##### Table of Contents





UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549





FORM 10-Q







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

FOR THE QUARTERLY PERIOD ENDED September 30, 2010

OR



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

For the transition period from  to

Commission file number 000-52240





Ben Franklin Financial, Inc.

(Exact name of registrant as specified in its charter)







|                                                               |  |                                  
|-------------------------------------------------------------- |  | ---------------------------------
|Federal                                                        |  | 20-5838969                       
|(State or other jurisdiction of
incorporation or organization) |  | (IRS Employer Identification No.)
|                                                               | 
|830 East Kensington Road, Arlington Heights, Illinois          |  | 60004                            
|(Address of principal executive offices)                       |  | (Zip Code)                       

(847)
398-0990

(Registrants telephone number, including area code)





Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90
days.    Yes  x    No   ̈

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

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



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

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

Number of outstanding shares of common stock as of November 12, 2010: 1,949,956 shares









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##### Table of Contents



BEN
FRANKLIN FINANCIAL, INC.

INDEX



|                                                                                                                              |  |          |    | 
|----------------------------------------------------------------------------------------------------------------------------- |  | -------- | -- | 
|                                                                                                                              |  | PAGE NO. |   
|PART I  Financial Information                                                                                                |  |          |    | 
|                                                                                                                              | 
|Item 1. Financial Statements of Ben Franklin Financial, Inc.                                                                  |  |          |    | 
|                                                                                                                              | 
|Consolidated Statements of Financial Condition (Unaudited) as of September 30, 2010 and December 31, 2009                     |  |          | 1  | 
|                                                                                                                              | 
|Consolidated Statements of Operations (Unaudited) for the three and nine months ended September 30, 2010 and
 2009            |  |          | 2  | 
|                                                                                                                              | 
|Consolidated Statements of Changes in Stockholders Equity (Unaudited) for the nine months ended September
 30, 2010 and 2009 |  |          | 3  | 
|                                                                                                                              | 
|Consolidated Statements of Cash Flows (Unaudited) for the nine months ended September 30, 2010 and 2009                       |  |          | 4  | 
|                                                                                                                              | 
|Notes to Consolidated Financial Statements (Unaudited)                                                                        |  |          | 5  | 
|                                                                                                                              | 
|Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations                                 |  |          | 12 | 
|                                                                                                                              | 
|Item 3. Quantitative and Qualitative Disclosures about Market Risk                                                            |  |          | 24 | 
|                                                                                                                              | 
|Item 4(T). Controls and Procedures                                                                                            |  |          | 24 | 
|                                                                                                                              | 
|PART II  Other Information                                                                                                   |  |          |    | 
|                                                                                                                              | 
|Item 1. Legal Proceedings                                                                                                     |  |          | 24 | 
|Item 1A. Risk Factors                                                                                                         |  |          | 24 | 
|Item 2. Unregistered Sales of Equity Securities and Use of Proceeds                                                           |  |          | 24 | 
|Item 3. Defaults Upon Senior Securities                                                                                       |  |          | 25 | 
|Item 4. Removed and Reserved                                                                                                  |  |          | 25 | 
|Item 5. Other Information                                                                                                     |  |          | 25 | 
|Item 6. Exhibits                                                                                                              |  |          | 25 | 
|Form 10-Q Signatures                                                                                                          |  |          | 26 | 



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##### Table of Contents



PART I
 Financial Information

Item 1. Financial Statements

BEN FRANKLIN FINANCIAL, INC.

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(Dollars in thousands except share
data)

(Unaudited)



|                                                                                                                                        |  |                   |         |   |                  |   |         |  
|--------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------- | ------- | - | ---------------- | - | ------- | -
|                                                                                                                                        |  | September 30,2010 |         |   | December 31,2009 |  
|ASSETS                                                                                                                                  |  |                   |         |   |                  |   |         |  
|Cash and due from banks                                                                                                                 |  | $                 | 3,307   |   |                  | $ | 1,016   |  
|Interest-earning deposit accounts                                                                                                       |  |                   | 1,194   |   |                  |   | 2,090   |  
|Federal funds sold                                                                                                                      |  |                   | 4,900   |   |                  |   | 4,690   |  
|                                                                                                                                        |  |                   |         |   |                  |   |         |  
|Cash and cash equivalents                                                                                                               |  |                   | 9,401   |   |                  |   | 7,796   |  
|Securities available-for-sale                                                                                                           |  |                   | 4,103   |   |                  |   | 2,463   |  
|Loans receivable, net of allowance for loan losses of $870 at September 30, 2010 and $940 at December 31,
2009                          |  |                   | 98,917  |   |                  |   | 104,594 |  
|Federal Home Loan Bank stock                                                                                                            |  |                   | 1,337   |   |                  |   | 1,337   |  
|Premises and equipment, net                                                                                                             |  |                   | 942     |   |                  |   | 963     |  
|Repossessed assets                                                                                                                      |  |                   | 687     |   |                  |   | 991     |  
|Accrued interest receivable                                                                                                             |  |                   | 374     |   |                  |   | 457     |  
|Prepaid FDIC premiums                                                                                                                   |  |                   | 492     |   |                  |   | 613     |  
|Other assets                                                                                                                            |  |                   | 114     |   |                  |   | 468     |  
|                                                                                                                                        |  |                   |         |   |                  |   |         |  
|                                                                                                                                        |  |                  
|Total assets                                                                                                                            |  | $                 | 116,367 |   |                  | $ | 119,682 |  
|                                                                                                                                        |  |                   |         |   |                  |   |         |  
|                                                                                                                                        |  |                  
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                    |  |                   |         |   |                  |   |         |  
|Liabilities                                                                                                                             |  |                   |         |   |                  |   |         |  
|Demand deposits - noninterest-bearing                                                                                                   |  | $                 | 2,160   |   |                  | $ | 1,835   |  
|Demand deposits - interest-bearing                                                                                                      |  |                   | 7,311   |   |                  |   | 7,332   |  
|Savings deposits                                                                                                                        |  |                   | 7,385   |   |                  |   | 7,278   |  
|Money market deposits                                                                                                                   |  |                   | 15,796  |   |                  |   | 11,002  |  
|Certificates of deposit                                                                                                                 |  |                   | 68,983  |   |                  |   | 75,666  |  
|                                                                                                                                        |  |                   |         |   |                  |   |         |  
|Total deposits                                                                                                                          |  |                   | 101,635 |   |                  |   | 103,113 |  
|Advances from Federal Home Loan Bank                                                                                                    |  |                   |        |   |                  |   | 2,000   |  
|Advances from borrowers for taxes and insurance                                                                                         |  |                   | 553     |   |                  |   | 433     |  
|Other liabilities                                                                                                                       |  |                   | 235     |   |                  |   | 264     |  
|Common stock in ESOP subject to contingent purchase obligation                                                                          |  |                   | 62      |   |                  |   | 43      |  
|                                                                                                                                        |  |                   |         |   |                  |   |         |  
|                                                                                                                                        |  |                  
|Total liabilities                                                                                                                       |  |                   | 102,485 |   |                  |   | 105,853 |  
|                                                                                                                                        |  |                  
|Stockholders equity                                                                                                                    |  |                   |         |   |                  |   |         |  
|Common stock, par value $0.01 per share; 20,000,000 shares authorized; 1,949,956 shares issued and outstanding (net of treasury
shares) |  |                   | 20      |   |                  |   | 20      |  
|Additional paid-in-capital                                                                                                              |  |                   | 8,138   |   |                  |   | 8,088   |  
|Treasury stock, at cost  68,270 and 67,843 shares                                                                                      |  |                   | (462    | ) |                  |   | (461    | )
|Retained earnings, substantially restricted                                                                                             |  |                   | 6,745   |   |                  |   | 6,776   |  
|Unearned Employee Stock Ownership Plan (ESOP) shares                                                                                    |  |                   | (571    | ) |                  |   | (609    | )
|Accumulated other comprehensive income                                                                                                  |  |                   | 74      |   |                  |   | 58      |  
|Reclassification of ESOP shares                                                                                                         |  |                   | (62     | ) |                  |   | (43     | )
|                                                                                                                                        |  |                   |         |   |                  |   |         |  
|Total stockholders equity                                                                                                              |  |                   | 13,882  |   |                  |   | 13,829  |  
|                                                                                                                                        |  |                   |         |   |                  |   |         |  
|                                                                                                                                        |  |                  
|Total liabilities and stockholders equity                                                                                              |  | $                 | 116,367 |   |                  | $ | 119,682 |  
|                                                                                                                                        |  |                   |         |   |                  |   |         |  

See accompanying notes to consolidated financial statements



1



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BEN FRANKLIN FINANCIAL, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollars in thousands except per share
amounts)

(Unaudited)



|                                                    |  |                                 |       |   |                                |   |       |      |  |   |       |   |  |   |        |  
|--------------------------------------------------- |  | ------------------------------- | ----- | - | ------------------------------ | - | ----- | ---- |  | - | ----- | - |  | - | ------ | -
|                                                    |  | Three Months EndedSeptember 30, |       |   | Nine Months EndedSeptember 30, |  
|                                                    |  | 2010                            |       |   | 2009                           |   |       | 2010 |  |   | 2009  |  
|Interest income                                     |  |                                 |       |   |                                |   |       |      |  |   |       |   |  |   |        |  
|Loans                                               |  | $                               | 1,288 |   |                                | $ | 1,400 |      |  | $ | 4,020 |   |  | $ | 4,301  |  
|Securities                                          |  |                                 | 23    |   |                                |   | 30    |      |  |   | 68    |   |  |   | 96     |  
|Federal funds sold and other                        |  |                                 | 2     |   |                                |   | 2     |      |  |   | 5     |   |  |   | 8      |  
|                                                    |  |                                 |       |   |                                |   |       |      |  |   |       |   |  |   |        |  
|                                                    |  |                                 | 1,313 |   |                                |   | 1,432 |      |  |   | 4,093 |   |  |   | 4,405  |  
|                                                    |  |                                 |       |  
|Interest expense                                    |  |                                 |       |   |                                |   |       |      |  |   |       |   |  |   |        |  
|Deposits                                            |  |                                 | 353   |   |                                |   | 629   |      |  |   | 1,200 |   |  |   | 2,037  |  
|Federal Home Loan Bank advances                     |  |                                 |      |   |                                |   | 73    |      |  |   | 39    |   |  |   | 217    |  
|                                                    |  |                                 |       |   |                                |   |       |      |  |   |       |   |  |   |        |  
|                                                    |  |                                 | 353   |   |                                |   | 702   |      |  |   | 1,239 |   |  |   | 2,254  |  
|                                                    |  |                                 |       |   |                                |   |       |      |  |   |       |   |  |   |        |  
|                                                    |  |                                 |       |  
|Net interest income                                 |  |                                 | 960   |   |                                |   | 730   |      |  |   | 2,854 |   |  |   | 2,151  |  
|                                                    |  |                                 |       |  
|Provision for loan losses                           |  |                                 | 280   |   |                                |   | 75    |      |  |   | 522   |   |  |   | 630    |  
|                                                    |  |                                 |       |   |                                |   |       |      |  |   |       |   |  |   |        |  
|                                                    |  |                                 |       |  
|Net interest income after provision for loan losses |  |                                 | 680   |   |                                |   | 655   |      |  |   | 2,332 |   |  |   | 1,521  |  
|                                                    |  |                                 |       |  
|Non-interest income                                 |  |                                 |       |   |                                |   |       |      |  |   |       |   |  |   |        |  
|Service fee income                                  |  |                                 | 32    |   |                                |   | 41    |      |  |   | 95    |   |  |   | 108    |  
|Loss on sale of other assets                        |  |                                 |      |   |                                |   |      |      |  |   | (1    | ) |  |   | (10    | )
|Other                                               |  |                                 | 3     |   |                                |   | 3     |      |  |   | 8     |   |  |   | 7      |  
|                                                    |  |                                 |       |   |                                |   |       |      |  |   |       |   |  |   |        |  
|                                                    |  |                                 | 35    |   |                                |   | 44    |      |  |   | 102   |   |  |   | 105    |  
|                                                    |  |                                 |       |  
|Non-interest expense                                |  |                                 |       |   |                                |   |       |      |  |   |       |   |  |   |        |  
|Compensation and employee benefits                  |  |                                 | 377   |   |                                |   | 413   |      |  |   | 1,147 |   |  |   | 1,287  |  
|Occupancy and equipment                             |  |                                 | 138   |   |                                |   | 135   |      |  |   | 407   |   |  |   | 420    |  
|Data processing services                            |  |                                 | 61    |   |                                |   | 56    |      |  |   | 189   |   |  |   | 173    |  
|Professional fees                                   |  |                                 | 78    |   |                                |   | 58    |      |  |   | 290   |   |  |   | 220    |  
|FDIC insurance premiums                             |  |                                 | 44    |   |                                |   | 50    |      |  |   | 130   |   |  |   | 173    |  
|Repossessed asset losses and holding costs          |  |                                 | 76    |   |                                |   | 4     |      |  |   | 102   |   |  |   | 38     |  
|Other                                               |  |                                 | 61    |   |                                |   | 68    |      |  |   | 210   |   |  |   | 221    |  
|                                                    |  |                                 |       |   |                                |   |       |      |  |   |       |   |  |   |        |  
|                                                    |  |                                 | 835   |   |                                |   | 784   |      |  |   | 2,475 |   |  |   | 2,532  |  
|                                                    |  |                                 |       |   |                                |   |       |      |  |   |       |   |  |   |        |  
|                                                    |  |                                 |       |  
|Loss before income taxes                            |  |                                 | (120  | ) |                                |   | (85   | )    |  |   | (41   | ) |  |   | (906   | )
|                                                    |  |                                 |       |  
|Income tax provision (benefit)                      |  |                                 | 3     |   |                                |   | 624   |      |  |   | (10   | ) |  |   | 322    |  
|                                                    |  |                                 |       |   |                                |   |       |      |  |   |       |   |  |   |        |  
|                                                    |  |                                 |       |  
|Net loss                                            |  | $                               | (123  | ) |                                | $ | (709  | )    |  | $ | (31   | ) |  | $ | (1,228 | )
|                                                    |  |                                 |       |   |                                |   |       |      |  |   |       |   |  |   |        |  
|                                                    |  |                                 |       |  
|Loss per common share                               |  |                                 | (0.07 | ) |                                |   | (0.38 | )    |  |   | (0.02 | ) |  |   | (0.65  | )

See accompanying notes to
consolidated financial statements



2



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BEN FRANKLIN FINANCIAL, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY

For the Nine
Months Ended September 30, 2010 and 2009  (Unaudited)



|                                                                                                                 |  |             |    |  |                          |   |       |               |  |   |                  |   |  |                    |        |   |                                     |   |      |                                 |  |   |       |  |  |                           |     |   |  |   |        |   |  |   |        |  
|---------------------------------------------------------------------------------------------------------------- |  | ----------- | -- |  | ------------------------ | - | ----- | ------------- |  | - | ---------------- | - |  | ------------------ | ------ | - | ----------------------------------- | - | ---- | ------------------------------- |  | - | ----- |  |  | ------------------------- | --- | - |  | - | ------ | - |  | - | ------ | -
|                                                                                                                 |  | CommonStock |    |  | AdditionalPaid-InCapital |   |       | TreasuryStock |  |   | RetainedEarnings |   |  | UnearnedESOPShares |        |   | AccumulatedOtherComprehensiveIncome |   |      | AmountReclassifiedon ESOPShares |  |   | Total |  |  | ComprehensiveIncome(Loss) |    
|                                                                                                                 |  |             |    |  |                          |   |       |               | 
|Balance at January 1, 2009                                                                                       |  | $           | 20 |  |                          | $ | 8,014 |               |  | $ | (285             | ) |  | $                  | 8,397  |   |                                     | $ | (665 | )                               |  | $ | 9     |  |  | $                         | (73 | ) |  | $ | 15,417 |   |  |   |        |  
|Comprehensive loss                                                                                               |  |             |    |  |                          |   |       |               |  |   |                  |   |  |                    |        |   |                                     |   |      |                                 |  |   |       |  |  |                           |     |   |  |   |        |   |  |   |        |  
|Net loss                                                                                                         |  |             |   |  |                          |   |      |               |  |   |                 |   |  |                    | (1,228 | ) |                                     |   |     |                                 |  |   |      |  |  |                           |    |   |  |   | (1,228 | ) |  | $ | (1,228 | )
|Unrealized gain on securities available-for-sale, net of deferred income taxes                                   |  |             |   |  |                          |   |      |               |  |   |                 |   |  |                    |       |   |                                     |   |     |                                 |  |   | 55    |  |  |                           |    |   |  |   | 55     |   |  |   | 55     |  
|                                                                                                                 |  |             |    |  |                          |   |       |               |  |   |                  |   |  |                    |        |   |                                     |   |      |                                 |  |   |       |  |  |                           |     |   |  |   |        |   |  |   |        |  
|Total comprehensive loss                                                                                         |  |             |    |  |                          |   |       |               |  |   |                  |   |  |                    |        |   |                                     |   |      |                                 |  |   |       |  |  |                           |     |   |  |   |        |   |  | $ | (1,173 | )
|                                                                                                                 |  |             |    |  |                          |   |       |               |  |   |                  |   |  |                    |        |   |                                     |   |      |                                 |  |   |       |  |  |                           |     |   |  |   |        |   |  |   |        |  
|Earned ESOP shares and other stock based compensation                                                            |  |             |   |  |                          |   | 58    |               |  |   |                 |   |  |                    |       |   |                                     |   | 42   |                                 |  |   |      |  |  |                           |    |   |  |   | 100    |   |  |   |        |  
|Purchase of common stock (29,359 shares)                                                                         |  |             |   |  |                          |   |      |               |  |   | (176             | ) |  |                    |       |   |                                     |   |     |                                 |  |   |      |  |  |                           |    |   |  |   | (176   | ) |  |   |        |  
|Reclassification due to change in fair value of common stock in ESOP subject to contingent repurchase obligation |  |             |   |  |                          |   |      |               |  |   |                 |   |  |                    |       |   |                                     |   |     |                                 |  |   |      |  |  |                           | 9   |   |  |   | 9      |   |  |   |        |  
|                                                                                                                 |  |             |    |  |                          |   |       |               |  |   |                  |   |  |                    |        |   |                                     |   |      |                                 |  |   |       |  |  |                           |     |   |  |   |        |   |  |   |        |  
|Balance at September 30, 2009                                                                                    |  | $           | 20 |  |                          | $ | 8,072 |               |  | $ | (461             | ) |  | $                  | 7,169  |   |                                     | $ | (623 | )                               |  | $ | 64    |  |  | $                         | (64 | ) |  | $ | 14,177 |   |  |   |        |  
|                                                                                                                 |  |             |    |  |                          |   |       |               |  |   |                  |   |  |                    |        |   |                                     |   |      |                                 |  |   |       |  |  |                           |     |   |  |   |        |   |  |   |        |  
|                                                                                                                 |  |             |    |  |                          |   |       |               | 
|Balance at January 1, 2010                                                                                       |  | $           | 20 |  |                          | $ | 8,088 |               |  | $ | (461             | ) |  | $                  | 6,776  |   |                                     | $ | (609 | )                               |  | $ | 58    |  |  | $                         | (43 | ) |  | $ | 13,829 |   |  |   |        |  
|Comprehensive loss                                                                                               |  |             |    |  |                          |   |       |               |  |   |                  |   |  |                    |        |   |                                     |   |      |                                 |  |   |       |  |  |                           |     |   |  |   |        |   |  |   |        |  
|Net loss                                                                                                         |  |             |   |  |                          |   |      |               |  |   |                 |   |  |                    | (31    | ) |                                     |   |     |                                 |  |   |      |  |  |                           |    |   |  |   | (31    | ) |  | $ | (31    | )
|Unrealized gain on securities available for-sale, net of deferred income taxes                                   |  |             |   |  |                          |   |      |               |  |   |                 |   |  |                    |       |   |                                     |   |     |                                 |  |   | 16    |  |  |                           |    |   |  |   | 16     |   |  |   | 16     |  
|                                                                                                                 |  |             |    |  |                          |   |       |               |  |   |                  |   |  |                    |        |   |                                     |   |      |                                 |  |   |       |  |  |                           |     |   |  |   |        |   |  |   |        |  
|Total comprehensive loss                                                                                         |  |             |    |  |                          |   |       |               |  |   |                  |   |  |                    |        |   |                                     |   |      |                                 |  |   |       |  |  |                           |     |   |  |   |        |   |  | $ | (15    | )
|                                                                                                                 |  |             |    |  |                          |   |       |               |  |   |                  |   |  |                    |        |   |                                     |   |      |                                 |  |   |       |  |  |                           |     |   |  |   |        |   |  |   |        |  
|Earned ESOP shares and other stock based compensation                                                            |  |             |   |  |                          |   | 50    |               |  |   |                 |   |  |                    |       |   |                                     |   | 38   |                                 |  |   |      |  |  |                           |    |   |  |   | 88     |   |  |   |        |  
|Purchase of common stock (427 shares)                                                                            |  |             |   |  |                          |   |      |               |  |   | (1               | ) |  |                    |       |   |                                     |   |     |                                 |  |   |      |  |  |                           |    |   |  |   | (1     | ) |  |   |        |  
|Reclassification due to change in fair value of common stock in ESOP subject to contingent repurchase obligation |  |             |   |  |                          |   |      |               |  |   |                 |   |  |                    |       |   |                                     |   |     |                                 |  |   |      |  |  |                           | (19 | ) |  |   | (19    | ) |  |   |        |  
|                                                                                                                 |  |             |    |  |                          |   |       |               |  |   |                  |   |  |                    |        |   |                                     |   |      |                                 |  |   |       |  |  |                           |     |   |  |   |        |   |  |   |        |  
|                                                                                                                 |  |             |    |  |                          |   |       |               | 
|Balance at September 30, 2010                                                                                    |  | $           | 20 |  |                          | $ | 8,138 |               |  | $ | (462             | ) |  | $                  | 6,745  |   |                                     | $ | (571 | )                               |  | $ | 74    |  |  | $                         | (62 | ) |  | $ | 13,882 |   |  |   |        |  
|                                                                                                                 |  |             |    |  |                          |   |       |               |  |   |                  |   |  |                    |        |   |                                     |   |      |                                 |  |   |       |  |  |                           |     |   |  |   |        |   |  |   |        |  

See accompanying notes to consolidated financial statements



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BEN FRANKLIN FINANCIAL, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands)

(Unaudited)



|                                                                                 |  |                                |        |   |      |   |        |  
|-------------------------------------------------------------------------------- |  | ------------------------------ | ------ | - | ---- | - | ------ | -
|                                                                                 |  | Nine Months EndedSeptember 30, |       
|                                                                                 |  | 2010                           |        |   | 2009 |  
|Cash flows from operating activities                                             |  |                                |        |   |      |   |        |  
|Net loss                                                                         |  | $                              | (31    | ) |      | $ | (1,228 | )
|Adjustments to reconcile net income (loss) to net cash from operating activities |  |                                |        |   |      |   |        |  
|Depreciation                                                                     |  |                                | 91     |   |      |   | 81     |  
|ESOP and other stock based compensation                                          |  |                                | 88     |   |      |   | 100    |  
|Amortization of premiums and discounts                                           |  |                                | 23     |   |      |   | 27     |  
|Provision for loan losses                                                        |  |                                | 522    |   |      |   | 630    |  
|Loss on sale of repossessed assets                                               |  |                                | 1      |   |      |   | 10     |  
|Write down of repossessed assets                                                 |  |                                | 65     |   |      |   |       |  
|Changes in:                                                                      |  |                                |        |   |      |   |        |  
|Deferred loan costs                                                              |  |                                | 59     |   |      |   | 145    |  
|Accrued interest receivable                                                      |  |                                | 83     |   |      |   | 96     |  
|Other assets                                                                     |  |                                | 457    |   |      |   | 318    |  
|Other liabilities                                                                |  |                                | (29    | ) |      |   | 88     |  
|                                                                                 |  |                                |        |   |      |   |        |  
|Net cash from operating activities                                               |  |                                | 1,329  |   |      |   | 267    |  
|                                                                                 |  |                               
|Cash flows from investing activities                                             |  |                                |        |   |      |   |        |  
|Principal repayments on mortgage-backed securities                               |  |                                | 382    |   |      |   | 546    |  
|Net decrease in loans                                                            |  |                                | 4,552  |   |      |   | 4,598  |  
|Purchase of loans                                                                |  |                                |       |   |      |   | (3,308 | )
|Purchase of securities available for sale                                        |  |                                | (2,000 | ) |      |   | (1,000 | )
|Sales of repossessed assets                                                      |  |                                | 832    |   |      |   | 46     |  
|Expenditures to improve other real estate owned                                  |  |                                | (61    | ) |      |   |       |  
|Expenditures for premises and equipment                                          |  |                                | (70    | ) |      |   | (13    | )
|                                                                                 |  |                                |        |   |      |   |        |  
|Net cash from investing activities                                               |  |                                | 3,635  |   |      |   | 869    |  
|                                                                                 |  |                               
|Cash flows from financing activities                                             |  |                                |        |   |      |   |        |  
|Net increase (decrease) in deposits                                              |  |                                | (1,478 | ) |      |   | 1,120  |  
|Purchase of treasury stock                                                       |  |                                | (1     | ) |      |   | (176   | )
|Payment of Federal Home Loan Bank advance                                        |  |                                | (2,000 | ) |      |   | (2,500 | )
|Net change in advances from borrowers for taxes and insurance                    |  |                                | 120    |   |      |   | 237    |  
|                                                                                 |  |                                |        |   |      |   |        |  
|Net cash from financing activities                                               |  |                                | (3,359 | ) |      |   | (1,319 | )
|                                                                                 |  |                                |        |   |      |   |        |  
|                                                                                 |  |                               
|Net change in cash and cash equivalents                                          |  |                                | 1,605  |   |      |   | (183   | )
|                                                                                 |  |                               
|Cash and cash equivalents at beginning of year                                   |  |                                | 7,796  |   |      |   | 7,950  |  
|                                                                                 |  |                                |        |   |      |   |        |  
|                                                                                 |  |                               
|Cash and cash equivalents at end of period                                       |  | $                              | 9,401  |   |      | $ | 7,767  |  
|                                                                                 |  |                                |        |   |      |   |        |  
|                                                                                 |  |                               
|Supplemental disclosures                                                         |  |                                |        |   |      |   |        |  
|Interest paid                                                                    |  | $                              | 1,255  |   |      | $ | 2,225  |  
|Transfers from loans to repossessed assets                                       |  |                                | 588    |   |      |   | 942    |  



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NOTES TO
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 1  Basis of Financial Statement Presentation

The accompanying consolidated financial statements of Ben Franklin Financial, Inc. (the Company) and its wholly owned subsidiary Ben Franklin
Bank of Illinois (the Bank) have been prepared in conformity with U.S. generally accepted accounting principles (GAAP) and with the rules and regulations of the Securities and Exchange Commission for interim financial
reporting. Accordingly, they do not include all of the information and footnotes required for complete financial statements. These interim financial statements should be read in conjunction with the consolidated financial statements and notes
thereto that were included in the Companys Form 10-K for the year ended December 31, 2009. All significant intercompany transactions are eliminated in consolidation. In the opinion of the Companys management, all adjustments
necessary (i) for a fair presentation of the financial statements for the interim periods included herein and (ii) to make such financial statements not misleading have been made and are of a normal and recurring nature. Interim results
are not necessarily indicative of results for a full year.

In preparing the financial statements, management is required to make estimates
and assumptions that affect the recorded amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses for the period. Actual results
could differ from those estimates. For further information with respect to significant accounting policies followed by the Company in preparation of the financial statements, refer to the Companys 2009 Annual Report on Form 10-K.

The Bank is a federally chartered stock savings bank and a member of the Federal Home Loan Bank (FHLB) system. The Bank maintains insurance
on deposit accounts with the Deposit Insurance Fund (DIF) of the Federal Deposit Insurance Corporation (FDIC). Ben Franklin Financial, MHC (the MHC), a federally chartered mutual holding company, owns 1,091,062
shares of the Companys common stock and will continue to own at least a majority of the Companys common stock as long as the MHC exists.

Note 2  New Accounting Standards

In January 2010, the FASB issued guidance to improve
disclosure requirements related to fair value measurements and disclosures. The guidance requires that a reporting entity should disclose separately the amounts of significant transfers in and out of Level 1 and Level 2 fair value measurements and
describe the reasons for the transfers and that activity in Level 3 should be presented on a gross basis rather than one net number for information about purchases, issuances, and settlements. The guidance also requires that a reporting entity
should provide fair value measurement disclosures for each class of assets and liabilities and about the valuation techniques and inputs used to measure fair value for both recurring and nonrecurring fair value measurements. This guidance is
effective for interim and annual reporting periods beginning after December 31, 2009 except for the roll forward of activity in Level 3 which is effective for interim and annual reporting periods beginning after December 31, 2010. Adopting
this pronouncement did not have a material effect on the results of operations or financial condition of the Company.

In July 2010, the FASB
updated disclosure requirements with respect to the credit quality of financing receivables and the allowance for credit losses. According to the guidance there are two levels of detail at which credit information will presentedthe
portfolio segment and class levels. The portfolio segment level is defined as the level where financing receivables are aggregated in developing a Companys systematic method for calculating its allowance for credit losses. The class
level is the second level at which credit information will be presented and represents the categorization of financing related receivables at a slightly less aggregated level than the portfolio segment level. Companies will now be required to
provide the following disclosures as a result of this update: a roll forward of the allowance for credit losses at the portfolio segment level with the ending balances further categorized according to impairment method along with the balance
reported in the related financing receivables at period end; additional disclosure of nonaccrual and impaired financing receivables by class as of period end; credit quality and past due/ aging information by class as of period end; information
surrounding the nature and extent of loan modifications and troubled debt restructurings and their effect on the allowance for credit losses during the period; and detail of any significant purchases or sales of financing receivables during the
period. The increased disclosure requirements become effective for annual/interim periods ending on or after December 15, 2010 with respect to period-end data and December 15, 2011 with respect to activity within a reporting
period. The provisions of this update will expand the Companys current disclosures with respect to our allowance for loan losses.



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Note 3  Securities
Available-for-Sale

As of September 30, 2010 the Companys securities available-for-sale consisted of notes and residential
mortgage-backed securities issued by the Government National Mortgage Association, Federal Home Loan Mortgage Corporation or Federal National Mortgage Association. Our two agency notes have maturity dates of September 2013 and 2014 respectively. At
December 31, 2009, securities available-for-sale consisted of residential mortgage-backed securities issued by the aforementioned agencies. Gross unrealized gains and losses at September 30, 2010 were $120,000 and zero, respectively. Gross
unrealized gains and losses at December 31, 2009 were $94,000 and zero, respectively. There were no sales of securities available-for-sale for the three or nine months ended September 30, 2010 and 2009, respectively.

Note 4  Loans

The following table sets
forth the composition of our loan portfolio by type of loan, at the dates indicated. We had no loans held for sale at September 30, 2010 and December 31, 2009.



|                                     |  |                        |        |   |                   |  |        |        |  |   |         |   |  |  |        |  
|------------------------------------ |  | ---------------------- | ------ | - | ----------------- |  | ------ | ------ |  | - | ------- | - |  |  | ------ | -
|                                     |  | September 30, 2010     |        |   | December 31, 2009 | 
|                                     |  | Amount                 |        |   | Percent           |  |        | Amount |  |   | Percent |  
|                                     |  | (Dollars in thousands) |       
|Real Estate:                         |  |                        |        |   |                   |  |        |        |  |   |         |   |  |  |        |  
|One- to four- family                 |  | $                      | 38,987 |   |                   |  | 39.07  | %      |  | $ | 40,051  |   |  |  | 37.98  | %
|Multi-family                         |  |                        | 17,679 |   |                   |  | 17.72  |        |  |   | 16,933  |   |  |  | 16.06  |  
|Commercial                           |  |                        | 13,609 |   |                   |  | 13.64  |        |  |   | 13,103  |   |  |  | 12.42  |  
|Construction                         |  |                        | 1,042  |   |                   |  | 1.04   |        |  |   | 4,393   |   |  |  | 4.17   |  
|Land                                 |  |                        | 1,183  |   |                   |  | 1.19   |        |  |   | 1,139   |   |  |  | 1.08   |  
|                                     |  |                        |        |   |                   |  |        |        |  |   |         |   |  |  |        |  
|Total real estate                    |  |                        | 72,500 |   |                   |  | 72.66  |        |  |   | 75,619  |   |  |  | 71.71  |  
|                                     |  |                        |        |  
|Consumer and other loans:            |  |                        |        |   |                   |  |        |        |  |   |         |   |  |  |        |  
|Home equity lines-of-credit          |  |                        | 16,768 |   |                   |  | 16.80  |        |  |   | 16,589  |   |  |  | 15.73  |  
|Commercial business                  |  |                        | 5,450  |   |                   |  | 5.46   |        |  |   | 5,916   |   |  |  | 5.61   |  
|Automobile                           |  |                        | 4,947  |   |                   |  | 4.96   |        |  |   | 7,214   |   |  |  | 6.84   |  
|Other                                |  |                        | 115    |   |                   |  | 0.12   |        |  |   | 121     |   |  |  | 0.11   |  
|                                     |  |                        |        |   |                   |  |        |        |  |   |         |   |  |  |        |  
|Total consumer and other loans       |  |                        | 27,280 |   |                   |  | 27.34  |        |  |   | 29,840  |   |  |  | 28.29  |  
|                                     |  |                        |        |   |                   |  |        |        |  |   |         |   |  |  |        |  
|                                     |  |                        |        |  
|Total loans                          |  |                        | 99,780 |   |                   |  | 100.00 | %      |  |   | 105,459 |   |  |  | 100.00 | %
|                                     |  |                        |        |  
|Premiums and net deferred loan costs |  |                        | 7      |   |                   |  |        |        |  |   | 75      |   |  |  |        |  
|Allowance for loan losses            |  |                        | (870   | ) |                   |  |        |        |  |   | (940    | ) |  |  |        |  
|                                     |  |                        |        |   |                   |  |        |        |  |   |         |   |  |  |        |  
|Total loans, net                     |  | $                      | 98,917 |   |                   |  |        |        |  | $ | 104,594 |   |  |  |        |  
|                                     |  |                        |        |   |                   |  |        |        |  |   |         |   |  |  |        |  



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Non-performing Assets and Troubled
Debt Restructurings

All non-performing loans were in non-accrual status at September 30, 2010 and December 31, 2009. No loans were
past due ninety days or more and still accruing interest at September 30, 2010 or December 31, 2009.

The following table sets forth
our non-performing assets and troubled debt restructurings by category at the dates indicated (dollars in thousands).



|                                                                                 |  |                    |    |  |                   |   |        |        |  |  |        |  |  |   |       |  
|-------------------------------------------------------------------------------- |  | ------------------ | -- |  | ----------------- | - | ------ | ------ |  |  | ------ |  |  | - | ----- | -
|                                                                                 |  | September 30, 2010 |    |  | December 31, 2009 |  
|                                                                                 |  | Number             |    |  | Amount            |   |        | Number |  |  | Amount | 
|Non-performing loans                                                             |  |                    |    |  |                   |   |        |        |  |  |        |  |  |   |       |  
|One-to four-family                                                               |  |                    | 9  |  |                   | $ | 1,780  |        |  |  | 7      |  |  | $ | 1,264 |  
|Multi-family                                                                     |  |                    | 1  |  |                   |   | 385    |        |  |  | 1      |  |  |   | 326   |  
|Land                                                                             |  |                    | 1  |  |                   |   | 388    |        |  |  |       |  |  |   |      |  
|Commercial real estate                                                           |  |                    | 5  |  |                   |   | 2,400  |        |  |  | 2      |  |  |   | 1,927 |  
|Construction                                                                     |  |                    |   |  |                   |   |       |        |  |  | 1      |  |  |   | 653   |  
|Commercial business                                                              |  |                    | 2  |  |                   |   | 868    |        |  |  | 2      |  |  |   | 868   |  
|Other                                                                            |  |                    | 2  |  |                   |   | 10     |        |  |  |       |  |  |   |      |  
|                                                                                 |  |                    |    |  |                   |   |        |        |  |  |        |  |  |   |       |  
|Total non-performing loans                                                       |  |                    | 20 |  |                   |   | 5,831  |        |  |  | 13     |  |  |   | 5,038 |  
|                                                                                 |  |                    |    | 
|Troubled debt restructurings                                                     |  |                    |    |  |                   |   |        |        |  |  |        |  |  |   |       |  
|One-to four-family                                                               |  |                    |   |  |                   |   |       |        |  |  | 1      |  |  |   | 542   |  
|Multi-family                                                                     |  |                    | 3  |  |                   |   | 2,898  |        |  |  |       |  |  |   |      |  
|Commercial business                                                              |  |                    | 1  |  |                   |   | 702    |        |  |  |       |  |  |   |      |  
|                                                                                 |  |                    |    |  |                   |   |        |        |  |  |        |  |  |   |       |  
|Total troubled debt restructurings                                               |  |                    | 4  |  |                   |   | 3,600  |        |  |  | 1      |  |  |   | 542   |  
|                                                                                 |  |                    |    | 
|Repossessed assets                                                               |  |                    |    |  |                   |   |        |        |  |  |        |  |  |   |       |  
|Foreclosed real estate                                                           |  |                    | 3  |  |                   |   | 654    |        |  |  | 2      |  |  |   | 963   |  
|Repossessed automobiles                                                          |  |                    | 2  |  |                   |   | 33     |        |  |  | 3      |  |  |   | 28    |  
|                                                                                 |  |                    |    |  |                   |   |        |        |  |  |        |  |  |   |       |  
|Total non-performing assets                                                      |  |                    | 5  |  |                   |   | 687    |        |  |  | 5      |  |  | $ | 991   |  
|                                                                                 |  |                    |    |  |                   |   |        |        |  |  |        |  |  |   |       |  
|Total non-performing loans, troubled debt restructurings, and repossessed assets |  |                    | 29 |  |                   | $ | 10,118 |        |  |  | 19     |  |  | $ | 6,571 |  
|                                                                                 |  |                    |    |  |                   |   |        |        |  |  |        |  |  |   |       |  
|                                                                                 |  |                    |    | 
|Non-performing loans to total loans                                              |  |                    |    |  |                   |   | 5.84   | %      |  |  |        |  |  |   | 4.77  | %
|Non-performing loans and troubled debt restructurings to total loans             |  |                    |    |  |                   |   | 9.45   | %      |  |  |        |  |  |   | 5.29  | %
|Non-performing assets and troubled debt restructurings to total assets           |  |                    |    |  |                   |   | 8.86   | %      |  |  |        |  |  |   | 5.49  | %

At September 30, 2010, our loans
classified as troubled debt restructurings included one loan with a reduction in interest rate for twelve months which had an outstanding balance of $804,000 at September 30, 2010 and three loans for which there was a reduction in the payment
amount for a twelve month period or less. All of these loans will revert to the original terms at the end of the modifications period. At September 30, 2010, all of these loans were performing under their revised terms and one which reverted to
its original term in September 2010. There were no additional commitments to lend on the restructured notes.



7



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Note 5  Allowance for Loan
Losses

The following table sets forth the activity in our allowance for loan losses for the periods indicated:



|                               |  |                                         |      |   |      |   |       |  
|------------------------------ |  | --------------------------------------- | ---- | - | ---- | - | ----- | -
|                               |  | For the Nine Months Ended September 30, |     
|                               |  | 2010                                    |      |   | 2009 |  
|                               |  | (Dollars in thousands)                  |     
|                               |  |                                        
|Balance at beginning of period |  | $                                       | 940  |   |      | $ | 584   |  
|Total charge-offs              |  |                                         | (605 | ) |      |   | (151  | )
|Total recoveries               |  |                                         | 13   |   |      |   | 14    |  
|Provision for loan losses      |  |                                         | 522  |   |      |   | 630   |  
|                               |  |                                         |      |   |      |   |       |  
|                               |  |                                        
|Balance at end of period       |  | $                                       | 870  |   |      | $ | 1,077 |  
|                               |  |                                         |      |   |      |   |       |  

Our allowance for impaired loans and troubled debt restructurings was $315,000 at September 30, 2010 and $366,000 at
December 31, 2009.



|                                                                   |  |                    |       |   |                   |  |       |  
|------------------------------------------------------------------ |  | ------------------ | ----- | - | ----------------- |  | ----- | -
|                                                                   |  | September 30, 2010 |       |   | December 31, 2009 | 
|Ratios:                                                            |  |                    |       |   |                   |  |       |  
|Allowance for loan losses to non-performing loans at end of period |  |                    | 14.92 | % |                   |  | 18.66 | %
|Allowance for loan losses to total loans at end of period          |  |                    | 0.87  | % |                   |  | 0.89  | %

Note 6  Stock Based Compensation

On October 18, 2006, the Company adopted an employee stock ownership plan (the ESOP) for the benefit of substantially all
employees. The ESOP borrowed $778,000 from the Company and used those funds to acquire 77,763 shares of the Companys common stock in connection with the Companys initial public offering at a price of $10 per share.

The ESOP has a plan year end of December 31. Expense related to the ESOP was $3,000 and $7,000 during the three months ended September 30, 2010
and 2009, respectively and $10,000 and $21,000 for the nine months ended September 30, 2010 and 2009, respectively.

Shares held by the
ESOP at September 30, 2010 were as follows:



|                                                                |  |   |         | 
|--------------------------------------------------------------- |  | - | ------- | 
|Shares committed to be released                                 |  |   | 3,792   | 
|Allocated shares                                                |  |   | 15,090  | 
|Unearned ESOP shares                                            |  |   | 57,043  | 
|                                                                |  |   |         | 
|                                                                | 
|Total ESOP shares                                               |  |   | 75,925  | 
|                                                                |  |   |         | 
|                                                                | 
|Fair value of unearned ESOP shares                              |  | $ | 188,000 | 
|                                                                |  |   |         | 
|                                                                | 
|Fair value of allocated shares subject to repurchase obligation |  | $ | 62,000  | 
|                                                                |  |   |         | 

On March 26, 2008, stockholders of the Company approved the Ben Franklin Financial, Inc. Equity Incentive Plan (the
Plan) which provides officers, employees, and directors of the Company and the Bank with stock based incentives to promote our growth and performance. The Plan shall remain in effect as long as any awards are outstanding provided,
however, that no awards be granted under the Plan after ten years from the date of adoption. The Plan authorizes the issuance of up to 136,085 shares of our common stock pursuant to grants of incentive and non-statutory stock options, stock
appreciation rights, and restricted stock awards. No more than 38,881 shares may be issued as restricted stock awards. No more than 97,204 shares may be issued pursuant to stock options and stock appreciation rights, all of which may be granted
pursuant to the exercise of incentive stock options. On April 17,



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2008, we granted restricted stock awards for 34,476 common shares and stock options for 86,740 common shares under the Plan, all of which vest over a five year period. Awards under the Plan may
also fully vest upon the participants death or disability or change in control of the Company. All of the options granted have an exercise price of $9.36 per share, which was the closing price of the stock on the grant date. As of
September 30, 2010, 34,696 options had vested. No options were exercised or forfeited as of September 30, 2010. The options had no intrinsic value as of September 30, 2010.

Stock option expense was $10,000 for the three months ended September 30, 2010, and 2009, respectively and $30,000 for the nine months ended September 30, 2010, and 2009, respectively. As of
September 30, 2010, $100,000 of unrecognized compensation cost is expected to be recognized over the next 2.6 years.

The fair value of
the restricted stock awards was $9.36 per share, which was the closing price of the stock on the April 17, 2008 grant date. As of September 30, 2010, 13,792 shares had vested. None of the restricted stock awards were forfeited as of
September 30, 2010. Restricted stock award expense was $16,000 during the three months ended September 30, 2010 and 2009, respectively and $48,000 for the nine months ended September 30, 2010, and 2009, respectively. As of
September 30, 2010, there was $164,000 of unrecognized compensation cost related to shares granted under the Plan. The cost is expected to be recognized over the next 2.6 years.

The value of stock options and restricted stock awards as of the grant date is expensed over the five year vesting period. Forfeitures of stock options and restricted stock awards are expected to be
insignificant.

No stock options or restricted stock awards have been granted since April 17, 2008.

Note 7  Income Taxes

In the third
quarter of 2009, the Company recorded a valuation allowance against its net deferred tax asset, thus reducing the net carrying value of deferred tax assets to zero. The valuation allowance is reviewed quarterly and adjusted based on amounts expected
to be realized. The valuation allowance for our net deferred tax asset was $574,000 as of September 30, 2010 and $578,000 at December 31, 2009.

Note 8  Stock Repurchase Program

On April 23, 2008, the Company adopted a stock
repurchase program to repurchase up to 44,634 shares or 4.8% of the Companys outstanding common stock (excluding shares held by the MHC). This program was completed in January of 2009. On January 28, 2009, the Company adopted a second
stock repurchase program to repurchase up to 42,487 shares representing approximately 5.0% of the Companys outstanding common stock (excluding shares held by the MHC). As of September 30, 2010, the Company had repurchased 67,650 shares
under both programs.

Note 9  Earnings Per Share

Basic earnings (loss) per share is based on net income (loss) divided by the weighted average number of shares outstanding during the period, including allocated and committed-to-be-released ESOP shares.
Diluted earnings (loss) per share shows the dilutive effect, if any, of additional common shares issuable under stock options, using the treasury stock method. All stock options were considered antidilutive and were excluded from the computation of
diluted earnings (loss) per share for the three and nine months ended September 30, 2010 and 2009.



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The following table presents a
reconciliation of the components used to compute basic and diluted earnings (loss) per share:



|                                           |  |                            |           |   |                           |   |           |                   |  |   |                   |   |  |   |            |  
|------------------------------------------ |  | -------------------------- | --------- | - | ------------------------- | - | --------- | ----------------- |  | - | ----------------- | - |  | - | ---------- | -
|                                           |  | For the Three Months Ended |           |   | For the Nine Months Ended |  
|                                           |  | September 30,2010          |           |   | September 30,2009         |   |           | September 30,2010 |  |   | September 30,2009 |  
|Net income (loss)                          |  | $                          | (123,000  | ) |                           | $ | (709,000  | )                 |  | $ | (31,000           | ) |  | $ | (1,228,000 | )
|Weighted average common shares outstanding |  |                            | 1,892,673 |   |                           |   | 1,887,467 |                   |  |   | 1,891,439         |   |  |   | 1,894,772  |  
|Basic and diluted income (loss) per share  |  | $                          | (0.07     | ) |                           | $ | (0.38     | )                 |  | $ | (0.02             | ) |  | $ | (0.65      | )

Note 10  Fair Value

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most
advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. GAAP establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the
use of unobservable inputs when measuring fair value. GAAP describes three levels of inputs that may be used to measure fair value:

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

Level 2: Significant other observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities in active
markets, quoted prices for identical assets or liabilities in markets that are not active or other inputs that are observable or can be corroborated by observable market data, (for example, interest rate and yield curves observable at commonly
quoted intervals, prepayment speeds, credit risks, and default rates).

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

The
Company used the following methods and significant assumptions to estimate the fair value of each type of financial instrument:

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

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

Repossessed Assets: Nonrecurring adjustments to certain commercial and residential real estate properties classified as other real estate owned
(OREO) and repossessed automobiles are measured at the lower of carrying amount or fair value, less costs to sell. Fair values for OREO are generally based on third party appraisals of the property while fair values for automobiles are based on
published values of comparable models, resulting in a Level 3 classification. In cases where the carrying amount exceeds the fair value, less costs to sell, an impairment loss is recognized.



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



|                                                            |  |                |       |  |                                                            |   |   |                                           |  |   |                                        |  |  |   |   | 
|----------------------------------------------------------- |  | -------------- | ----- |  | ---------------------------------------------------------- | - | - | ----------------------------------------- |  | - | -------------------------------------- |  |  | - | - | 
|                                                            |  |                |       |  | Fair Value Measurements Using                              |  
|                                                            |  | CarryingValue  |       |  | Quoted Prices inActive Marketsfor IdenticalAssets(Level 1) |   |   | SignificantOtherObservableInputs(Level 2) |  |   | SignificantUnobservableInputs(Level
3) | 
|                                                            |  | (In thousands) |      
|September 30, 2010                                          |  |                |       |  |                                                            |   |   |                                           |  |   |                                        |  |  |   |   | 
|Assets:                                                     |  |                |       |  |                                                            |   |   |                                           |  |   |                                        |  |  |   |   | 
|Mortgage-backed securities available for sale - residential |  | $              | 2,102 |  |                                                            | $ |  |                                           |  | $ | 2,102                                  |  |  | $ |  | 
|United States agency notes available for sale               |  |                | 2,001 |  |                                                            | $ |  |                                           |  | $ | 2,001                                  |  |  | $ |  | 
|                                                            |  |                |       | 
|December 31, 2009                                           |  |                |       |  |                                                            |   |   |                                           |  |   |                                        |  |  |   |   | 
|Assets:                                                     |  |                |       |  |                                                            |   |   |                                           |  |   |                                        |  |  |   |   | 
|Mortgage-backed securities available for sale - residential |  | $              | 2,463 |  |                                                            | $ |  |                                           |  | $ | 2,463                                  |  |  | $ |  | 

Assets Measured on a Non-Recurring
Basis

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



|                   |  |                |       |  |                                                            |   |   |                                           |  |   |                                        |  |  |   |       | 
|------------------ |  | -------------- | ----- |  | ---------------------------------------------------------- | - | - | ----------------------------------------- |  | - | -------------------------------------- |  |  | - | ----- | 
|                   |  |                |       |  | Fair Value Measurements Using                              |  
|                   |  | CarryingValue  |       |  | Quoted Prices inActive Marketsfor IdenticalAssets(Level 1) |   |   | SignificantOtherObservableInputs(Level 2) |  |   | SignificantUnobservableInputs(Level
3) | 
|                   |  | (In thousands) |      
|September 30, 2010 |  |                |       |  |                                                            |   |   |                                           |  |   |                                        |  |  |   |       | 
|Assets:            |  |                |       |  |                                                            |   |   |                                           |  |   |                                        |  |  |   |       | 
|Impaired loans     |  | $              | 4,218 |  |                                                            | $ |  |                                           |  | $ |                                       |  |  | $ | 4,218 | 
|Repossessed assets |  |                | 687   |  |                                                            |   |  |                                           |  |   |                                       |  |  |   | 687   | 
|                   |  |                |       | 
|December 31, 2009  |  |                |       |  |                                                            |   |   |                                           |  |   |                                        |  |  |   |       | 
|Assets:            |  |                |       |  |                                                            |   |   |                                           |  |   |                                        |  |  |   |       | 
|Impaired loans     |  | $              | 2,841 |  |                                                            | $ |  |                                           |  | $ |                                       |  |  | $ | 2,841 | 
|Repossessed assets |  |                | 991   |  |                                                            |   |  |                                           |  |   |                                       |  |  |   | 991   | 

Impaired loans, which are measured
for impairment using the fair value of the collateral (less cost to sell) for collateral dependent loans, had a aggregate balance of $4,470,000, with a $252,000 valuation allowance at September 30, 2010 resulting in an additional provision for
loan losses of $55,000 and $177,000 for the three and nine months ended September 30, 2010 respectively. Impaired loans at December 31, 2009 had an aggregate balance of $3,144,000 with a $303,000 valuation allowance.

Repossessed assets, consisting of other real estate owned and repossessed automobiles are measured at the lower of cost or fair value less cost to sell.
Repossessed assets were carried at cost of $687,000 at September 30, 2010, consisting of the cost basis of $752,000 and a valuation allowance of $65,000, and $991,000 at December 31, 2009, consisting of the cost basis of $1,125,000 and a
valuation allowance of $134,000.



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The carrying amounts and estimated
fair values of the Companys financial instruments are as follows:



|                                  |  |                        |        |  |                     |   |         |               |  |   |                     |  |  |   |         | 
|--------------------------------- |  | ---------------------- | ------ |  | ------------------- | - | ------- | ------------- |  | - | ------------------- |  |  | - | ------- | 
|                                  |  | September 30, 2010     |        |  | December 31, 2009   |  
|                                  |  | CarryingValue          |        |  | Estimated FairValue |   |         | CarryingValue |  |   | Estimated FairValue | 
|                                  |  | (Dollars in thousands) |       
|Financial assets                  |  |                        |        |  |                     |   |         |               |  |   |                     |  |  |   |         | 
|Cash and cash equivalents         |  | $                      | 9,401  |  |                     | $ | 9,401   |               |  | $ | 7,796               |  |  | $ | 7,796   | 
|Securities available-for-sale     |  |                        | 4,103  |  |                     |   | 4,103   |               |  |   | 2,463               |  |  |   | 2,463   | 
|Loans receivable, net             |  |                        | 98,917 |  |                     |   | 104,009 |               |  |   | 104,594             |  |  |   | 108,811 | 
|FHLB stock                        |  |                        | 1,337  |  |                     |   | N/A     |               |  |   | 1,337               |  |  |   | N/A     | 
|Accrued interest receivable       |  |                        | 374    |  |                     |   | 374     |               |  |   | 457                 |  |  |   | 457     | 
|                                  |  |                        |        | 
|Financial liabilities             |  |                        |        |  |                     |   |         |               |  |   |                     |  |  |   |         | 
|Demand, money market, and savings |  | $                      | 32,652 |  |                     | $ | 32,652  |               |  | $ | 27,447              |  |  | $ | 27,447  | 
|Certificates of deposits          |  |                        | 68,983 |  |                     |   | 70,139  |               |  |   | 75,666              |  |  |   | 76,734  | 
|FHLB advances                     |  |                        |       |  |                     |   |        |               |  |   | 2,000               |  |  |   | 2,034   | 
|Accrued interest payable          |  |                        | 4      |  |                     |   | 4       |               |  |   | 21                  |  |  |   | 4       | 

The methods and assumptions used to
determine fair values for each class of financial instrument are presented below.

The estimated fair values for cash and cash equivalents,
accrued interest receivable, demand, money market, and savings deposits, and accrued interest payable approximate their carrying values. The estimated fair values for securities available-for-sale are based on matrix pricing. It was not practicable
to determine the fair value of FHLB stock due to the restriction placed on transferability. The estimated fair value for loans is based on current market rates for similar loans, applied for the time period until estimated payment. The estimated
fair value of certificates of deposit is based on current market rates for such deposits, applied for the time period until maturity. The fair value of FHLB advances is based on current rates for similar financing. Commitments to extend credit are
not included in the table above as their estimated fair value is immaterial.

While the above estimates are based on managements
judgment of the most appropriate factors, there is no assurance that were the Company to have disposed of these items on September 30, 2010, the fair values would have been achieved, because the market value may differ depending on the
circumstances.

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

Forward-Looking Statements

This quarterly report on Form 10-Q may contain statements relating to the future results of the Company (including certain projections and business trends) that are considered forward-looking
statements as defined in the Private Securities Litigation Reform Act of 1995 (the PSLRA). Such forward-looking statements, in addition to historical information, which involve risk and uncertainties, are based on the beliefs,
assumptions and expectations of management. Words such as expects, believes, should, plans, anticipates, will, potential, could, intend,
may, outlook, predict, project, would, estimates, assumes, likely, and variations of such similar expressions are intended to identify such
forward-looking statements. Examples of forward-looking statements include, but are not limited to: statements of our goals, intentions, and expectations; statements regarding our business plans and prospects and growth and operating strategies;
statements regarding the asset quality of our loan and investment portfolios; and estimates of our risks and future costs and benefits. For this presentation, the Company and its subsidiary claim the protection of the safe harbor for forward-looking
statements contained in the PSLRA.

Factors that could cause future results to vary from current management expectations include, but are not
limited to: our ability to manage the risk from our one-to four-family, home equity line-of-credit, multi-family, commercial real estate, construction, land, commercial business, and automobile lending including purchased loans; the future level of
deposit insurance premiums and special assessments applicable to us; significantly increased competition among



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depository and other financial institutions; our ability to execute our plan to grow our assets on a profitable basis; our ability to execute on a favorable basis any plan we may have to acquire
other institutions or branches or establish new offices including a transaction assisted by the FDIC; changes in the interest rate environment that reduce our margins or reduce the fair value of financial instruments; inflation; general economic
conditions, both nationally and in our market area; adverse changes in the securities and national and local real estate markets (including loan demand, housing demand, and real estate values); our ability to originate a satisfactory amount of high
quality loans in an unfavorable economic environment; legislative or regulatory changes that adversely affect our business including the recently enacted banking reform legislation by the U.S. Congress; the impact of the U.S. governments
stimulus program and its various financial institution rescue plans including TARP; the effect of the Dodd-Frank Reform Act, our ability to enter new markets successfully and take advantage of growth opportunities; changes in consumer spending,
borrowing and savings habits; changes in accounting policies and practices, as may be adopted by the bank regulatory agencies and the authoritative accounting bodies; the performance of our investment in FHLB of Chicago stock; changes in our
organization, compensation and benefit plans; and other factors. The forward-looking statements are made as of the date of this report, and the Company assumes no obligation to update the forward-looking statements or to update the reasons why
actual results could differ from those projected in the forward-looking statements.

New Federal Legislation

Congress has recently enacted the Dodd-Frank Wall Street Reform and Consumer Protection Act which will significantly change the current bank regulatory
structure and affect the lending, investment, trading and operating activities of financial institutions and their holding companies. The Dodd-Frank Act will eliminate our current primary federal regulator, the Office of Thrift Supervision, and will
require the Bank to be regulated by the Office of the Comptroller of the Currency (the primary federal regulator for national banks). The Dodd-Frank Act also authorizes the Board of Governors of the Federal Reserve System to supervise and regulate
all savings and loan holding companies like the Company, in addition to bank holding companies which it currently regulates. As a result, the Federal Reserve Boards current regulations applicable to bank holding companies, including holding
company capital requirements, will apply to savings and loan holding companies like the Company. These capital requirements are substantially similar to the capital requirements currently applicable to the Bank. The Dodd-Frank Act also requires the
Federal Reserve Board to set minimum capital levels for bank holding companies that are as stringent as those required for the insured depository subsidiaries, and the components of Tier 1 capital would be restricted to capital instruments that are
currently considered to be Tier 1 capital for insured depository institutions. Bank holding companies with assets of less than $500 million are exempt from these capital requirements. Under the Dodd-Frank Act, the proceeds of trust preferred
securities are excluded from Tier 1 capital unless such securities were issued prior to May 19, 2010 by bank or savings and loan holding companies with less than $15 billion of assets. The legislation also establishes a floor for capital of
insured depository institutions that cannot be lower than the standards in effect today, and directs the federal banking regulators to implement new leverage and capital requirements within 18 months that take into account off-balance sheet
activities and other risks, including risks relating to securitized products and derivatives.

The Dodd-Frank Act also creates a new Consumer
Financial Protection Bureau with broad powers to supervise and enforce consumer protection laws. The Consumer Financial Protection Bureau has broad rule-making authority for a wide range of consumer protection laws that apply to all banks and
savings institutions such as the Bank, including the authority to prohibit unfair, deceptive or abusive acts and practices. The Consumer Financial Protection Bureau has examination and enforcement authority over all banks and savings
institutions with more than $10 billion in assets. Banks and savings institutions with $10 billion or less in assets will be examined by their applicable bank regulators. The new legislation also weakens the federal preemption available for national
banks and federal savings associations, and gives state attorneys general the ability to enforce applicable federal consumer protection laws.

The legislation also broadens the base for Federal Deposit Insurance Corporation insurance assessments. Assessments will now be based on the average
consolidated total assets less tangible equity capital of a financial institution. The Dodd-Frank Act also permanently increases the maximum amount of deposit insurance for banks, savings institutions and credit unions to $250,000 per depositor,
retroactive to January 1, 2009, and non-interest bearing transaction accounts have unlimited deposit insurance through December 31, 2013. Lastly, the Dodd-Frank Act will increase stockholder influence over boards of directors by requiring
companies to give stockholders a non-binding



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vote on executive compensation and so-called golden parachute payments, and authorizing the Securities and Exchange Commission to promulgate rules that would allow stockholders to
nominate their own candidates using a companys proxy materials. The legislation also directs the Federal Reserve Board to promulgate rules prohibiting excessive compensation paid to bank holding company executives, regardless of whether the
company is publicly traded or not.

General

The Bank is a federally chartered savings bank headquartered in Arlington Heights, Illinois. The Bank was originally founded in 1893 as a building and loan association. We conduct our business from our
main office and one branch office. Both of our offices are located in the northwestern corridor of the Chicago metropolitan area.

Our
principal business activity is attracting retail deposits from the general public in our market and investing those deposits, together with funds generated from operations and to a lesser extent borrowings, in one- to four-family residential
mortgage loans and, to a lesser extent, home equity lines-of-credit, commercial real estate loans, multi-family real estate loans, construction and land loans, and other loans. Over the past several years, we have also purchased automobile loans and
commercial loans secured by medical equipment although purchases for automobile loans ended in 2008 and purchases of medical equipment loans ended in 2009. We have also invested in mortgage-backed securities and U.S. Government sponsored entity
notes. Our primary sources of funds are deposits and principal and interest payments on loans and securities. The Bank offers a variety of deposit accounts, including checking, money market, savings, and certificates of deposit, and emphasizes
personal and efficient service for its customers. We also use borrowings, primarily Federal Home Loan Bank of Chicago advances, to supplement cash flow needs, to lengthen the maturities of liabilities for interest rate risk purposes and to manage
the cost of funds. Our competition for loans and deposits comes principally from commercial banks, savings institutions, mortgage banking firms and credit unions. Our primary focus is to develop and build profitable customer relationships across all
lines of business while maintaining our focus as a community bank.

Our results of operations depend primarily on our net interest income. Net
interest income is the difference between the interest income we earn on our interest-earning assets, consisting primarily of loans, mortgage-backed and other securities, and other interest-earning assets, and the interest paid on our
interest-bearing liabilities, consisting primarily of savings and transaction accounts, certificates of deposit, and Federal Home Loan Bank of Chicago advances. Our results of operations also are affected by our provision for loan losses,
non-interest income and non-interest expense. Non-interest income consists primarily of deposit service charges and loan origination service fees charged for loans funded by other institutions, and miscellaneous other income. Non-interest expense
consists primarily of compensation and employee benefits, occupancy and equipment expenses, data processing, professional fees, FDIC insurance premiums and assessments, repossessed asset losses and carrying costs, and other operating expenses. Our
results of operations may be affected significantly by general and local economic and competitive conditions, changes in market interest rates, governmental policies and actions of regulatory authorities.

Since March of 2009, we have experienced a decline in assets primarily due to the decrease in the balance of our loan portfolio as loan originations have
not kept pace with repayments and payoffs in the portfolio primarily due to weak loan demand during the current economic downturn. We will continue, subject to market conditions, to focus on expanding multi-family, home equity lines-of-credit,
commercial real estate and commercial business lending while maintaining our current level of one- to four-family residential lending. We also anticipate, depending on the real estate market and economic conditions, continuing construction lending.
In addition, we will pursue other lending alternatives to diversify our loan portfolio and to manage credit and interest rate risks and may pursue other opportunities to achieve growth. While we believe growth is essential for our future
profitability, we intend to carefully monitor our underwriting standards and the concentration levels within our loan portfolio to manage our exposure to credit risks.

Since March of 2008, we have experienced an increase in the balance of our non-performing loans and other assets as the weak economic environment has impacted borrowers ability to make payments and
has resulted in a decline in the value of real estate collateralizing the debt. We continue to focus our efforts on working with our borrowers during these difficult times; however, when appropriate we pursue legal recourse through foreclosure or
other actions as part of our goal of reducing our non-performing assets.



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While we have experienced some
earnings and asset quality challenges the past several years, primarily due to the local and national economic environment, some positive signs have emerged as the residential development immediately surrounding our main office continues to progress
and the new grocery store adjacent to our office continues to draw a large number of shoppers into the area. We are hopeful that these early signs of recovery will provide opportunities to help us meet our growth objectives for the future. We may
also explore additional expansion opportunities in the future, subject to our capital or other limitations.

Critical Accounting Policies

Certain of our accounting policies are important to the reporting of our financial results, since they require management to make
difficult, complex and/or subjective judgments, some of which may relate to matters that are inherently uncertain. Estimates associated with these policies are susceptible to material changes as a result of changes in facts and circumstances. Facts
and circumstances which could affect these judgments include, but are not limited to, changes in interest rates, changes in performance of the local economy, changes in the financial condition of borrowers, and changes in value of loan collateral
such as real estate. As discussed in the Companys Annual Report on Form 10-K for the year ended December 31, 2009, management believes that its critical accounting policies include determining the allowance for loan losses, determination
of the fair value of stock options and accounting for stock based compensation under the Companys Equity Incentive Plan, and accounting for deferred income taxes.

Comparison of Financial Condition at September 30, 2010 and December 31, 2009

General. For the nine months ended September 30, 2010, we experienced a decrease in assets primarily due to a decrease in our loan
portfolio due to lower loan originations as loan demand remained weak in the current economic environment. During this time period, deposit balances also decreased primarily due to a decrease in certificates of deposit. While certificates of deposit
customers pursued higher interest rates, other deposit customers exhibited a preference for liquidity as evidenced by the continued increase in the balance of our money market accounts. With our excess liquidity, we paid off a maturing Federal Home
Loan Bank advance at the end of June 2010.

The prolonged economic downturn has continued to impact our borrowers ability to meet debt
obligations and our efforts to resolve our non-performing loans have been impacted by the lengthy foreclosure process. Given the current economic environment, we do not anticipate balance sheet growth during the remainder of the year as we focus on
reducing our non-performing assets and improving our capital position through earnings.

Assets.Total assets at
September 30, 2010 were $116.4 million compared to $119.7 million at December 31, 2009, a decrease of $3.3 million or 2.8%. This decrease was primarily due to a $5.7 million decrease in our net loan portfolio balance partially offset by a
$3.2 million increase in securities and cash and cash equivalents.

Our net loan portfolio balance decreased to $98.9 million at
September 30, 2010 compared to $104.6 million at December 31, 2009 primarily due to loan repayments and payoffs and the transfers of certain loans to repossessed assets. The decrease included: a $3.3 million decrease in the balance of our
construction loans; a $2.3 million decrease in our automobile loans; and a $1.1 million decrease in our one- to four-family residential loans, partially offset by a $746,000 increase in our multi-family loans and a $506,000 increase in our
commercial real estate loans. Overall, we anticipate our loan portfolio balance will decrease slightly throughout the remainder of 2010 as loan demand remains weak.

At September 30, 2010 our allowance for loan losses was $870,000 or 0.87% of total loans compared to $940,000 or 0.89% of total loans at December 31, 2009. Our allowance reflects the decrease in
value of collateral securing non-performing real estate loans. The decrease in the balance of our allowance for loan losses at September 30, 2010 compared to December 31, 2009 reflects the decrease in the balance of our loan portfolio for
the period and a $51,000 decrease in the amount related to our impaired loans, primarily due to charge-offs on such loans. Our non-performing loans totaled $5.8 million or 5.84% of total loans at September 30, 2010 compared to $5.0 million or
4.77% of total loans at December 31, 2009. Our loans classified as troubled debt restructurings totaled $3.6 million or 3.61% of total loans at September 30, 2010 which included three loans secured by multi-family properties totaling $2.9
million and one commercial business loan totaling $702,000, compared to $542,000 or 0.51% of total loans at December 31, 2009 which included one loan secured by a residential property. Our foreclosed assets totaled



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$687,000 at September 30, 2010 compared to $991,000 at December 31, 2009 primarily due to the $751,000 sale of a single-family residence partially offset by the transfer of repossessed
assets, net of improvements and write-downs, totaling $447,000. Two of the real estate owned properties are under contract and are scheduled to close in the fourth quarter of 2010. Our troubled debt restructurings, which accounts for $3.1 million of
the $3.5 million increase in our non-performing assets for the nine months ended September 30, 2010, are all performing under their revised terms and are anticipated to revert to their original terms at the end of their respective restructured
periods.

Our securities portfolio increased $1.6 million or 66.6% to $4.1 million at September 30, 2010 primarily due to purchases of
agency notes totaling $2.0 million with original maturities ranging from three to four years and yields ranging from 1.20% to 1.50%. This increase was offset by repayments on mortgage-backed securities. Cash and cash equivalents increased $1.6
million to $9.4 million at September 30, 2010 primarily due to repayments on loans. Subject to market conditions, management anticipates reducing the balance of cash and cash equivalents in the future to generate additional interest income.

Our other assets decreased $354,000 primarily due to the collection of federal tax refunds resulting from the carryback of our 2009 net
operating loss against taxable income reported in prior years.

Liabilities. Our customer deposits decreased by $1.5 million or
1.5% to $101.6 million at September 30, 2010 compared to $103.1 million at December 31, 2009. Our certificate of deposit accounts decreased $6.7 million or 8.8% to $69.0 million at September 30, 2010 primarily due to lower market
rates offered by the Bank compared to our competition. Our non-certificate of deposit accounts increased $5.2 million or 19.0% to $32.7 million at September 30, 2010 primarily due to an increase in our money market accounts as customers sought
liquid alternatives for their funds. With our excess liquidity, we paid off the remaining $2.0 million Federal Home Loan Bank advance at the end of June 2010.

Equity. Total stockholders equity at September 30, 2010 was $13.9 million, an increase of $53,000 or 0.38% from $13.8 million at December 31, 2009. The increase resulted
primarily from an increase of $69,000 for ESOP and other stock based compensation, and an increase of $16,000 due to unrealized gains on available-for-sale securities, partially offset by our net loss of $31,000 for the nine months ended
September 30, 2010.

Comparison of Operating Results for the Three Months Ended September 30, 2010 and 2009

General.For the three months ended September 30, 2010 our net loss was $123,000 compared to a net loss of $709,000 for the three
months ended September 30, 2009. This improvement was primarily due to a $621,000 decrease in our tax provision as we established a valuation allowance for our net deferred tax asset in the third quarter of 2009, and a $230,000 increase in our
net interest income as deposit costs continued to decrease. Partially offsetting these changes was an increase in our provision for loan losses of $205,000 and an increase of $51,000 in non-interest expense.

Interest Income. Interest income was $1.3 million for the three months ended September 30, 2010, $119,000 or 8.3% less than the prior
year period. Interest income from loans decreased $112,000 or 8.0% to $1.3 million for the three months ended September 30, 2010 primarily due to a $6.3 million decrease in the average balance of our loan portfolio to $99.2 million for the
three months ended September 30, 2010 compared to the prior year period. The average balance of our automobile and consumer loans, construction loans, and one- to four-family loans decreased $3.5 million, $2.0 million, and $455,000 respectively
for the comparative period primarily due to repayments and pay-offs, transfers of loans to repossessed assets, and lower origination volume. The average yield of our loan portfolio was 5.20% for the third quarter of 2010 compared to 5.28% for the
prior year period.

Interest income from securities decreased $7,000 or 23.3% to $23,000 for the three months ended September 30, 2010.
The average balance of our securities portfolio decreased $468,000 to $2.4 million for the three months ended September 30, 2010 compared to the prior year period primarily due to repayments on mortgage-backed securities, partially offset by
the purchase of $2.0 million of agency notes in the third quarter of 2010. The average yield on securities for the three months ended September 30, 2010 was 3.75% compared to 4.19 % for the prior year period primarily due to the downward
repricing of our adjustable rate mortgage-backed securities and the lower yield on the securities purchased during the third quarter of 2010.



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Interest Expense.
Interest expense for the three months ended September 30, 2010 was $353,000, a decrease of $349,000 or 49.7% from the prior year period due to decreases in interest expense on deposits and our Federal Home Loan Bank advances. Interest expense
on deposits decreased $276,000 primarily due to the decrease in the average cost of deposits to 1.44% for the three months ended September 30, 2010 compared to 2.47% for the prior year period as the average cost of our certificates of deposit
decreased to 1.82% for the three months ended September 30, 2010 from 3.08% for the prior year period as the general low market interest rates led to the downward repricing of maturing certificate of deposit accounts. The average balance of
interest bearing deposits decreased $3.0 million to $98.0 million for the third quarter of 2010 compared to the prior year period primarily due to an $8.0 million decrease in the average balance of our certificate of deposit accounts to $68.3
million. The average balance of our non-certificate of deposit accounts increased to $29.7 million for the third quarter of 2010 compared to $24.9 million from the prior year period. There was no interest expense on advances from the Federal Home
Loan Bank of Chicago for the three months ended September 30, 2010 compared to $73,000 for the prior year period primarily due to a $6.4 million decrease in the average balance of our advances due to the repayments in the second half of 2009
and second quarter of 2010.

Net Interest Income. Net interest income for the three months ended September 30, 2010
was $960,000 compared to $730,000 for the three months ended September 30, 2009. For the three months ended September 30, 2010, the average yield on interest-earning assets was 4.86% and the average cost of interest-bearing liabilities was
1.44% compared to 4.76% and 2.59%, respectively, for the three months ended September 30, 2009. These changes resulted in an increase in our net interest rate spread to 3.42% and net interest margin to 3.55% for the third quarter of 2010
compared to a net interest rate spread of 2.17% and net interest rate margin of 2.43% for the third quarter of 2009.

Provision for Loan Losses. Our provision for loan losses was $280,000 for the three months ended September 30, 2010 compared to
$75,000 for the three months ended September 30, 2009. Our provision for the three months ended September 30, 2010 was primarily related to the decrease in value of collateral securing non-performing real estate loans, $161,000 of which
related to a construction loan to build a single-family residence which was foreclosed and transferred to repossessed assets, $47,000 of which related to two new non-performing loans during the third quarter, and $54,000 of which related to a loan
secured by commercial real estate. Our provision for the three months ended September 30, 2009 was primarily related to collateral securing a non-performing construction loan that had declined in value which was offset by a recovery on a
previously charged-off loan.

Non-interest Income. For the three months ended September 30, 2010, non-interest
income decreased to $35,000 compared to $44,000 for the three months ended September 30, 2009 primarily due to a $4,000 decrease in fees received for originating loans for other institutions.

Non-interest Expense. For the three months ended September 30, 2010, non-interest expense totaled $835,000 compared to $784,000
for the three months ended September 30, 2009, an increase of 6.5%. Our repossessed asset losses and holding costs increased $72,000 in the third quarter of 2010 primarily due to a $65,000 write-down of two real estate owned properties which
are under contracts to sell. Professional fees increased $20,000 primarily due to an increase in legal fees related to foreclosure proceedings. Compensation and employee benefit expense decreased $36,000 primarily due to staff reductions. All other
expenses decreased $5,000 on a net basis.

Income Tax.Since the third quarter of 2009, we have maintained a
valuation allowance for substantially all of our deferred tax assets. Our review of the deferred tax asset for the three months ended September 30, 2010 resulted in a $3,000 income tax provision compared to a $624,000 provision for the three
months ended September 30, 2009 when the valuation allowance was established.

Comparison of Operating Results for the Nine Months
Ended September 30, 2010 and 2009

General.For the nine months ended September 30, 2010, our net loss was $31,000
compared to a net loss of $1.2 million for the nine months ended September 30, 2009. This improvement was primarily due to a $703,000 increase in our net interest income as deposit costs continued to decrease, a $332,000 decrease in our
provision for income taxes due to the valuation allowance for our deferred tax asset established in the third quarter of 2009, a $108,000 decrease in our provision for loan losses, and a $57,000 decrease in non-interest expense. The declining values
in our local real estate market and the costs associated with resolving non-performing assets have offset most of the improvements we have seen in our net interest margin and our efforts to control costs.



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Interest Income.
Interest income was $4.1 million for the nine months ended September 30, 2010, $312,000 or 7.1% less than the prior year period. Interest income from loans decreased $281,000 or 6.5% to $4.0 million for the nine months ended September 30,
2010 primarily due to a $5.9 million decrease in the average balance of our loan portfolio to $101.1 million for the nine months ended September 30, 2010 compared to the prior year period. The average balance of our automobile and consumer
loans, construction loans, and one- to four- family real estate loans decreased $3.3 million, $3.1 million, and $826,000 respectively for the comparative period primarily due to repayments and pay-offs, transfer of loans to repossessed assets, and
lower origination volume. These decreases were partially offset by a $815,000 increase in the average balance of our commercial business. The average yield of our loan portfolio was 5.31% for the first nine months of 2010 compared to 5.37% for the
prior year period.

Interest income from securities decreased $28,000 or 29.2% to $68,000 for the nine months ended September 30, 2010.
The average balance of our securities portfolio decreased $618,000 to $2.3 million for the nine months ended September 30, 2010 compared to the prior year period primarily due to repayments on mortgage-backed securities. The average yield on
securities for the nine months ended September 30, 2010 was 3.95% compared to 4.39% for the prior year period, primarily due to the downward repricing of our adjustable rate mortgage-backed securities.

Interest income from interest earning deposits was $5,000 for the nine months ended September 30, 2010 compared to $8,000 for the prior year period
primarily due to a $3.6 million decrease in the average balance to $7.2 million for the first nine months of 2010.

Interest
Expense. Interest expense for the nine months ended September 30, 2010 was $1.2 million, a decrease of $1.0 million or 45.0% from the prior year period due to the decrease in interest expense on deposits and our Federal Home Loan
Bank advances. Interest expense on deposits decreased $837,000 primarily due to the decrease in our average cost of deposits to 1.63% for the nine months ended September 30, 2010 compared to 2.68% for the prior year period as the average cost
of our certificates of deposit decreased to 2.04% for the nine months ended September 30, 2010 compared to 3.28% for the prior year period as the general low market interest rates led to the downward repricing of maturing certificate of deposit
accounts. Given the current level of market rates, we anticipate that our average cost for certificates of deposit will remain at current levels through the remainder of the year as many certificates have repriced into the current low rates. The
average balance of interest bearing deposits decreased $3.2 million to $98.6 million for the first nine months of 2010 compared to the prior year period primarily due to a $7.6 million decrease in the average balance of our certificate of deposit
accounts to $70.5 million. The average balance of our non-certificate of deposit accounts increased to $28.1 million for the first nine months of 2010 compared to $23.7 million from the prior year period. Interest expense on advances from the
Federal Home Loan Bank of Chicago was $39,000 for the nine months ended September 30, 2010 compared to $217,000 for the prior year period primarily due to a $5.2 million decrease in the average balance of our advances due to repayments during
the second half of 2009 and second quarter of 2010. The average cost of our Federal Home Loan Bank advances was 3.93% for the first nine months of 2010 compared to 4.47% for the prior year period.

Net Interest Income. Net interest income for the nine months ended September 30, 2010 was $2.9 million compared to $2.2 million
for the nine months ended September 30, 2009. For the nine months ended September 30, 2010, the average yield on interest-earning assets was 4.94% and the average cost of interest-bearing liabilities was 1.66% compared to 4.88% and 2.78%,
respectively, for the nine months ended September 30, 2009. These changes resulted in an increase in our net interest rate spread to 3.28% and net interest margin to 3.44% for the first nine months of 2010 compared to a net interest rate spread
of 2.10% and net interest rate margin of 2.38% for the comparative period in 2009. We anticipate that our net interest rate spread will remain at its current level through the remainder of the year given the current level of market rates.

Provision for Loan Losses. Our provision for loan losses was $522,000 for the nine months ended September 30, 2010
compared to $630,000 for the nine months ended September 30, 2009. Our provision for the nine months ended September 30, 2010 primarily reflected: the decrease in value of collateral securing non-performing real estate loans, $161,000 of
which related to a construction loan to build a single-family residence and $121,000 of which related to a loan secured by a multi-family residence, both of which were foreclosed and transferred to repossessed assets in 2010; $54,000 related to a
loan secured by commercial real estate; $47,000 related to two new



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non-performing loans during the third quarter; and the decline in collateral value for other non-performing loans which resulted in an increase in estimated loss factors applied to various
performing loan segments of our portfolio. Our provision for the comparative period in 2009 reflected: a $340,000 provision for a loan to a commercial leasing company; an increase in charge-offs primarily from the sale of collateral securing a
non-performing commercial real estate loan, which we accepted in lieu of foreclosure, and automobile loans; an $89,000 provision for a construction loan secured by residential property; and the decline in collateral value for other non-performing
loans which resulted in an increase in estimated loss factors applied to various performing loan segments of our portfolio.

Non-interest Income. For the nine months ended September 30, 2010, non-interest income decreased to $102,000 compared to
$105,000 for the nine months ended September 30, 2009 primarily due to an $11,000 decrease in fees received for originating loans for other institutions partially offset by a $9,000 decrease in losses on the sale of other assets.

Non-interest Expense. For the nine months ended September 30, 2010, non-interest expense decreased $57,000 to $2.5 million
compared to the prior year period, a decrease of 2.3%. Compensation and employee benefit expense decreased $140,000 primarily due to staff reductions and a 5.0% salary reduction for senior officers which was effective May 2009. FDIC insurance
premiums decreased $43,000 primarily due to the special assessment imposed on all FDIC insured institutions in the second quarter of 2009 which totaled approximately $57,000. Professional fees increased $70,000, including $27,000 for legal and
advisory fees related to our bid for a financial institution in an FDIC assisted transaction in January of 2010 and increased foreclosure related expenses. Other repossessed asset losses and holding costs increased $64,000 in the third quarter of
2010 primarily due to a $65,000 write-down on two real estate owned properties which are under contract to sell. All other expenses decreased $8,000 on a net basis.

Income Tax (Benefit).Our review of the valuation allowance for our deferred tax asset resulted in a tax benefit of $10,000 for the nine months ended September 30, 2010 compared to a
$322,000 provision for the nine months ended September 30, 2009 which was the result of the valuation allowance we establish for our deferred tax asset.



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Analysis of Net Interest Income

Net interest income represents the difference between the income we earn on interest-earning assets and the interest expense we pay on
interest-bearing liabilities. Net interest income also depends upon the relative amounts of interest-earning assets and interest-bearing liabilities and the interest rates earned or paid on them.

The following tables set forth average balance sheets, average yields and costs, and certain other information for the periods indicated. All average
balances are daily average balances. Non-accrual loans were included in the computation of average balances, but have been reflected in the table as loans carrying a zero yield. The yields set forth below include the effect of deferred fees,
discounts and premiums that are amortized or accreted to interest income.



|                                                                   |  |                                  |         |  |          |   |       |            |  |  |                           |   |  |          |         |  |            |   |       |  |  |  |        |  
|------------------------------------------------------------------ |  | -------------------------------- | ------- |  | -------- | - | ----- | ---------- |  |  | ------------------------- | - |  | -------- | ------- |  | ---------- | - | ----- |  |  |  | ------ | -
|                                                                   |  | Three Months Ended September 30, |        
|                                                                   |  | 2010                             |         |  | 2009     |  
|                                                                   |  | AverageOutstandingBalance        |         |  | Interest |   |       | Yield/Cost |  |  | AverageOutstandingBalance |   |  | Interest |         |  | Yield/Cost |  
|                                                                   |  | (Dollars in thousands)           |        
|                                                                   |  |                                  |         |  |          |  
|Assets:                                                            |  |                                  |         |  |          |   |       |            |  |  |                           |   |  |          |         |  |            |   |       |  |  |  |        |  
|Loans:                                                             |  |                                  |         |  |          |   |       |            |  |  |                           |   |  |          |         |  |            |   |       |  |  |  |        |  
|One- to four-family                                                |  | $                                | 37,536  |  |          | $ | 472   |            |  |  | 5.03                      | % |  | $        | 37,991  |  |            | $ | 500   |  |  |  | 5.26   | %
|Multi-family, commercial real estate, and land                     |  |                                  | 31,165  |  |          |   | 476   |            |  |  | 6.12                      |   |  |          | 31,166  |  |            |   | 494   |  |  |  | 6.29   |  
|Construction                                                       |  |                                  | 2,309   |  |          |   | 32    |            |  |  | 5.61                      |   |  |          | 4,346   |  |            |   | 47    |  |  |  | 4.33   |  
|Commercial business                                                |  |                                  | 6,203   |  |          |   | 91    |            |  |  | 5.90                      |   |  |          | 6,298   |  |            |   | 90    |  |  |  | 5.64   |  
|Home equity lines-of-credit                                        |  |                                  | 16,678  |  |          |   | 136   |            |  |  | 3.27                      |   |  |          | 16,870  |  |            |   | 129   |  |  |  | 3.04   |  
|Automobile and other consumer                                      |  |                                  | 5,333   |  |          |   | 81    |            |  |  | 6.13                      |   |  |          | 8,826   |  |            |   | 140   |  |  |  | 6.29   |  
|                                                                   |  |                                  |         |  |          |   |       |            |  |  |                           |   |  |          |         |  |            |   |       |  |  |  |        |  
|Total loans                                                        |  |                                  | 99,224  |  |          |   | 1,288 |            |  |  | 5.20                      |   |  |          | 105,497 |  |            |   | 1,400 |  |  |  | 5.28   |  
|Securities                                                         |  |                                  | 2,373   |  |          |   | 23    |            |  |  | 3.75                      |   |  |          | 2,840   |  |            |   | 30    |  |  |  | 4.19   |  
|Other interest-earning assets                                      |  |                                  | 6,635   |  |          |   | 2     |            |  |  | 0.10                      |   |  |          | 11,560  |  |            |   | 2     |  |  |  | 0.10   |  
|                                                                   |  |                                  |         |  |          |   |       |            |  |  |                           |   |  |          |         |  |            |   |       |  |  |  |        |  
|Total interest-earning assets                                      |  |                                  | 108,232 |  |          | $ | 1,313 |            |  |  | 4.86                      |   |  |          | 119,897 |  |            | $ | 1,432 |  |  |  | 4.76   |  
|Non-interest-earning assets                                        |  |                                  | 7,342   |  |          |   |       |            |  |  |                           |   |  |          | 5,489   |  |            |   |       |  |  |  |        |  
|                                                                   |  |                                  |         |  |          |   |       |            |  |  |                           |   |  |          |         |  |            |   |       |  |  |  |        |  
|Total assets                                                       |  | $                                | 115,574 |  |          |   |       |            |  |  |                           |   |  | $        | 125,386 |  |            |   |       |  |  |  |        |  
|                                                                   |  |                                  |         |  |          |   |       |            |  |  |                           |   |  |          |         |  |            |   |       |  |  |  |        |  
|                                                                   |  |                                  |         |  |          |  
|Liabilities and stockholders equity:                              |  |                                  |         |  |          |   |       |            |  |  |                           |   |  |          |         |  |            |   |       |  |  |  |        |  
|Savings deposits                                                   |  | $                                | 7,393   |  |          | $ | 4     |            |  |  | 0.20                      |   |  | $        | 7,218   |  |            | $ | 4     |  |  |  | 0.24   |  
|Money market/demand deposits                                       |  |                                  | 22,355  |  |          |   | 39    |            |  |  | 0.70                      |   |  |          | 17,575  |  |            |   | 33    |  |  |  | 0.75   |  
|Certificates of deposit                                            |  |                                  | 68,272  |  |          |   | 310   |            |  |  | 1.82                      |   |  |          | 76,276  |  |            |   | 592   |  |  |  | 3.08   |  
|                                                                   |  |                                  |         |  |          |   |       |            |  |  |                           |   |  |          |         |  |            |   |       |  |  |  |        |  
|Total deposits                                                     |  |                                  | 98,020  |  |          |   | 353   |            |  |  | 1.44                      |   |  |          | 101,069 |  |            |   | 629   |  |  |  | 2.47   |  
|FHLB advances                                                      |  |                                  |        |  |          |   |      |            |  |  |                          |   |  |          | 6,418   |  |            |   | 73    |  |  |  | 4.47   |  
|                                                                   |  |                                  |         |  |          |   |       |            |  |  |                           |   |  |          |         |  |            |   |       |  |  |  |        |  
|Total interest-bearing liabilities                                 |  |                                  | 98,020  |  |          |   | 353   |            |  |  | 1.44                      |   |  |          | 107,487 |  |            |   | 702   |  |  |  | 2.59   |  
|                                                                   |  |                                  |         |  |          |   |       |            |  |  |                           |   |  |          |         |  |            |   |       |  |  |  |        |  
|Non-interest-bearing deposits                                      |  |                                  | 2,528   |  |          |   |       |            |  |  |                           |   |  |          | 1,716   |  |            |   |       |  |  |  |        |  
|Other liabilities                                                  |  |                                  | 820     |  |          |   |       |            |  |  |                           |   |  |          | 1,240   |  |            |   |       |  |  |  |        |  
|                                                                   |  |                                  |         |  |          |   |       |            |  |  |                           |   |  |          |         |  |            |   |       |  |  |  |        |  
|Total liabilities                                                  |  |                                  | 101,368 |  |          |   |       |            |  |  |                           |   |  |          | 110,443 |  |            |   |       |  |  |  |        |  
|Stockholders equity                                               |  |                                  | 14,206  |  |          |   |       |            |  |  |                           |   |  |          | 14,943  |  |            |   |       |  |  |  |        |  
|                                                                   |  |                                  |         |  |          |   |       |            |  |  |                           |   |  |          |         |  |            |   |       |  |  |  |        |  
|Total liabilities and stockholders equity                         |  | $                                | 115,574 |  |          |   |       |            |  |  |                           |   |  | $        | 125,386 |  |            |   |       |  |  |  |        |  
|                                                                   |  |                                  |         |  |          |   |       |            |  |  |                           |   |  |          |         |  |            |   |       |  |  |  |        |  
|                                                                   |  |                                  |         |  |          |  
|Net interest income                                                |  |                                  |         |  |          | $ | 960   |            |  |  |                           |   |  |          |         |  |            | $ | 730   |  |  |  |        |  
|                                                                   |  |                                  |         |  |          |   |       |            |  |  |                           |   |  |          |         |  |            |   |       |  |  |  |        |  
|Net interest rate spread                                           |  |                                  |         |  |          |   |       |            |  |  | 3.42                      | % |  |          |         |  |            |   |       |  |  |  | 2.17   | %
|                                                                   |  |                                  |         |  |          |   |       |            |  |  |                           |   |  |          |         |  |            |   |       |  |  |  |        |  
|Net interest-earning assets                                        |  | $                                | 10,212  |  |          |   |       |            |  |  |                           |   |  | $        | 12,410  |  |            |   |       |  |  |  |        |  
|                                                                   |  |                                  |         |  |          |   |       |            |  |  |                           |   |  |          |         |  |            |   |       |  |  |  |        |  
|Net interest margin                                                |  |                                  |         |  |          |   |       |            |  |  | 3.55                      | % |  |          |         |  |            |   |       |  |  |  | 2.43   | %
|                                                                   |  |                                  |         |  |          |   |       |            |  |  |                           |   |  |          |         |  |            |   |       |  |  |  |        |  
|Average of interest-earning assets to interest-bearing Liabilities |  |                                  |         |  |          |   |       |            |  |  | 110.42                    | % |  |          |         |  |            |   |       |  |  |  | 111.55 | %
|                                                                   |  |                                  |         |  |          |   |       |            |  |  |                           |   |  |          |         |  |            |   |       |  |  |  |        |  



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|                                                                   |  |                                 |         |  |          |   |       |            |  |  |                           |   |  |          |         |  |            |   |       |  |  |  |        |  
|------------------------------------------------------------------ |  | ------------------------------- | ------- |  | -------- | - | ----- | ---------- |  |  | ------------------------- | - |  | -------- | ------- |  | ---------- | - | ----- |  |  |  | ------ | -
|                                                                   |  | Nine Months Ended September 30, |        
|                                                                   |  | 2010                            |         |  | 2009     |  
|                                                                   |  | AverageOutstandingBalance       |         |  | Interest |   |       | Yield/Cost |  |  | AverageOutstandingBalance |   |  | Interest |         |  | Yield/Cost |  
|                                                                   |  | (Dollars in thousands)          |        
|                                                                   |  |                                 |         |  |          |  
|Assets:                                                            |  |                                 |         |  |          |   |       |            |  |  |                           |   |  |          |         |  |            |   |       |  |  |  |        |  
|Loans:                                                             |  |                                 |         |  |          |   |       |            |  |  |                           |   |  |          |         |  |            |   |       |  |  |  |        |  
|One- to four-family                                                |  | $                               | 38,196  |  |          | $ | 1,495 |            |  |  | 5.22                      | % |  | $        | 39,022  |  |            | $ | 1,564 |  |  |  | 5.34   | %
|Multi-family, commercial real estate, and land                     |  |                                 | 31,316  |  |          |   | 1,450 |            |  |  | 6.19                      |   |  |          | 30,636  |  |            |   | 1,432 |  |  |  | 6.25   |  
|Construction                                                       |  |                                 | 2,567   |  |          |   | 117   |            |  |  | 6.10                      |   |  |          | 5,658   |  |            |   | 246   |  |  |  | 5.81   |  
|Commercial business                                                |  |                                 | 6,300   |  |          |   | 279   |            |  |  | 5.92                      |   |  |          | 5,485   |  |            |   | 242   |  |  |  | 5.90   |  
|Home equity lines-of-credit                                        |  |                                 | 16,635  |  |          |   | 399   |            |  |  | 3.21                      |   |  |          | 16,733  |  |            |   | 375   |  |  |  | 3.00   |  
|Automobile and other consumer                                      |  |                                 | 6,111   |  |          |   | 280   |            |  |  | 6.14                      |   |  |          | 9,460   |  |            |   | 442   |  |  |  | 6.24   |  
|                                                                   |  |                                 |         |  |          |   |       |            |  |  |                           |   |  |          |         |  |            |   |       |  |  |  |        |  
|Total loans                                                        |  |                                 | 101,125 |  |          |   | 4,020 |            |  |  | 5.31                      |   |  |          | 106,994 |  |            |   | 4,301 |  |  |  | 5.37   |  
|Securities                                                         |  |                                 | 2,290   |  |          |   | 68    |            |  |  | 3.95                      |   |  |          | 2,908   |  |            |   | 96    |  |  |  | 4.39   |  
|Other interest-earning assets                                      |  |                                 | 7,198   |  |          |   | 5     |            |  |  | 0.09                      |   |  |          | 10,769  |  |            |   | 8     |  |  |  | 0.16   |  
|                                                                   |  |                                 |         |  |          |   |       |            |  |  |                           |   |  |          |         |  |            |   |       |  |  |  |        |  
|Total interest-earning assets                                      |  |                                 | 110,613 |  |          | $ | 4,093 |            |  |  | 4.94                      |   |  |          | 120,671 |  |            | $ | 4,405 |  |  |  | 4.88   |  
|Non-interest-earning assets                                        |  |                                 | 6,567   |  |          |   |       |            |  |  |                           |   |  |          | 5,658   |  |            |   |       |  |  |  |        |  
|                                                                   |  |                                 |         |  |          |   |       |            |  |  |                           |   |  |          |         |  |            |   |       |  |  |  |        |  
|Total assets                                                       |  | $                               | 117,180 |  |          |   |       |            |  |  |                           |   |  | $        | 126,329 |  |            |   |       |  |  |  |        |  
|                                                                   |  |                                 |         |  |          |   |       |            |  |  |                           |   |  |          |         |  |            |   |       |  |  |  |        |  
|                                                                   |  |                                 |         |  |          |  
|Liabilities and stockholders equity:                              |  |                                 |         |  |          |   |       |            |  |  |                           |   |  |          |         |  |            |   |       |  |  |  |        |  
|Savings deposits                                                   |  | $                               | 7,313   |  |          | $ | 11    |            |  |  | 0.20                      |   |  | $        | 7,325   |  |            | $ | 18    |  |  |  | 0.33   |  
|Money market/demand deposits                                       |  |                                 | 20,819  |  |          |   | 113   |            |  |  | 0.73                      |   |  |          | 16,386  |  |            |   | 101   |  |  |  | 0.83   |  
|Certificates of deposit                                            |  |                                 | 70,455  |  |          |   | 1,076 |            |  |  | 2.04                      |   |  |          | 78,104  |  |            |   | 1,918 |  |  |  | 3.28   |  
|                                                                   |  |                                 |         |  |          |   |       |            |  |  |                           |   |  |          |         |  |            |   |       |  |  |  |        |  
|Total deposits                                                     |  |                                 | 98,587  |  |          |   | 1,200 |            |  |  | 1.63                      |   |  |          | 101,815 |  |            |   | 2,037 |  |  |  | 2.68   |  
|FHLB advances                                                      |  |                                 | 1,319   |  |          |   | 39    |            |  |  | 3.93                      |   |  |          | 6,473   |  |            |   | 217   |  |  |  | 4.47   |  
|                                                                   |  |                                 |         |  |          |   |       |            |  |  |                           |   |  |          |         |  |            |   |       |  |  |  |        |  
|Total interest-bearing liabilities                                 |  |                                 | 99,906  |  |          |   | 1,239 |            |  |  | 1.66                      |   |  |          | 108,288 |  |            |   | 2,254 |  |  |  | 2.78   |  
|                                                                   |  |                                 |         |  |          |   |       |            |  |  |                           |   |  |          |         |  |            |   |       |  |  |  |        |  
|Non-interest-bearing deposits                                      |  |                                 | 2,422   |  |          |   |       |            |  |  |                           |   |  |          | 1,742   |  |            |   |       |  |  |  |        |  
|Other liabilities                                                  |  |                                 | 757     |  |          |   |       |            |  |  |                           |   |  |          | 1,080   |  |            |   |       |  |  |  |        |  
|                                                                   |  |                                 |         |  |          |   |       |            |  |  |                           |   |  |          |         |  |            |   |       |  |  |  |        |  
|Total liabilities                                                  |  |                                 | 103,085 |  |          |   |       |            |  |  |                           |   |  |          | 111,110 |  |            |   |       |  |  |  |        |  
|Stockholders equity                                               |  |                                 | 14,095  |  |          |   |       |            |  |  |                           |   |  |          | 15,219  |  |            |   |       |  |  |  |        |  
|                                                                   |  |                                 |         |  |          |   |       |            |  |  |                           |   |  |          |         |  |            |   |       |  |  |  |        |  
|Total liabilities and stockholders equity                         |  | $                               | 117,180 |  |          |   |       |            |  |  |                           |   |  | $        | 126,329 |  |            |   |       |  |  |  |        |  
|                                                                   |  |                                 |         |  |          |   |       |            |  |  |                           |   |  |          |         |  |            |   |       |  |  |  |        |  
|Net interest income                                                |  |                                 |         |  |          | $ | 2,854 |            |  |  |                           |   |  |          |         |  |            | $ | 2,151 |  |  |  |        |  
|                                                                   |  |                                 |         |  |          |   |       |            |  |  |                           |   |  |          |         |  |            |   |       |  |  |  |        |  
|Net interest rate spread                                           |  |                                 |         |  |          |   |       |            |  |  | 3.28                      | % |  |          |         |  |            |   |       |  |  |  | 2.10   | %
|                                                                   |  |                                 |         |  |          |   |       |            |  |  |                           |   |  |          |         |  |            |   |       |  |  |  |        |  
|Net interest-earning assets                                        |  | $                               | 10,707  |  |          |   |       |            |  |  |                           |   |  | $        | 12,383  |  |            |   |       |  |  |  |        |  
|                                                                   |  |                                 |         |  |          |   |       |            |  |  |                           |   |  |          |         |  |            |   |       |  |  |  |        |  
|Net interest margin                                                |  |                                 |         |  |          |   |       |            |  |  | 3.44                      | % |  |          |         |  |            |   |       |  |  |  | 2.38   | %
|                                                                   |  |                                 |         |  |          |   |       |            |  |  |                           |   |  |          |         |  |            |   |       |  |  |  |        |  
|Average of interest-earning assets to interest-bearing Liabilities |  |                                 |         |  |          |   |       |            |  |  | 110.72                    | % |  |          |         |  |            |   |       |  |  |  | 111.44 | %
|                                                                   |  |                                 |         |  |          |   |       |            |  |  |                           |   |  |          |         |  |            |   |       |  |  |  |        |  



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Rate/Volume Analysis

The following table presents the dollar amount of changes in interest income and interest expense for the major categories of Ben Franklin
Financial, Inc.s interest-earning assets and interest-bearing liabilities. Information is provided for each category of interest-earning assets and interest-bearing liabilities with respect to (i) changes attributable to changes in volume
(i.e., changes in average balances multiplied by the prior-period average rate) and (ii) changes attributable to rate (i.e., changes in average rate multiplied by prior-period average balances). For purposes of this table, changes attributable
to both rate and volume, which cannot be segregated, have been allocated proportionately to the change due to volume and the change due to rate.



|                                               |  |                                               |      |   |                                              |   |      |                           |        |   |                         |      |  |   |      |   |  |   |      |   |  |   |        |  
|---------------------------------------------- |  | --------------------------------------------- | ---- | - | -------------------------------------------- | - | ---- | ------------------------- | ------ | - | ----------------------- | ---- |  | - | ---- | - |  | - | ---- | - |  | - | ------ | -
|                                               |  | Three Months Ended September 30,2010 vs. 2009 |      |   | Nine Months Ended September 30,2010 vs. 2009 |  
|                                               |  | Increase (Decrease)Due
to                     |      |   | TotalIncrease(Decrease)                      |   |      | Increase (Decrease)Due to |        |   | TotalIncrease(Decrease) |     
|                                               |  | Volume                                        |      |   | Rate                                         |   |      |                           | Volume |   |                         | Rate |  |  
|                                               |  | (Dollars in thousands)                        |     
|                                               |  |                                               |      |   |                                              |  
|Interest-earning assets:                       |  |                                               |      |   |                                              |   |      |                           |        |   |                         |      |  |   |      |   |  |   |      |   |  |   |        |  
|Loans:                                         |  |                                               |      |   |                                              |   |      |                           |        |   |                         |      |  |   |      |   |  |   |      |   |  |   |        |  
|One- to four-family                            |  | $                                             | (6   | ) |                                              | $ | (22  | )                         |        | $ | (28                     | )    |  | $ | (34  | ) |  | $ | (35  | ) |  | $ | (69    | )
|Multi-family, commercial real estate, and land |  |                                               |     |   |                                              |   | (18  | )                         |        |   | (18                     | )    |  |   | 32   |   |  |   | (14  | ) |  |   | 18     |  
|Construction                                   |  |                                               | (26  | ) |                                              |   | 11   |                           |        |   | (15                     | )    |  |   | (141 | ) |  |   | 12   |   |  |   | (129   | )
|Commercial business                            |  |                                               | (2   | ) |                                              |   | 3    |                           |        |   | 1                       |      |  |   | 36   |   |  |   | 1    |   |  |   | 37     |  
|Home equity lines-of-credit                    |  |                                               | (1   | ) |                                              |   | 8    |                           |        |   | 7                       |      |  |   | (2   | ) |  |   | 26   |   |  |   | 24     |  
|Automobile and other consumer                  |  |                                               | (55  | ) |                                              |   | (4   | )                         |        |   | (59                     | )    |  |   | (155 | ) |  |   | (7   | ) |  |   | (162   | )
|                                               |  |                                               |      |   |                                              |   |      |                           |        |   |                         |      |  |   |      |   |  |   |      |   |  |   |        |  
|Total loans                                    |  |                                               | (90  | ) |                                              |   | (22  | )                         |        |   | (112                    | )    |  |   | (264 | ) |  |   | (17  | ) |  |   | (281   | )
|Securities                                     |  |                                               | (15  | ) |                                              |   | 8    |                           |        |   | (7                      | )    |  |   | (52  | ) |  |   | 24   |   |  |   | (28    | )
|Other interest-earning assets                  |  |                                               |     |   |                                              |   |     |                           |        |   |                        |      |  |   | (1   | ) |  |   | (2   | ) |  |   | (3     | )
|                                               |  |                                               |      |   |                                              |   |      |                           |        |   |                         |      |  |   |      |   |  |   |      |   |  |   |        |  
|Total interest-earning assets                  |  |                                               | (105 | ) |                                              |   | (14  | )                         |        |   | (119                    | )    |  |   | (317 | ) |  |   | 5    |   |  |   | (312   | )
|                                               |  |                                               |      |   |                                              |   |      |                           |        |   |                         |      |  |   |      |   |  |   |      |   |  |   |        |  
|                                               |  |                                               |      |   |                                              |  
|Interest-bearing liabilities:                  |  |                                               |      |   |                                              |   |      |                           |        |   |                         |      |  |   |      |   |  |   |      |   |  |   |        |  
|Savings deposits                               |  |                                               | 1    |   |                                              |   | (1   | )                         |        |   |                        |      |  |   |     |   |  |   | (7   | ) |  |   | (7     | )
|Money market/demand accounts                   |  |                                               | 8    |   |                                              |   | (2   | )                         |        |   | 6                       |      |  |   | 25   |   |  |   | (13  | ) |  |   | 12     |  
|Certificates of deposit                        |  |                                               | (57  | ) |                                              |   | (225 | )                         |        |   | (282                    | )    |  |   | (173 | ) |  |   | (669 | ) |  |   | (842   | )
|                                               |  |                                               |      |   |                                              |   |      |                           |        |   |                         |      |  |   |      |   |  |   |      |   |  |   |        |  
|Total deposits                                 |  |                                               | (48  | ) |                                              |   | (228 | )                         |        |   | (276                    | )    |  |   | (148 | ) |  |   | (689 | ) |  |   | (837   | )
|FHLB Advances                                  |  |                                               | (73  | ) |                                              |   |     |                           |        |   | (73                     | )    |  |   | (155 | ) |  |   | (23  | ) |  |   | (178   | )
|                                               |  |                                               |      |   |                                              |   |      |                           |        |   |                         |      |  |   |      |   |  |   |      |   |  |   |        |  
|Total interest-bearing Liabilities             |  |                                               | (121 | ) |                                              |   | (228 | )                         |        |   | (349                    | )    |  |   | (303 | ) |  |   | (712 | ) |  |   | (1,015 | )
|                                               |  |                                               |      |   |                                              |   |      |                           |        |   |                         |      |  |   |      |   |  |   |      |   |  |   |        |  
|Change in net interest income                  |  | $                                             | 16   |   |                                              | $ | 214  |                           |        | $ | 230                     |      |  | $ | (14  | ) |  | $ | 717  |   |  | $ | 703    |  
|                                               |  |                                               |      |   |                                              |   |      |                           |        |   |                         |      |  |   |      |   |  |   |      |   |  |   |        |  



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Liquidity and Capital Resources

Our primary sources of funds are deposits and the proceeds from principal and interest payments on loans and mortgage-backed securities.
While maturities and scheduled amortization of loans and securities are predicable sources of funds, deposit flows and mortgage prepayments are greatly influenced by general interest rates, economic conditions and competition. We generally manage
the pricing of our deposits to be competitive within our market and to increase core deposit relationships.

Liquidity management is both a
daily and long-term responsibility of management. We adjust our investments in liquid assets based upon managements assessment of (i) expected loan demand, (ii) expected deposit flows, (iii) yields available on interest-earning
deposits and securities, and (iv) the objectives of our asset/liability management program. Excess liquid assets are invested generally in interest-earning overnight deposits, federal funds sold, short and intermediate-term U.S. Government
sponsored entity obligations, and mortgage-backed securities of short duration. If we require funds beyond our ability to generate them internally, we have additional borrowing capacity with the Federal Home Loan Bank of Chicago.

Our cash flows are comprised of three primary classifications: (i) cash flows from operating activities, (ii) investing activities, and
(iii) financing activities. Net cash from operating activities was $1.3 million and $267,000 for the nine months ended September 30, 2010 and 2009, respectively. Net cash from investing activities consisted primarily of disbursements for
loan originations and purchases which were offset by principal collections on loans and mortgage-backed securities. Net cash from investing activities was $3.6 million and $869,000 for the nine months ended September 30, 2010 and 2009,
respectively. Net cash from financing activities consisted primarily of the activity in deposit, borrowing, and escrow accounts. The net cash from financing activities was ($3.4) million and ($1.3) million for the nine months ended
September 30, 2010 and 2009, respectively.

Our most liquid assets are cash and short-term investments. The levels of these assets are
dependent on our operating, financing, lending, and investing activities during any given period. We may also utilize the sale of securities available-for-sale, federal funds purchased, Federal Home Loan Bank of Chicago advances and other borrowings
as sources of funds. At September 30, 2010, cash and cash equivalents totaled $9.4 million.

At September 30, 2010, the Bank
exceeded all of its regulatory capital requirements to be well capitalized with a Tier 1 (core) capital level of $10.4 million, or 8.91% of adjusted total assets which was $4.6 million above the required level of $5.8 million, or 5.00%; and total
risk-based capital of $11.2 million or 12.03% of risk weighted assets, which was $1.9 million above the required level of $9.3 million or 10.00%. The Bank at September 30, 2010 was categorized as well capitalized under applicable regulatory
criteria. Management is not aware of any conditions or events since the most recent notification that would change the Banks category.

At September 30, 2010, we had outstanding commitments to originate loans of $151,000. We expect to have sufficient funds available to meet our
current loan commitments. Loan commitments have, in recent periods, been funded through liquidity and normal deposit flows. Certificates of deposit scheduled to mature in one year or less from September 30, 2010 totaled $48.8 million.
Management believes that, based on past experience, a significant portion of such deposits will remain with us. Based on the foregoing, in addition to our level of core deposits and capital, we consider our liquidity and capital resources sufficient
to meet our outstanding short-term and long-term needs.

Off-Balance Sheet Arrangements.

In the normal course of operations, we engage in a variety of financial transactions that, in accordance with generally accepted accounting principles,
are not recorded in our financial statements. These transactions involve, to varying degrees, elements of credit, interest rate and liquidity risk. Such transactions are used primarily to manage customers requests for funding and take the form
of loan commitments and available lines of credit. For the three months ended September 30, 2010 and 2009, we did not engage in any off-balance sheet transactions other than loan origination commitments in the normal course of our lending
activities.



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Item 3. Quantitative and Qualitative Disclosures About Market Risk

This item is not applicable because we are a smaller reporting company.

Item 4T. Controls and Procedures

We have adopted
disclosure controls and procedures designed to facilitate our financial reporting. The disclosure controls currently consist of communications among the Chief Executive Officer, the Chief Financial Officer and each department head to identify any
transactions, events, trends, risks or contingencies which may be material to our operations. Our disclosure controls also contain certain elements of our internal controls adopted in connection with applicable accounting and regulatory guidelines.
Our Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of our disclosure controls as of the end of the period covered by this report and found them to be effective. Finally, the Chief Executive Officer, Chief
Financial Officer, the Audit Committee and our independent registered public accounting firm also meet on a quarterly basis.

We maintain
internal control over financial reporting. There have not been any significant changes in such internal control over financial reporting in the last quarter that have materially affected, or are reasonably likely to materially affect, our internal
control over financial reporting.

PART II - Other Information

Item 1. Legal Proceedings

At September 30, 2010 there were no material pending legal proceedings to which the Company or the Bank is a party other than ordinary routine litigation incidental to their respective businesses.

Item 1A. Risk Factors

This item is not applicable because we are a smaller reporting company.

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



|                                       |  |                                          |     |  |                                       |   |      |                                                                                         |  |  |                                                                                                                |  |  |  |        | 
|-------------------------------------- |  | ---------------------------------------- | --- |  | ------------------------------------- | - | ---- | --------------------------------------------------------------------------------------- |  |  | -------------------------------------------------------------------------------------------------------------- |  |  |  | ------ | 
|Period                                 |  | Total Number ofShare (or
Units)Purchased |     |  | Average price Paidper Share (or Unit) |   |      | Total Number ofShares (or 
Units)Purchased as Part ofPublicly 
AnnouncedPlan or Program |  |  | Maximum Number(or ApproximateDollar Value ofShares (or Units)that May Yet BePurchased Under thePlan or Program | 
|July 1, 2010  July 31, 2010           |  |                                          |    |  |                                       | $ |     |                                                                                         |  |  |                                                                                                               |  |  |  | 19,471 | 
|August 1, 2010  August 31, 2010       |  |                                          |    |  |                                       | $ |     |                                                                                         |  |  |                                                                                                               |  |  |  | 19,471 | 
|September 1, 2010  September 30, 2010 |  |                                          | 427 |  |                                       | $ | 4.00 |                                                                                         |  |  |                                                                                                               |  |  |  | 19,471 | 
|                                       |  |                                          |     | 
|Total                                  |  |                                          | 427 |  |                                       | $ | 4.00 |                                                                                         |  |  |                                                                                                               |  |  |  | 19,471 | 

On January 28, 2009, the Company
announced its second Stock Repurchase Program pursuant to which the Company intends to repurchase 42,487 shares of its outstanding common stock (excluding shares owed by the MHC). The Stock Repurchase Program will be in effect through
December 31, 2009. The first Stock Repurchase Program announced April 23, 2008 was completed in January of 2009. The 427 shares purchased in September represent a distribution to terminated ESOP participants who exercised their put option
which the Company then placed in treasury.



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Item 3. Defaults upon Senior Securities

Not Applicable

Item 4. Removed and Reserved

Item 5. Other Information

Not Applicable

Item 6. Exhibits

(a) Exhibits



|     |  |                                                           
|---- |  | ----------------------------------------------------------
|31.1 |  | Rule 13(a)  14(a) Certification (Chief Executive Officer)
|31.2 |  | Rule 13(a)  14(a) Certification (Chief Financial Officer)
|32.1 |  | Section 1350 Certification (Chief Executive Officer)      
|32.2 |  | Section 1350 Certification (Chief Financial Officer)      



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Signatures

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



|                                          |  |                                      
|----------------------------------------- |  | -------------------------------------
|BEN FRANKLIN FINANCIAL, INC.
(Registrant)
|                                          | 
|Date: November 12, 2010                   |  | /s/ C. Steven Sjogren                
|                                          |  | C. Steven Sjogren                    
|                                          |  | President and Chief Executive Officer



26