |

----

*table            of            contents*

*Potential        Problem Assets.  *

*Deposits        and        Borrowed Money.  *

|                                                  |   | **June                  30, 2007**      |    |   | **December                  31, 2006** |   |   |       |   |
|-------------------------------------------------------|--------|-----------------------------------------|---------|--------|----------------------------------------|--------|--------|------------|--------|
|                                                  |   | **Amount**                              |    |   | **%                  of Total**        |   |   | **Amount** |   |   | **%                  of Total** |   |   | **%                  Change** |   |
|                                                  |   | (Dollars                  in thousands) |    |
| Checking                  accounts:                   |   |                                    |    |   |                                   |   |   |       |   |   |   |   |   |   |   |
| Non-interest                  bearing                 |   | $                                       | 65,104  |   |                                   |   | 7.3    | %          |   | $ | 58,547 |   |   |   | 6.5 | % |   |   | 11.2 | % |
| Interest-bearing                                      |   |                                    | 101,160 |   |                                   |   | 11.4   |       |   |   | 100,912 |   |   |   | 11.1 |   |   |   | 0.2 |   |
| Money                  market accounts                |   |                                    | 169,294 |   |                                   |   | 19.1   |       |   |   | 182,153 |   |   |   | 20.1 |   |   |   | (7.1 | ) |
| Savings                  accounts                     |   |                                    | 144,966 |   |                                   |   | 16.3   |       |   |   | 148,707 |   |   |   | 16.4 |   |   |   | (2.5 | ) |
| Core                  deposits                        |   |                                    | 480,524 |   |                                   |   | 54.1   |       |   |   | 490,319 |   |   |   | 54.1 |   |   |   | (2.0 | ) |
| Certificates                  of deposit:             |   |                                    |    |   |                                   |   |   |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Less                  than                  $100,000  |   |                                    | 271,843 |   |                                   |   | 30.6   |       |   |   | 281,810 |   |   |   | 31.0 |   |   |   | (3.5 | ) |
| $100,000                  or                  greater |   |                                    | 135,447 |   |                                   |   | 15.3   |       |   |   | 134,966 |   |   |   | 14.9 |   |   |   | 0.4 |   |
| Time                  deposits                        |   |                                    | 407,290 |   |                                   |   | 45.9   |       |   |   | 416,776 |   |   |   | 45.9 |   |   |   | (2.3 | ) |
| Total                  deposits                       |   | $                                       | 887,814 |   |                                   |   | 100.0  | %          |   | $ | 907,095 |   |   |   | 100.0 | % |   |   | (2.1 | ) |

*Repo Sweep*

----

*table            of            contents*

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   | **June                  30, 2007**                           |   |   | **December                  31, 2006** |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------|--------|--------|----------------------------------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   | **Weighted****Average****Contractual                  Rate** |   |   | **Amount**                             |   |   | **Weighted                  Average****Contractual                  Rate** |   |   | **Amount** |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   | (Dollars                  in thousands)                      |   |
| Other                  short-term borrowings                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |                                                         |   |   |                                   |   |   |   |   |   |   |   |
| Repo                  Sweeps                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |                                                         | 4.20   | %      |                                   | $      | 24,238 |   |   |   | 4.75 | % |   | $ | 23,117 |   |
| Secured                  advances from FHLB – Indianapolis:                                                                                                                                                                                                                                                                                                                                                                                                                     |   |                                                         |   |   |                                   |   |   |   |   |   |   |   |   |   |   |   |
| Maturing                  in 2007 –                  fixed-rate                                                                                           |   |                                                         | 3.67   |   |                                   |   | 52,000 |   |   |   | 3.65 |   |   |   | 87,000 |   |
| Maturing                  in 2008 –                  fixed-rate                                                                                           |   |                                                         | 3.89   |   |                                   |   | 72,000 |   |   |   | 3.89 |   |   |   | 72,000 |   |
| Maturing                  in 2009 –                  fixed-rate                                                                                           |   |                                                         | 4.09   |   |                                   |   | 15,000 |   |   |   | 4.09 |   |   |   | 15,000 |   |
| Maturing                  in 2014 – fixed-rate                  (1)                                                                                       |   |                                                         | 6.71   |   |                                   |   | 1,190 |   |   |   | 6.71 |   |   |   | 1,190 |   |
| Maturing                  in 2018 – fixed-rate                  (1)                                                                                       |   |                                                         | 5.54   |   |                                   |   | 2,763 |   |   |   | 5.54 |   |   |   | 2,763 |   |
| Maturing                  in 2019 – fixed-rate                  (1)                                                                                       |   |                                                         | 6.31   |   |                                   |   | 7,301 |   |   |   | 6.31 |   |   |   | 7,372 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |                                                         |   |   |                                   |   | 150,254 |   |   |   |   |   |   |   | 185,325 |   |
| Less:  deferred                  premium                  on early extinguishmentof                  debt                                                            |   |                                                         |   |   |                                   |   | (3,540 | ) |   |   |   |   |   |   | (6,167 | ) |
| Net                  FHLB – Indianapolis                  advances                                                                                             |   |                                                         |   |   |                                   |   | 146,714 |   |   |   |   |   |   |   | 179,158 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |                                                         |   |   |                                   |   |   |   |   |   |   |   |   |   |   |   |
| Total                  borrowed                  money                                                                                                |   |                                                         |   |   |                                   | $      | 170,952 |   |   |   |   |   |   | $ | 202,275 |   |
| Weighted-average                  contractual interest rate                                                                                                                                                                                                                                                                                                                                                                                                                           |   |                                                         | 4.03   | %      |                                   |   |   |   |   |   | 4.02 | % |   |   |   |   |

----

*table            of            contents*

*Capital        Resources.  *

*Part II. Item 2.  Unregistered Sales        of Equity Securities and Use of Proceeds.*

*OTS*

|                                        |   | **Actual**                                |    |   | **For                    Capital Adequacy Purposes** |   |   | **To                    Be Well-Capitalized Under Prompt Corrective Action                    Provisions** |   |
|---------------------------------------------|--------|-------------------------------------------|---------|--------|------------------------------------------------------|--------|--------|------------------------------------------------------------------------------------------------------------|--------|
|                                        |   | **Amount**                                |    |   | **Ratio**                                            |   |   | **Amount**                                                                                                 |   | **Ratio** |   |   | **Amount** |   | **Ratio** |   |
|                                        |   | (Dollars                    in thousands) |    |
| As                    of June 30, 2007:     |   |                                      |    |   |                                                 |   |   |                                                                                                       |   |   |   |   |   |   |   |   |
| Risk-based                                  |   | $                                         | 132,043 |   |                                                 |   | 13.90  | %                                                                                                          |   | $ | 76,004 |   | >8.00 |  % |   | $ | 95,005 |   | >10.00 |  % |
| Tangible                                    |   |                                      | 121,449 |   |                                                 |   | 10.10  |                                                                                                       |   |   | 18,038 |   | >1.50 |   |   |   | 24,051 |   | >2.00 |   |
| Core                                        |   |                                      | 121,449 |   |                                                 |   | 10.10  |                                                                                                       |   |   | 48,101 |   | >4.00 |   |   |   | 60,127 |   | >5.00 |   |
|                                        |   |                                      |    |   |                                                 |   |   |                                                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |
| As                    of December 31, 2006: |   |                                      |    |   |                                                 |   |   |                                                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |
| Risk-based                                  |   | $                                         | 132,762 |   |                                                 |   | 14.10  | %                                                                                                          |   | $ | 75,332 |   | >8.00 |  % |   | $ | 94,165 |   | >10.00 |  % |
| Tangible                                    |   |                                      | 121,599 |   |                                                 |   | 9.71   |                                                                                                       |   |   | 18,780 |   | >1.50 |   |   |   | 25,040 |   | >2.00 |   |
| Core                                        |   |                                      | 121,599 |   |                                                 |   | 9.71   |                                                                                                       |   |   | 50,080 |   | >4.00 |   |   |   | 62,600 |   | >5.00 |   |

----

*table of contents*

**Liquidity        and Commitments**

|   | • | deposits and Repo                  Sweeps; |
|--------|---------|--------------------------------------------|

|   | • | scheduled payments of amortizing loans and                  mortgage-backed securities; |
|--------|---------|-----------------------------------------------------------------------------------------|

|   | • | prepayments and maturities of outstanding loans                  and                  mortgage-backed securities; |
|--------|---------|-------------------------------------------------------------------------------------------------------------------|

|   | • | maturities of investment securities and other                  short-term investments; |
|--------|---------|----------------------------------------------------------------------------------------|

|   | • | funds provided from operations;                  and |
|--------|---------|------------------------------------------------------|

|   | • | borrowings from the                  FHLB. |
|--------|---------|--------------------------------------------|

|   | • | purchases of available-for-sale securities                  totaling                  $40.9 million; |
|--------|---------|------------------------------------------------------------------------------------------------------|

|   | • | repayments of borrowed money totaling $35.1                  million; |
|--------|---------|-----------------------------------------------------------------------|

|   | • | decreases in the balances of deposit accounts                  totaling                  $19.4 million; |
|--------|---------|---------------------------------------------------------------------------------------------------------|

|   | • | repurchases of the Company’s common stock totaling $6.5                  million; and |
|--------|---------|---------------------------------------------------------------------------------------------|

|   | • | net loan fundings totaling $6.5                  million. |
|--------|---------|-----------------------------------------------------------|

|   | • | proceeds from sales, maturities and paydowns                  of                  securities aggregating $68.8 million; and |
|--------|---------|-----------------------------------------------------------------------------------------------------------------------------|

|   | • | net cash provided by operating activities totaling                  $7.9                  million. |
|--------|---------|----------------------------------------------------------------------------------------------------|

*Contractual        Obligations.*** **

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*table            of            contents*

|                                                                                                                                                                                                                                                                                                                                                |   | **Payments                  Due By Period**               |    |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------------|---------|
|                                                                                                                                                                                                                                                                                                                                                |   | **One                  Year****Or                  Less** |    |   | **Over                  One****Through****Three                  Years** |   |   | **Over                  Three Through****Five                  Years** |   |   | **Over                  Five****Years** |   |   | **Total** |   |
|                                                                                                                                                                                                                                                                                                                                                |   | (Dollars                  in thousands)                   |    |
| FHLB                  advances                  (1)                                                 |   | $                                                         | 92,259  |   |   | $ | 47,573 |   |   | $ | 656 |   |   | $ | 9,766 |   |   | $ | 150,254 |   |
| Repo                  Sweeps                  (2)                                                   |   |                                                      | 24,238  |   |   |   | – |   |   |   | – |   |   |   | – |   |   |   | 24,238 |   |
| Operating                  leases                                                                   |   |                                                      | 637     |   |   |   | 720 |   |   |   | 168 |   |   |   | 7 |   |   |   | 1,532 |   |
| Dividends                  payable on common stock                                                                                                                                                                                                                                                                                                  |   |                                                      | 1,317   |   |   |   | – |   |   |   | – |   |   |   | – |   |   |   | 1,317 |   |
|                                                                                                                                                                                                                                                                                                                                                |   | $                                                         | 118,451 |   |   | $ | 48,293 |   |   | $ | 824 |   |   | $ | 9,773 |   |   | $ | 177,341 |   |

*Deposits and Borrowed Money*

*Off-Balance        Sheet Obligations.  *

----

*table of contents*

|                                                           |   | **One                  Year****or                  Less** |    |   | **Over                  One****Through****Three                  Years** |   |    | **Over                  Three Through****Five                  Years** |   |   | **Over                  Five Years** |   |   | **Total** |    |
|----------------------------------------------------------------|--------|-----------------------------------------------------------|---------|--------|--------------------------------------------------------------------------|--------|---------|------------------------------------------------------------------------|--------|--------|--------------------------------------|--------|--------|-----------|---------|
|                                                           |   | (Dollars                  in thousands)                   |    |
| Commitments                  to extend credit:            |   |                                                      |    |   |                                                                     |   |    |                                                                   |   |   |                                 |   |   |      |    |
| Commercial                                                     |   | $                                                         | 25,407  |   |                                                                     | $      | 4,706   |                                                                   |   | $      | 1,159                                |   |   | $         | 820     |   |   | $ | 32,092 |   |
| Retail                                                         |   |                                                      | 14,614  |   |                                                                     |   | – |                                                                   |   |   | –                              |   |   |      | – |   |   |   | 14,614 |   |
| Commitments                  to purchase loans:                |   |                                                      |    |   |                                                                     |   |    |                                                                   |   |   |                                 |   |   |      |    |   |   |   |   |   |
| Commercial                                                     |   |                                                      | 10,000  |   |                                                                     |   | – |                                                                   |   |   | –                              |   |   |      | – |   |   |   | 10,000 |   |
| Commitments                  to fund unused construction loans |   |                                                      | 19,074  |   |                                                                     |   | 37,051  |                                                                   |   |   | 6,157                                |   |   |      | 6,411   |   |   |   | 68,693 |   |
| Commitments                  to fund unused lines of credit:   |   |                                                      |    |   |                                                                     |   |    |                                                                   |   |   |                                 |   |   |      |    |   |   |   |   |   |
| Commercial                                                     |   |                                                      | 18,905  |   |                                                                     |   | 12,449  |                                                                   |   |   | 4,224                                |   |   |      | 247     |   |   |   | 35,825 |   |
| Retail                                                         |   |                                                      | 12,918  |   |                                                                     |   | 107     |                                                                   |   |   | 260                                  |   |   |      | 59,111  |   |   |   | 72,396 |   |
| Letters                  of credit                             |   |                                                      | 5,029   |   |                                                                     |   | 625     |                                                                   |   |   | 692                                  |   |   |      | – |   |   |   | 6,346 |   |
| Credit                  enhancements                           |   |                                                      | 3,439   |   |                                                                     |   | 37,583  |                                                                   |   |   | –                              |   |   |      | 5,300   |   |   |   | 46,322 |   |
|                                                           |   | $                                                         | 109,386 |   |                                                                     | $      | 92,521  |                                                                   |   | $      | 12,492                               |   |   | $         | 71,889  |   |   | $ | 286,288 |   |

*IDPLOC*

----

*table of contents*

**Item        3.  Quantitative and        Qualitative Disclosures about Market Risk**

*IRR**NPV*

*ALCO*

----

*table of contents*

|                                                               |   |   | **Net                    Portfolio Value**    |   |
|--------------------------------------------------------------------|--------|--------|-----------------------------------------------|--------|
|                                                               |   |   | **At                    March 31, 2007**      |   |   | **At                    December 31, 2006** |   |
|                                                               |   |   | **$                    Amount**               |   |   | **$                    Change** |   |   | **%                    Change** |   |   | **$                    Amount** |   |   | **$                    Change** |   |   | **%                    Change** |   |
|                                                               |   |   | **(Dollars                    in thousands)** |   |
| Assumed                    change in interest rates (basis points) |   |   |                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                               | +300   |   |                                          | $      | 145,208 |   |   | $ | (35,743 | ) |   |   | (19.8 | )% |   | $ | 145,688 |   |   | $ | (32,565 | ) |   |   | (18.3 | )% |
|                                                               | +200   |   |                                          |   | 158,639 |   |   |   | (22,312 | ) |   |   | (12.3 | ) |   |   | 157,889 |   |   |   | (20,364 | ) |   |   | (11.4 | ) |
|                                                               | +100   |   |                                          |   | 170,608 |   |   |   | (10,343 | ) |   |   | (5.7 | ) |   |   | 168,493 |   |   |   | (9,760 | ) |   |   | (5.5 | ) |
|                                                               | 0      |   |                                          |   | 180,951 |   |   |   | – |   |   |   | – |   |   |   | 178,253 |   |   |   | – |   |   |   | – |   |
|                                                               | -100   |   |                                          |   | 189,800 |   |   |   | 8,849 |   |   |   | 4.9 |   |   |   | 185,481 |   |   |   | 7,228 |   |   |   | 4.1 |   |
|                                                               | -200   |   |                                          |   | 196,876 |   |   |   | 15,925 |   |   |   | 8.8 |   |   |   | 192,248 |   |   |   | 13,995 |   |   |   | 7.9 |   |

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   | **Percentage                  of Deposits Repricing****In                  First Year** |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------------------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   | **June                  30, 2007**                                                      |   |   | **December                  31, 2006** |   |
| Deposit                  category:                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   |                                                                                    |   |   |   |   |
| Business                  checking                  accounts                                                                       |   |                                                                                    | 20     | % |   |   | 20 | % |
| Interest                  checking                  accounts                                                                       |   |                                                                                    | 20     |   |   |   | 20 |   |
| High-yield                  checking                  accounts                                                                     |   |                                                                                    | 95     |   |   |   | 95 |   |
| Savings                  accounts                                                                                                  |   |                                                                                    | 30     |   |   |   | 30 |   |
| Money                  market                  accounts                                                                            |   |                                                                                    | 50     |   |   |   | 50 |   |

*rate shocks*

|                                                                                    |   |   | **Percentage                  Change in Net Interest Income****Over                  a Twelve Month Time Period** |   |
|-----------------------------------------------------------------------------------------|--------|--------|-------------------------------------------------------------------------------------------------------------------|--------|
|                                                                                    |   |   | **June                  30, 2007**                                                                                |   |   | **December                  31, 2006** |   |
| Assumed                  change in interest rates (basis                  points): |   |   |                                                                                                              |   |   |   |   |
|                                                                                    | +200   |   |                                                                                                              |   | (0.5 | )% |   |   | (0.8 | )% |
|                                                                                    | +100   |   |                                                                                                              |   | – |   |   |   | (0.2 | ) |
|                                                                                    | -100   |   |                                                                                                              |   | (0.5 | ) |   |   | (0.6 | ) |
|                                                                                    | -200   |   |                                                                                                              |   | (1.7 | ) |   |   | (3.1 | ) |

----

*table            of            contents*

**Item        4.  Controls and        Procedures**

*the 1934 Act*

----

*table of contents*

**Part        II.  OTHER INFORMATION**

**Item        1.  Legal        Proceedings**

**Legal        Proceedings**

**Item        1A.  Risk        Factors**

*Management’s Discussion and Analysis of        Financial Condition and Results of Operations – Forward Looking        Statements*

**Item        2.  Unregistered Sales        of Equity Securities and Use of Proceeds**

| **Period**                        |   | **Total                  Number of Shares Purchased** |    |   | **Average                  Price Paid Per Share** |   |   | **Total                  Number of Shares Purchased as Part of Publicly Announced Plans                  or                  Programs** |   |   | **Maximum                  Number of Shares that May Yet Be Purchased Under the Plans or                  Programs (1)** |   |
|-----------------------------------|--------|-------------------------------------------------------|---------|--------|---------------------------------------------------|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------|--------|--------|-------------------------------------------------------------------------------------------------------------------------------|--------|
| April                  1-30, 2007 |   |                                                  | 31,761  |   |                                              | $      | 14.96  |                                                                                                                                    |   |   | 31,761                                                                                                                        |   |   |   | 492,994 |   |
| May                  1-31, 2007   |   |                                                  | 64,040  |   |                                              |   | 15.00  |                                                                                                                                    |   |   | 64,040                                                                                                                        |   |   |   | 428,954 |   |
| June                  1-30, 2007  |   |                                                  | 77,987  |   |                                              |   | 14.87  |                                                                                                                                    |   |   | 77,987                                                                                                                        |   |   |   | 350,967 |   |
| Total                             |   |                                                  | 173,788 |   |                                              |   | 14.93  |                                                                                                                                    |   |   | 173,788                                                                                                                       |   |   |   | 350,967 |   |

| (1) | The                  Company publicly announced on February 27, 2007 a repurchase program                  for                  600,000 shares.  Prior to April 1, 2007, 75,245 shares had been                  repurchased under that program.  During July 2007, the Company                  repurchased 34,942 shares under this                  program. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**Item        3.  Defaults Upon Senior        Securities**

----

*table of contents*

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

*Annual Meeting*

|  Frank                D. Lester  |  8,539,648                 FOR |  537,497                 WITHHELD |
|---------------------------------------|------------------------------------------|---------------------------------------------|
|  Thomas                F. Prisby |  8,528,075                 FOR |  549,070                 WITHHELD |

|   | (2) | Ratify the appointment of BKD, LLP as the Company’s                  independent registered public accounting firm for the year ended                  December                  31, 2007. |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**Item        5.  Other        Information**

----

*table of contents*

**Item        6.  Exhibits**

|   | (a)    |   | List                  of exhibits (filed herewith unless otherwise                  noted).                                                         |
|--------|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |   |                                                                                                                                                |
|   | 3.1    |   | Certificate                  of Incorporation of CFS Bancorp, Inc.                  (1)                                                             |
|   | 3.2    |   | Bylaws                  of CFS Bancorp, Inc. (1)                                                                                                    |
|   | 4.0    |   | Form                  of Stock Certificate of CFS Bancorp, Inc.                  (2)                                                                |
|   | 10.1   |   | Employment                  Agreement entered into between Citizens Financial                  Bank and Thomas F. Prisby (3)                        |
|   | 10.2   |   | Employment                  Agreement entered into between CFS Bancorp, Inc.                  and Thomas F. Prisby (3)                              |
|   | 10.3   |   | CFS                  Bancorp, Inc. Amended and Restated 1998 Stock Option                  Plan (4)                                                 |
|   | 10.4   |   | CFS                  Bancorp, Inc. Amended and Restated 1998 Recognition and                  Retention Plan and Trust Agreement (4)                |
|   | 10.5   |   | CFS                  Bancorp, Inc. 2003 Stock Option Plan (5)                                                                                       |
|   | 10.6   |   | Employment                  Agreement entered into between Citizens Financial                  Bank and Charles V. Cole (3)                         |
|   | 10.7   |   | Employment                  Agreement entered into between Citizens Financial                  Bank and Thomas L. Darovic (3)                       |
|   | 10.8   |   | Employment                  Agreement entered into between CFS Bancorp, Inc.                  and Charles V. Cole (3)                               |
|   | 10.9   |   | Employment                  Agreement entered into between CFS Bancorp, Inc.                  and Thomas L. Darovic (3)                             |
|   | 10.10  |   | Employment                  Agreement entered into between Citizens Financial                  Services, FSB and Zoran Koricanac (6)                |
|   | 10.11  |   | Employment                  Agreement entered into between CFS Bancorp, Inc.                  and Zoran Koricanac (6)                               |
|   | 10.12  |   | Amended                  and Restated Supplemental ESOP Benefit Plan of CFS                  Bancorp, Inc. and Citizens Financial Services, FSB (6) |
|   | 10.13  |   | CFS                  Bancorp, Inc. Directors’ Deferred Compensation Plan                  (6)                                                 |
|   | 31.1   |   | Rule                  13a-14(a) Certification of Chief Executive                  Officer                                                           |
|   | 31.2   |   | Rule                  13a-14(a) Certification of Chief Financial                  Officer                                                           |
|   | 32.0   |   | Section                  1350 Certifications                                                                                                        |
|   | 32.0   |   | Section                  1350 Certifications                                                                                                        |

| (1) | Incorporated                  by reference from the Company’s                  Definitive                  Proxy Statement from the Annual Meeting of Stockholders filed with                  the SEC                  on March 25, 2005. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | Incorporated by reference from the Company’s                  Annual                  Report on Form 10-K for the year ended December 31,                  2005. |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3) | Incorporated by reference from the Company’s                  Form 8-K                  filed on July 7, 2006. |
|-----|----------------------------------------------------------------------------------------------------------------------|

| (4) | Incorporated by reference from the Company’s Definitive                  Proxy Statement for the Annual Meeting of Stockholders filed with                  the SEC                  on March 23, 2001. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (5) | Incorporated by reference from the Company’s Definitive                  Proxy Statement for the Annual Meeting of Stockholders filed with                  the SEC                  on March 31, 2003. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (6) | Incorporated by reference from the Company’s Annual                  Report on Form 10-K for the year ended December 31,                  2004. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------|

----

*table of contents*

**SIGNATURES**

**CFS        BANCORP, INC.**

| Date:  August                  3, 2007 | By:    | /s/                  Thomas F. Prisby                          |
|--------------------------------------------------|--------|----------------------------------------------------------------|
|                                             |   | Thomas                  F. Prisby, Chairman and                |
|                                             |   | Chief                  Executive Officer                       |
|                                             |   |                                                           |
| Date:  August                  3, 2007 | By:    | /s/                  Charles V. Cole                           |
|                                             |   | Charles                  V. Cole, Executive Vice President and |
|                                             |   | Chief                  Financial Officer                       |

----