AJS Bancorp, Inc. - FORM 10-Q

Attached files

file	filename
EX-32 - EX-32 - AJS Bancorp, Inc.	a15-12140_1ex32.htm
EX-31.1 - EX-31.1 - AJS Bancorp, Inc.	a15-12140_1ex31d1.htm
EX-31.2 - EX-31.2 - AJS Bancorp, Inc.	a15-12140_1ex31d2.htm

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended June 30, 2015

o 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 000-55083

AJS BANCORP, INC.

(Exact name of registrant as specified in its charter)

Maryland		90-1022599
(State or other jurisdiction of		(I.R.S. Employer Identification No.)
incorporation or organization)

14757 S. Cicero Ave., Midlothian, IL		60445
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code (708) 687-7400

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 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 o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, 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 x Noo

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.

Large accelerated filer o		Accelerated filer o

Non-accelerated filer o (do not check if smaller reporting company)		Smaller reporting company x

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

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class		Outstanding
Common Stock, par value $0.01 per share		2,198,435 shares as of August 12, 2015

Table of Contents

FORM 10-Q

FOR THE QUARTER ENDED JUNE 30, 2015

INDEX

		PAGE NO.

PART I - Financial Information

Item 1. Financial Statements(Unaudited)

Consolidated Unaudited Statements of Financial Condition		1
Consolidated Unaudited Statements of Operations		2
Consolidated Unaudited Statements of Comprehensive Income		3
Consolidated Unaudited Statements of Cash Flows		4
Consolidated Unaudited Statements of Stockholders’ Equity		5
Notes to the Consolidated Unaudited Financial Statements		6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	30
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	51
Item 4.	Controls and Procedures	51

PART II - Other Information

Item 1.	Legal Proceedings	51
Item 1A.	Risk Factors	51
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	51
Item 3.	Defaults Upon Senior Securities	52
Item 4.	Mine Safety Disclosures	52
Item 5.	Other Information	52
Item 6.	Exhibits	52
Signatures		53

Table of Contents

AJS BANCORP, INC.

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

JUNE 30, 2015 AND DECEMBER 31, 2014

(Dollars in thousands, except per share data)

	June 30,			December 31,
	2015			2014
	(Unaudited)
ASSETS
Cash and cash equivalents	$	24,516		$	32,898
Securities available-for-sale	51,815			54,214
Securities held-to-maturity (fair value: 2015 -$335; 2014 - $341)	327			331
Loans, net (allowance: 2015 — $1,080; 2014 - $1,103)	116,690			114,130
Federal Home Loan Bank stock	1,291			1,768
Premises and equipment	3,540			3,623
Bank-owned life insurance	5,802			5,706
Other real estate owned	1,300			1,751
Accrued interest receivable	430			438
Other assets	2,784			2,664

Total assets	$	208,495		$	217,523

LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities
Deposits	$	165,323		$	166,249
Federal Home Loan Bank advances	5,000			12,000
Advance payments by borrowers for taxes and insurance	2,058			2,068
Other liabilities and accrued interest payable	2,568			3,084
Total liabilities	174,949			183,401

Employee Stock Ownership Plan (ESOP) repurchase obligation	988			909

Stockholders’ equity
Preferred stock, $.01 par value, 50,000,000 shares authorized; none issued	—			—
Common stock, $.01 par value, 100,000,000 shares authorized; 2,198,435 shares outstanding at June 30, 2015 and 2,218,863 shares outstanding at December 31, 2014	22			22
Additional paid-in capital	13,291			13,731
Retained earnings	20,888			21,126
Accumulated other comprehensive loss	(159		)	(20		)
Unearned stock awards	(434		)	(596		)
Unearned ESOP shares	(1,050		)	(1,050		)
Total stockholders’ equity	32,558			33,213

Total liabilities and stockholders’ equity	$	208,495		$	217,523

See accompanying notes.

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AJS BANCORP, INC.

CONSOLIDATED UNAUDITED STATEMENTS OF OPERATIONS

THREE AND SIX MONTHS ENDED JUNE 30, 2015 AND JUNE 30, 2014

(Dollars in thousands, except per share data)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2015			2014			2015			2014

Interest and dividend income
Loans	$	1,121		$	1,195		$	2,240		$	2,410
Securities	169			213			344			461
Interest-earning deposits and other	16			17			35			29
Total interest income	1,306			1,425			2,619			2,900

Interest expense
Deposits	148			167			294			327
Federal Home Loan Bank advances and other	32			86			81			176
Total interest expense	180			253			375			503

Net interest income	1,126			1,172			2,244			2,397

Provision for loan losses	115			480			130			480

Net interest income after provision for loan losses	1,011			692			2,114			1,917

Non-interest income
Service fees	74			70			141			138
Rental income	19			19			38			38
Earnings on bank-owned life insurance	48			50			96			98
Security gains	—			29			74			67
Other real estate owned gains (losses)	—			—			(19		)	16
Other	33			16			63			31
Total non-interest income	174			184			393			388

Non-interest expense
Compensation and employee benefits	595			560			1,198			1,111
Occupancy expense	181			167			365			364
Data processing expense	87			84			177			175
Advertising and promotion	11			16			22			29
Professional and regulatory	89			157			182			266
Postage and supplies	22			24			47			49
Bank security	32			33			60			61
Federal deposit insurance	49			67			96			136
Other real estate owned expense/impairment	208			36			237			25
Other	113			144			228			273
Total non-interest expense	1,387			1,288			2,612			2,489

Income (loss) before income taxes	(202		)	(412		)	(105		)	(184		)

Income tax expense (benefit)	(94		)	(1,891		)	(72		)	(1,891		)

Net Income (loss)	$	(108	)	$	1,479		$	(33	)	$	1,707
Earnings per share
Basic	$	(0.05	)	$	0.66		$	(0.02	)	$	0.77
Diluted	$	(0.05	)	$	0.66		$	(0.02	)	$	0.76

See accompanying notes.

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AJS BANCORP, INC.

CONSOLIDATED UNAUDITED STATEMENTS OF COMPREHENSIVE INCOME

THREE AND SIX MONTHS ENDED JUNE 30, 2015 AND JUNE 30, 2014

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2015			2014			2015			2014

Net Income (loss)	$	(108	)	$	1,479		$	(33	)	$	1,707

Other comprehensive income:
Unrealized gains on securities available-for-sale:
Unrealized holding gain (loss) arising during the period	(310		)	410			(153		)	630
Reclassification adjustment for (gains) losses included in net income	—			(29		)	(74		)	(67		)
Tax effect	122			(153		)	88			(225		)
Total other comprehensive income (loss)	(188		)	228			(139		)	338

Comprehensive income (loss)	$	(296	)	$	1,707		$	(172	)	$	2,045

See accompanying notes.

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AJS BANCORP, INC.

CONSOLIDATED UNAUDITIED STATEMENT OF CASH FLOWS

SIX MONTHS ENDED JUNE 30, 2015 AND JUNE 30, 2014

	Six Months Ended
	June 30,
	2015			2014
Cash flows from operating activities
Net income (loss)	$	(33	)	$	1,707
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation	102			117
Provision for loan losses	130			480
Net amortization of securities	124			133
Stock award and option expense	80			13
Earnings on bank-owned life insurance	(96		)	(98		)
(Gain) loss on sale of securities available-for-sale	(74		)	(67		)
(Gain) loss on the sale of other real estate owned	19			(16		)
Other real estate owned impairment	205			37
Reversal of valuation allowance on deferred taxes	—			(1,701		)
Changes in:
Accrued interest receivable and other assets	(112		)	140
Accrued interest payable and other liabilities	(428		)	(154		)
Net cash provided by (used in) operating activities	(83		)	591

Cash flows from investing activities
Securities available-for-sale
Purchases	(14,958		)	(11,964		)
Sales	3,306			7,407
Calls, maturities and principal payments	13,778			7,166
Loan origination and repayments, net	(2,906		)	1,131
Proceeds from sale of other real estate	455			181
Improvements to other real estate owned	(12		)	—
Purchase of equipment, net	(19		)	(177		)
Net cash provided by (used in) investing activities	(356		)	3,744

Cash flows from financing activities
Net change in deposits	(926		)	1,970
Maturities of FHLB advances	(7,000		)	(2,000		)
Redemption of FHLB stock	477			—
Repurchase of common stock	(279		)	—
Dividends paid on common stock	(205		)	(810		)
Net change in advance payments by borrowers for taxes and insurance	(10		)	(123		)
Net cash used in financing activities	(7,943		)	(963		)
Net change in cash and cash equivalents	(8,382		)	3,372
Cash and cash equivalents at beginning of year	32,898			22,281

Cash and cash equivalents at end of period	$	24,516		$	25,653

Supplemental disclosures of cash flow information
Cash paid during the year for
Interest	$	391		$	508
Income taxes	—			1
Supplemental noncash disclosures
Transfers from loans to real estate owned	$	216		$	25
Transfers of negative advance payment for borrowers for tax and insurance balances to loans	—			31
Transfers of loans to held for sale	—			1,203

See accompanying notes.

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AJS BANCORP, INC.

CONSOLIDATED UNAUDITED STATEMENTS OF STOCKHOLDERS’ EQUITY

SIX MONTHS ENDED JUNE 30, 2015 AND YEAR ENDED DECEMBER 31, 2014

										Accumulated
				Additional						Other			Unearned			Unearned
	Common			Paid-In			Retained			Comprehensive			Stock			ESOP
	Stock			Capital			Earnings			Income (Loss)			Awards			Shares			Total
Balance at January 1, 2014	$	23		$	15,330		$	20,523		$	(405	)	$	—		$	(1,087	)	$	34,384
Allocation of stock awards of 56,267 shares	1			674			—			—			(675		)	—			—
Stock awards earned	—			—			—			—			79			—			79
Stock options compensation	—			16			—			—			—			—			16
Common stock repurchases of 150,867 shares	(2		)	(2,039		)	—			—			—			—			(2,041		)
Reclassification due to changes in fair value of common stock in ESOP subject to contingent repurchase obligation	—			(263		)	—			—			—			—			(263		)
Net income	—			—			2,102			—			—			—			2,102
Cash dividends of $0.70	—			—			(1,499		)	—			—			—			(1,499		)
Other comprehensive income	—			—			—			385			—			—			385
ESOP shares earned shares	—			13			—			—			—			37			50
Balance at December 31, 2014	22			13,731			21,126			(20		)	(596		)	(1,050		)	33,213
Forfeited stock awards of 8,000 shares	—			(96		)	—			—			96			—			—
Stock awards earned	—			—			—			—			66			—			66
Stock options compensation	—			14			—			—			—			—			14
Common stock repurchases of 20,428 shares	—			(279		)	—			—			—			—			(279		)
Reclassification due to changes in fair value of common stock in ESOP subject to contingent repurchase obligation	—			(79		)	—			—			—			—			(79		)
Net loss	—			—			(33		)	—			—			—			(33		)
Cash dividends of $0.10	—			—			(205		)	—			—			—			(205		)
Other comprehensive income (loss)	—			—			—			(139		)	—			—			(139		)
Balance at June 30, 2015	$	22		$	13,291		$	20,888		$	(159	)	$	(434	)	$	(1,050	)	$	32,558

(Continued)

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AJS BANCORP, INC.

NOTES TO THE CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS

(Dollars in thousands, except per share and share data)

NOTE 1 -BASIS OF PRESENTATION AND CONSOLIDATION

AJS Bancorp, Inc. (the “Company”), is a savings and loan holding company, the principal asset of which consists of its ownership of A.J. Smith Federal Savings Bank (the “Bank”). The Bank is a federally chartered savings bank with operations located in Midlothian and Orland Park, Illinois. The Bank provides single-family residential, home equity and commercial real estate loans to customers and accepts deposits from customers located in the southern suburbs of Chicago, Illinois. The consolidated financial statements included herein include the accounts of the Company and the Bank. All significant intercompany items have been eliminated.

On October 9, 2013, the Company completed a second step conversion and reorganization and sale of common stock. Prior to the completion of the second step conversion, the Company was a federal corporation and mid-tier holding company in the mutual holding company structure. Following the reorganization, the Company is the Maryland chartered holding company of the Bank.

The information contained in the accompanying consolidated financial statements is unaudited. In the opinion of management, the consolidated financial statements contain all adjustments necessary for a fair statement of the results of operations for the interim periods. All such adjustments are of a normal recurring nature. Any differences appearing between the numbers presented in the financial statements and management’s discussion and analysis are due to rounding. The results of operations for the interim periods are not necessarily indicative of the results which may be expected for the entire year or for any other period.

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions which affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements, as well as the reported amounts of income and expenses during the reported periods. Actual results could differ from those estimates.

(Continued)

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AJS BANCORP, INC.

NOTES TO THE CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS

(Dollars in thousands, except per share and share data)

NOTE 2 - SECURITIES

The fair value of securities available-for-sale and the related gross unrealized gains and losses recognized in accumulated other comprehensive income (loss) were as follows:

	June 30, 2015
			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
U.S. government-sponsored entities	$	10,000	$	1	$	(5	)	$	9,996
Residential agency mortgage-backed	42,076		107		(364		)	41,819

Total	$	52,076	$	108	$	(369	)	$	51,815

	December 31, 2014
			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
U.S. government-sponsored entities	$	11,000	$	3	$	(10	)	$	10,993
Residential agency mortgage-backed	43,248		188		(215		)	43,221

Total	$	54,248	$	191	$	(225	)	$	54,214

(Continued)

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AJS BANCORP, INC.

NOTES TO THE CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS

(Dollars in thousands, except per share and share data)

NOTE 2 - SECURITIES (Continued)

The amortized cost, unrecognized gains and losses, and fair values of securities held-to-maturity were as follows:

	June 30, 2015
			Gross		Gross
	Amortized		Unrecognized		Unrecognized		Fair
	Cost		Gains		Losses		Value

Residential agency mortgage-backed	$	7	$	1	$	—	$	8
State and municipal	320		7		—		327

	$	327	$	8	$	—	$	335

	December 31, 2014
			Gross		Gross
	Amortized		Unrecognized		Unrecognized		Fair
	Cost		Gains		Losses		Value

Residential agency mortgage-backed	$	11	$	—	$	—	$	11
State and municipal	320		10		—		330

	$	331	$	10	$	—	$	341

(Continued)

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AJS BANCORP, INC.

NOTES TO THE CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS

(Dollars in thousands, except per share and share data)

NOTE 2 - SECURITIES (Continued)

Expected maturities of securities at June 30, 2015 were as follows. Securities not due at a single maturity date (mortgage-backed securities) are shown separately.

	Available-for-Sale				Held-to-Maturity
	Amortized		Fair		Amortized		Fair
	Cost		Value		Cost		Value

Due after one year through five years	$	10,000	$	9,996	$	260	$	266
Due after five years through ten years	—		—		60		61
Residential agency mortgage-backed	42,076		41,819		7		8

	$	52,076	$	51,815	$	327	$	335

Securities with a carrying value of approximately $9,279 and $10,161 at June 30, 2015 and December 31, 2014 were pledged to secure public deposits and for other purposes as required or permitted by law.

The proceeds from sales of securities and the associated gains for the three and six months ended June 30, 2015 and 2014 are listed below:

	Three Months		Six Months		Three Months		Six Months
	Ended		Ended		Ended		Ended
	June 30		June 30,		June 30,		June 30,
	2015		2015		2014		2014

Proceeds from sale	$	—	$	3,306	$	1,950	$	7,407
Gross realized gains	—		74		29		67

(Continued)

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AJS BANCORP, INC.

NOTES TO THE CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS

(Dollars in thousands, except per share and share data)

NOTE 2 - SECURITIES (Continued)

Securities with unrealized losses not recognized in income, by length of time that individual securities have been in a continuous unrealized loss position, are as follows:

	June 30, 2015
	Less Than 12 Months					12 Months or More					Total
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
	Value		Loss			Value		Loss			Value		Loss
U.S. government-sponsored entities	$	2,996	$	(5	)	$	—	$	—		$	2,996	$	(5	)
Residential agency mortgage-backed	11,856		(67		)	12,512		(297		)	24,368		(364		)

Total temporarily impaired	$	14,852	$	(72	)	$	12,512	$	(297	)	$	27,364	$	(369	)

	December 31, 2014
	Less Than 12 Months					12 Months or More					Total
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
	Value		Loss			Value		Loss			Value		Loss

U.S. government-sponsored entities	$	4,992	$	(8	)	$	998	$	(2	)	$	5,990	$	(10	)
Residential agency mortgage-backed	3,112		(10		)	13,750		(205		)	16,862		(215		)

Total temporarily impaired	$	8,104	$	(18	)	$	14,748	$	(207	)	$	22,852	$	(225	)

Unrealized losses on securities have not been recognized because the issuer’s securities are of high credit quality (rated AA or higher), management does not intend to sell and it is not more likely than not that management would be required to sell the securities prior to their anticipated recovery, and the decline in fair value was largely due to changes in interest rates. The fair value is expected to recover as the securities approach maturity.

(Continued)

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AJS BANCORP, INC.

NOTES TO THE CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS

(Dollars in thousands, except per share and share data)

NOTE 3 - LOANS

Loans were as follows:

	June 30,					December 31,
	2015					2014
	Amount			Percent		Amount			Percent

Mortgage:
One—to-four family	$	100,632		85.5	%	$	97,214		84.4	%
Multi-family and commercial	8,919			7.6		9,493			8.3
Home equity	7,855			6.7		8,069			7.0
Consumer and other	233			0.2		349			0.3
	117,639			100.0	%	115,125			100.0	%
Allowance for loan losses	(1,080		)			(1,103		)
Net deferred costs and other	131					108
Loans, net	$	116,690				$	114,130

The following tables present the activity in the allowance for loan losses by portfolio segment:

	For the Three Months Ended June 30, 2015
				Multi-family
	One—to-Four			and			Home			Consumer
	Family			Commercial			Equity			and Other		Total

Allowances for loan losses:
Beginning balance	$	816		$	233		$	21		$	—	$	1,070
Provision for loan losses	135			(19		)	(1		)	—		115
Charge-offs	(107		)	—			—			—		(107		)
Recoveries	2			—			—			—		2

Total ending allowance balance	$	846		$	214		$	20		$	—	$	1,080

(Continued)

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AJS BANCORP, INC.

NOTES TO THE CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS

(Dollars in thousands, except per share and share data)

NOTE 3- LOANS (Continued)

	For the Six Months Ended June 30, 2015
				Multi-family
	One-to-Four			and			Home			Consumer
	Family			Commercial			Equity			and Other		Total

Allowances for loan losses:
Beginning balance	$	822		$	259		$	22		$	—	$	1,103
Provision for loan losses	172			(40		)	(2		)	—		130
Charge-offs	(152		)	(7		)	—			—		(159		)
Recoveries	4			2			—			—		6

Total ending allowance balance	$	846		$	214		$	20		$	—	$	1,080

	For the Three Months Ended June 30, 2014
				Multi-family
	One—to-Four			and			Home		Consumer
	Family			Commercial			Equity		and Other		Total

Allowances for loan losses:
Beginning balance	$	953		$	216		$	24	$	1	$	1,194
Provision for loan losses	(6		)	485			1		—		480
Charge-offs	(23		)	(449		)	—		—		(472		)
Recoveries	1			1			—		—		2

Total ending allowance balance	$	925		$	253		$	25	$	1	$	1,204

	For the Six Months Ended June 30, 2014
Allowances for loan losses:
Beginning balance	$	823		$	466		$	109		$	1	$	1,399
Provision for loan losses	161			403			(84		)	—		480
Charge-offs	(61		)	(618		)	—			—		(679		)
Recoveries	2			2			—			—		4

Total ending allowance balance	$	925		$	253		$	25		$	1	$	1,204

(Continued)

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AJS BANCORP, INC.

NOTES TO THE CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS

(Dollars in thousands, except per share and share data)

NOTE 3- LOANS (Continued)

The following tables present the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on impairment method:

	June 30, 2015
			Multi-Family				Consumer
	One—to-Four		and		Home		and
	Family		Commercial		Equity		Other		Total
Allowance for loan losses:
Loans individually evaluated for impairment	$	219	$	—	$	—	$	—	$	219
Loans collectively evaluated for impairment	627		214		20		—		861

Total ending allowance balance	$	846	$	214	$	20	$	—	$	1,080

Loans:
Loans individually evaluated for impairment	$	1,549	$	708	$	—	$	—	$	2,257
Loans collectively evaluated for impairment	99,083		8,211		7,855		233		115,382

Total ending loans balance	$	100,632	$	8,919	$	7,855	$	233	$	117,639

	December 31, 2014
			Multi-Family				Consumer
	One—to-Four		and		Home		and
	Family		Commercial		Equity		Other		Total

Allowance for loan losses:
Loans individually evaluated for impairment	$	234	$	—	$	—	$	—	$	234
Loans collectively evaluated for impairment	588		259		22		—		869

Total ending allowance balance	$	822	$	259	$	22	$	—	$	1,103

Loans:
Loans individually evaluated for impairment	$	1,564	$	899	$	—	$	—	$	2,463
Loans collectively evaluated for impairment	95,650		8,594		8,069		349		112,662

Total ending loans balance	$	97,214	$	9,493	$	8,069	$	349	$	115,125

(Continued)

Table of Contents

AJS BANCORP, INC.

NOTES TO THE CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS

(Dollars in thousands, except per share and share data)

NOTE 3- LOANS (Continued)

	As of June 30, 2015						As of December 31, 2014
					Allowance						Allowance
	Unpaid				for Loan		Unpaid				for Loan
	Principal		Recorded		Losses		Principal		Recorded		Losses
	Balance		Investment		Allocated		Balance		Investment		Allocated

With no related allowance recorded:
One—to-four family	$	404	$	292	$	—	$	410	$	297	$	—
Multi-family and commercial	991		708		—		1,185		899		—
Home equity	—		—		—						—
Consumer and other	—		—		—		—		—		—
Subtotal	1,395		1,000		—		1,595		1,196		—

With an allowance recorded:
One—to-four family	1,293		1,257		219		1,300		1,267		234
Multi-family and
commercial	—		—		—		—
Home equity	—		—		—		—		—		—
Consumer and other	—		—		—		—		—		—
Subtotal	1,293		1,257		219		1,300		1,267		234

Total	$	2,688	$	2,257	$	219	$	2,895	$	2,463	$	234

	For the Three Months						For the Three Months
	Ended June 30, 2015						Ended June 30, 2014
	Average		Interest		Cash		Average		Interest		Cash
	Recorded		Income		Basis		Recorded		Income		Basis
	Investment		Recognized		Recognized		Investment		Recognized		Recognized

With no related allowance recorded:
One—to-four family	$	294	$	4	$	—	$	150	$	7	$	—
Multi-family and commercial	713		—		6		1,605				6
Home equity	—		—		—				—		—
Consumer and other	—		—		—				—		—
Subtotal	1,007		4		6		1,755		7		6

With an allowance recorded:
One—to-four family	1,258		12		—		1,328		14		—
Multi-family and
commercial	—		—		—		287		—		—
Home equity	—		—		—				—		—
Consumer and other	—		—		—		—		—		—
Subtotal	1,258		12		—		1,615		14		—

Total	$	2,265	$	16	$	6	$	3,370	$	21	$	6

(Continued)

Table of Contents

AJS BANCORP, INC.

NOTES TO THE CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS

(Dollars in thousands, except per share and share data)

NOTE 3 - LOANS (Continued)

	For the Six Months						For the Six Months
	Ended June 30, 2015						Ended June 30, 2014
	Average		Interest		Cash		Average		Interest		Cash
	Recorded		Income		Basis		Recorded		Income		Basis
	Investment		Recognized		Recognized		Investment		Recognized		Recognized
With no related allowance recorded:
One—to-four family	$	295	$	9	$	—	$	841	$	7	$	—
Multi-family and commercial	775		—		12		1,732		—		6
Home equity	—		—		—		48		—		—
Subtotal	1,070		9		12		2,621		7		6

With an allowance recorded:
One—to-four family	1,261		27		—		1,135		30		—
Multi-family and commercial	—		—		—		413		—		—
Home equity	—		—		—		—		—		—
Subtotal	1,261		27		—		1,548		30		—

Total	$	2,331	$	36	$	12	$	4,169	$	37	$	6

The recorded investment in loans excludes accrued interest receivable and loan origination costs, net, due to immateriality.

(Continued)

Table of Contents

AJS BANCORP, INC.

NOTES TO THE CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS

(Dollars in thousands, except per share and share data)

NOTE 3 - LOANS (Continued)

Nonaccrual loans and loans past due 90 days still on accrual include both smaller balance homogeneous loans that are collectively evaluated for impairment and individually classified impaired loans. The following tables present the recorded investment in nonaccrual and loans past due over 90 days still on accrual by class of loans:

					Loans Past Due Over
	Nonaccrual				90 Days Still Accruing
	June 30,		December 31,		June 30,		December 31,
	2015		2014		2015		2014

One—to-four family	$	1,474	$	1,886	$	—	$	—
Multi-family and commercial	708		900		—		—
Home equity	181		192		—		—
Consumer and other	—		—		—		—
Total	$	2,363	$	2,978	$	—	$	—

The following tables present the aging of the recorded investment in past due loans by class of loans:

	June 30, 2015
	30 - 59		60 - 89		Greater Than
	Days		Days		90 Days		Total		Loans Not
	Past Due		Past Due		Past Due		Past Due		Past Due		Total

One—to-four family	$	429	$	72	$	783	$	1,284	$	99,348	$	100,632
Multi-family and commercial	—		200		—		200		8,719		8,919
Home equity	42		—		58		100		7,755		7,855
Consumer and other	—		—		—		—		233		233
Total	$	471	$	272	$	841	$	1,584	$	116,055	$	117,639

	December 31, 2014
	30 - 59		60 - 89		Greater Than
	Days		Days		90 Days		Total		Loans Not
	Past Due		Past Due		Past Due		Past Due		Past Due		Total

One-to-four family	$	245	$	305	$	753	$	1,303	$	95,911	$	97,214
Multi-family and commercial	206		—		379		585		8,908		9,493
Home equity	88		44		35		167		7,902		8,069
Consumer and other	—		—		—		—		349		349
Total	$	539	$	349	$	1,167	$	2,055	$	113,070	$	115,125

(Continued)

Table of Contents

AJS BANCORP, INC.

NOTES TO THE CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS

(Dollars in thousands, except per share and share data)

NOTE 3 - LOANS (Continued)

Troubled Debt Restructurings

Troubled debt restructurings by accrual status and specific reserves allocated to troubled debt restructurings were as follows:

	June 30,		December 31,
	2015		2014

Accrual status	$	1,230	$	1,431
Non-accrual status	1,026		1,032
	2,256		2,463
Specific reserves allocated	219		234
Net	$	2,037	$	2,229

No additional loan commitments were outstanding to these borrowers at June 30, 2015 and December 31, 2014. Loans are returned to accrual status after a period of satisfactory payment performance under the terms of the restructuring, but no earlier than six months.

The following tables present loans by class modified as troubled debt restructurings that occurred during the three and six months ended June 30, 2015:

		Pre-Modification		Post-Modification
		Outstanding		Outstanding
	Number of	Recorded		Recorded
	Loans	Investment		Investment
June 30, 2015
One-to—four family	1	$	217	$	219
Multi-family and commercial	—	—		—
Home equity	—	—		—
Consumer and other	—	—		—
Total	1	$	217	$	219

The recorded investment increased due to real estate taxes. The troubled debt restructurings described above were evaluated for impairment prior to modification, did not result in an increase in the

(Continued)

Table of Contents

AJS BANCORP, INC.

NOTES TO THE CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS

(Dollars in thousands, except per share and share data)

NOTE 3 - LOANS (Continued)

allowance for loan losses upon modification, and resulted in no additional charge-offs for the three and six months ended June 30, 2015. There were no new troubled debt restructurings made during the three and six months ended June 30, 2014.

A loan is considered to be in payment default once it is 30 days contractually past due under the modified terms. There were no troubled debt restructurings for which there was a payment default within twelve months following the modification during the six months ended June 30, 2014. The following table presents loans by class modified as troubled debt restructurings for which there was a payment default within twelve months following the modification during the six months ended June 30, 2015.

	Number of	Recorded
	Loans	Investment
June 30, 2015
One-to—four family residences	1	$	217
Total	1	$	217

There were no troubled debt restructurings for which there was a payment default within twelve months following the modification during the three and six months ended June 30, 2014.

The terms of certain other loans were modified during the three and six months ended June 30, 2015 and 2014 that did not meet the definition of a troubled debt restructuring. These loan balances were not material in the three and six months ended June 30, 2015 and 2014.

In order to determine whether a borrower is experiencing financial difficulty, an evaluation is performed of the probability that the borrower will be in payment default on any of its debt in the foreseeable future without the modification. This evaluation is performed under the Company’s internal underwriting policy.

(Continued)

Table of Contents

AJS BANCORP, INC.

NOTES TO THE CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS

(Dollars in thousands, except per share and share data)

NOTE 3 - LOANS (Continued)

Credit Quality Indicators:

The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The Company analyzes loans individually by classifying the loans as to credit risk. This analysis includes one —to four-family, multi-family and commercial real estate loans, home equity loans, and consumer and other. This analysis is performed on a quarterly basis. The Company uses the following definitions for risk ratings:

Special Mention. Loans classified as special mention have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the Company’s credit position at some future date.

Substandard. Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected.

Doubtful. Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of current existing facts, conditions, and values, highly questionable and improbable.

Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered to be Pass rated loans. As of June 30, 2015 and December 31, 2014, the risk category of loans by class of loans was as follows:

	June 30, 2015
			Special
	Pass		Mention		Substandard		Doubtful		Total
On —to- four family	$	97,718	$	—	$	2,914	$	—	$	100,632
Multi-family and commercial	2,317		146		6,456		—		8,919
Home equity	7,674		—		181		—		7,855
Consumer and other	233		—		—		—		233
Total	$	107,942	$	146	$	9,551	$	—	$	117,639

(Continued)

Table of Contents

AJS BANCORP, INC.

NOTES TO THE CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS

(Dollars in thousands, except per share and share data)

NOTE 3 - LOANS (Continued)

	December 31, 2014
			Special
	Pass		Mention		Substandard		Doubtful		Total
One—to-four family	$	94,007	$	—	$	3,207	$	—	$	97,214
Multi-family and commercial	2,649		102		6,742		—		9,493
Home equity	7,641		—		428		—		8,069
Consumer and other	349		—		—		—		349
Total	$	104,646	$	102	$	10,377	$	—	$	115,125

NOTE 4 - FAIR VALUES

Fair value is the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. There are three levels of inputs that may be used to measure fair 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; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

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

(Continued)

Table of Contents

AJS BANCORP, INC.

NOTES TO THE CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS

(Dollars in thousands, except per share and share data)

NOTE 4 - FAIR VALUES (Continued)

The Company used the following methods and significant assumptions used to estimate the fair value of the following items:

Securities: The fair values of trading securities and securities available-for-sale are determined by quoted market prices, if available (Level 1). For securities where quoted prices are not available, fair values are calculated based on market prices of similar securities (Level 2).

Impaired Loans: At the time a loan is considered impaired, it is valued at the lower of cost or fair value of underlying collateral. Impaired loans carried at fair value generally receive specific allocations of the allowance for loan losses. For collateral dependent loans, fair value is commonly based on recent real estate appraisals. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the independent 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. Non-real estate collateral may be valued using an appraisal, net book value per the borrower’s financial statements, or aging reports, adjusted or discounted based on management’s historical knowledge, changes in market conditions from the time of the valuation, and management’s expertise and knowledge of the client and client’s business, resulting in a Level 3 fair value classification. Impaired loans are evaluated on a quarterly basis for additional impairment and adjusted accordingly.

Other Real Estate Owned: Assets acquired through or instead of loan foreclosure are initially recorded at fair value less costs to sell when acquired, establishing a new cost basis. These assets are subsequently accounted for at lower of cost or fair value less estimated costs to sell. Fair value is commonly based on recent real estate appraisals. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the independent 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.

(Continued)

Table of Contents

AJS BANCORP, INC.

NOTES TO THE CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS

(Dollars in thousands, except per share and share data)

NOTE 4 - FAIR VALUES (Continued)

Appraisals for both collateral dependent impaired loans and real estate owned are performed by certified general appraisers (for commercial properties) or certified residential appraisers (for residential properties) whose qualifications and licenses have been reviewed and verified by the Company. On an annual basis, the Company compares the actual selling price of collateral that has been sold to the most recent appraised value to determine what additional adjustment should be made to the appraisal value to arrive at fair value.

At June 30, 2015 and December 31, 2014, the Company had no liabilities measured at fair value. Assets measured at fair value on a recurring basis are summarized below:

June 30, 2015

Quoted Prices in

Significant

Active Markets

Other

Significant

For Identical

Observable

Unobservable

Assets

Inputs

Securities available-for-sale

Total

(Level 1)

(Level 2)

(Level 3)

U.S. government-sponsored entities

9,996

—

9,996

—

Residential agency mortgage-backed

41,819

—

41,819

—

December 31, 2014

Quoted Prices in

Significant

Active Markets

Other

Significant

For Identical

Observable

Unobservable

Assets

Inputs

Securities available-for-sale

Total

(Level 1)

(Level 2)

(Level 3)

U.S. government-sponsored entities

10,993

—

10,993

—

Residential agency mortgage-backed

43,221

—

43,221

—

There were no transfers between Level 1 and Level 2 during the six months ended June 30, 2015 and the year ended December 31, 2014.

(Continued)

Table of Contents

AJS BANCORP, INC.

NOTES TO THE CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS

(Dollars in thousands, except per share and share data)

NOTE 4 - FAIR VALUES (Continued)

The following tables set forth the Company’s assets that were measured at fair value on a non-recurring basis:

June 30, 2015

Quoted Prices in

Significant

Active Markets

Other

Significant

For Identical

Observable

Unobservable

Assets

Inputs

Total

(Level 1)

(Level 2)

(Level 3)

Other real estate owned:

One—to-four family

—

Multi-family and commercial

1,260

—

1,260

	December 31, 2014
			Quoted Prices in		Significant
			Active Markets		Other		Significant
			For Identical		Observable		Unobservable
			Assets		Inputs		Inputs
	Total		(Level 1)		(Level 2)		(Level 3)
Impaired loans:
One-to-four family	$	201	$	—	$	—	$	201
Multi-family and commercial	346		—		—		346
Other real estate owned:
One-to-four family	412		—		—		412
Multi-family and commercial	1,299		—		—		1,299

At June 30, 2015, other real estate owned, which is carried at fair value less estimated costs to sell, had a carrying amount of $1,815, net of a valuation allowance of $515, resulting in a write-down of $205 during the six months ended June 30, 2015. At December 31, 2014, other real estate owned had a carrying amount of $2,021, net of a valuation allowance of $310, resulting in a write-down of $86 during 2014.

At December 31, 2014, loans which are measured for impairment using the fair value of the collateral for collateral dependent loans impaired loans, had a recorded investment of $547, with no valuation allowance, resulting in an additional provision for loan losses of $134 for 2014.

(Continued)

Table of Contents

AJS BANCORP, INC.

NOTES TO THE CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS

(Dollars in thousands, except per share and share data)

NOTE 4 - FAIR VALUES (Continued)

The following table presents quantitative information about level 3 fair value measurements for financial instruments measured at fair value on a non-recurring basis:

	June 30, 2015
			Valuation		Range
	Fair Value		Technique(s)	Unobservable Input(s)	(Weighted Average)

Other real estate owned:
One-to-four family	$	40	Sales comparison approach	Adjustment for differences between the comparable sales	0-11.7% (-0.2%)
Multi-family and commercial	216		Sales comparison approach	Adjustment for differences between the comparable sales	5.7-55.4% (34.2%)
	1,044		Income approach	Adjustment for differences in net operating income expectations	13.1% (13.1%)
				Capitalization rate	8.3% (8.3%)

	December 31, 2014
			Valuation		Range
	Fair Value		Technique(s)	Unobservable Input(s)	(Weighted Average)
Impaired loans:
One-to-four family	$	201	Sales comparison approach	Adjustment for differences between the comparable Sales	0.0-7.0% (-4.8%)
Multi-family and commercial	346		Sales comparison approach	Adjustment for differences between the comparable sales	0.0-56.7% (18.2%)

Other real estate owned:
One-to-four family	412		Sales comparison approach	Adjustment for differences between the comparable sales	0.0-5.3% (-6.5%)
Multi-family and commercial	90		Sales comparison approach	Adjustment for differences between the comparable sales	5.7-55.4% (34.2%)
	1,209		Income approach	Adjustment for differences in net operating income expectations	13.1% (13.1%)
				Capitalization rate	8.3% (8.3%)

(Continued)

Table of Contents

AJS BANCORP, INC.

NOTES TO THE CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS

(Dollars in thousands, except per share and share data)

NOTE 4 - FAIR VALUES (Continued)

The carrying amount and estimated fair value of financial instruments not previously presented were as follows.

	June 30, 2015
	Carrying		Fair Value Measurements Using:
	Amount		Level 1		Level 2		Level 3		Total
Financial assets
Cash and cash equivalents	$	24,516	$	24,516	$	—	$	—	$	24,516
Securities held-to-maturity	327		—		335		—		335
Loans, net	116,690		—		—		115,975		115,975
FHLB stock	1,291		N/A		N/A		N/A		1,291
Accrued interest receivable	430		—		19		411		430

Financial liabilities
Non-interest-bearing deposits	$	22,262	$		$	—	$	—	$	22,262
Interest-bearing deposits	143,061		—		143,137		—		143,137
FHLB advances	5,000		—		5,085		—		5,085
Advances from borrowers for taxes	2,058		—		2,058		—		2,058
Accrued interest payable	12		—		12		—		12

	December 31, 2014
	Carrying		Fair Value Measurements Using:
	Amount		Level 1		Level 2		Level 3		Total
Financial assets
Cash and cash equivalents	$	32,898	$	32,898	$	—	$	—	$	32,898
Securities held-to-maturity	331		—		341		—		341
Loans, net (less impaired loans)	113,583		—		—		113,316		113,316
FHLB stock	1,768		N/A		N/A		N/A		1,768
Accrued interest receivable	438		—		20		418		438

Financial liabilities
Non-interest-bearing deposits	$	20,905	$	20,905	$	—	$	—	$	20,905
Interest-bearing deposits	145,344		—		145,444		—		145,444
FHLB advances	12,000		—		12,163		—		12,163
Advances from borrowers for taxes	2,068		—		2,068		—		2,068
Accrued interest payable	28		—		28		—		28

(Continued)

Table of Contents

AJS BANCORP, INC.

NOTES TO THE CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS

(Dollars in thousands, except per share and share data)

NOTE 4 - FAIR VALUES (Continued)

The methods and assumptions, not previously presented, used to estimate fair values are described as follows:

(a) Cash and Cash Equivalents

The carrying amounts of cash and short-term instruments approximate fair values and are classified as Level 1

(b) Securities Held-to-Maturity

The carrying amounts of held to maturity securities are determined using a pricing matrix resulting in a Level 2 classification.

(c) FHLB Stock

It is not practical to determine the fair value of FHLB stock due to restrictions placed on its transferability.

(d) Loans

Fair values of loans, excluding loans held for sale, are estimated as follows: For variable rate loans that reprice frequently and with no significant change in credit risk, fair values are based on carrying values resulting in a Level 3 classification. Fair values for other loans are estimated using discounted cash flow analyses, using interest rates currently being offered for loans with similar terms to borrowers of similar credit quality resulting in a Level 3 classification. Impaired loans are valued at the lower of cost or fair value as described previously. The methods utilized to estimate the fair value of loans do not necessarily represent an exit price.

(e) Accrued Interest Receivable

The carrying amount of accrued interest receivable approximates its fair value and is classified as Level 2 for securities and Level 3 for loans.

(Continued)

Table of Contents

AJS BANCORP, INC.

NOTES TO THE CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS

(Dollars in thousands, except per share and share data)

NOTE 4 - FAIR VALUES (Continued)

(f) Deposits

The fair values disclosed for demand deposits (e.g., interest and non-interest checking, passbook savings, and certain types of money market accounts) are, by definition, equal to the amount payable on demand at the reporting date (i.e., their carrying amount) and are classified as Level 1. The carrying amounts of variable rate, fixed-term money market accounts and certificates of deposit approximate their fair values at the reporting date are classified as a Level 2. Fair values for fixed rate certificates of deposit are estimated using a discounted cash flows calculation that applies interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on time deposits resulting in a Level 2 classification.

(g) Federal Home Loan Bank Advances

The fair value of Federal Home Loan Bank advances, which are at a fixed rate, are estimated using discounted cash flow analyses based on current rates for similar advances resulting in a Level 2 classification.

(h) Securities Sold Under Agreements to Repurchase

The carrying amounts of securities sold under agreements to repurchase approximate fair value resulting in a Level 2 classification.

(i) Advances From Borrowers For Taxes

The carrying value of the short-term borrowings approximated fair value and are classified as Level 2.

(j) Accrued Interest Payable

The carrying amount of accrued interest payable approximates its fair value and is classified as Level 2.

(Continued)

Table of Contents

NOTE 5 - EARNINGS PER SHARE

According to the provisions of FASB ASC 260, Earnings Per Share, non-vested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents are participating securities and are included in the computation of EPS pursuant to the two-class method. The two-class method is an earnings allocation formula that determines earnings per share for each class of common stock and participating security according to dividends declared (or accumulated) and participation rights in undistributed earnings. ESOP shares are considered outstanding for basic and diluted earnings per share when the shares are committed to be released. The Company’s non-vested restricted stock awards qualify as participating securities.

Net income is allocated between the common stock and participating securities pursuant to the two-class method, based on their rights to receive dividends, participate in earnings or absorb losses. Basic earnings per common share is computed by dividing net earnings available to common shareholders by the weighted average number of common shares outstanding during the period, excluding participating non-vested restricted shares.

The table below calculates the earnings per share for the three months and six months ended June 30, 2015 and 2014:

	Three Months					Six Months
	June 30,					June 30,
	2015			2014		2015			2014
Basic
Net income (loss)	$	(108	)	$	1,479	$	(33	)	$	1,707
Distributed earnings allocated to participated securities	3			—		5			—
Undistributed income allocated to participated securities	(6		)	—		(6		)	—
Earnings allocated to common shareholders	$	(105	)	$	1,479	$	(32	)	$	1,707

Weighted average common shares outstanding including participating securities	2,093,418			2,225,780		2,097,723			2,213,449
Less: Participating securities	(51,935		)	—		(54,077		)	—
Weighted-average common shares outstanding	2,041,483			2,225,780		2,043,646			2,213,449

Basic earnings per common share	$	(0.05	)	$	0.66	$	(0.02	)	$	0.77

Diluted
Net earnings allocated to common stock	$	(105	)	$	1,479	$	(32	)	$	1,707
Weighted average common shares outstanding for basic	2,041,483			2,225,780		2,043,646			2,225,780
Add: dilutive effects of assumed exercise of stock options and stock awards	11,042			23,200		8,673			23,163

Diluted weighted-average shares for basic	2,052,525			2,248,980		2,052,319			2,263,612

Diluted earnings per common share	$	(0.05	)	$	0.66	$	(0.02	)	$	0.76

At June 30, 2015 and 2014, there were 111,507 and 119,507 anti-dilutive stock options, respectively.

Employee stock ownership plan shares are considered outstanding for this calculation unless unearned. At June 30, 2015 and 2014, there were 105,032 and 108,783 shares unearned from the employee stock ownership plan, respectively.

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NOTE 6—EQUITY INCENTIVE PLAN

The Company’s 2014 Equity Incentive Plan provides for grants of stock options, stock awards, stock units, awards, performance stock awards, stock appreciations rights, and other equity-based awards to key employees and nonemployee directors. As of June 30, 2015, the Company has only granted stock options and stock awards. The Company recognizes stock compensation costs for services received in a share-based payment transaction over the required service period, generally defined as the vesting period.

For stock options, certain key employees and nonemployee directors were granted options to purchase shares of the Company’s common stock at fair value at the date of the grant (exercise price). The options become exercisable in equal installments over a five-year period from the date of grant, and they expire ten years from the date of grant. Compensation cost is determined by estimating the fair value of the option on the date of the grant using a closed form option valuation (Black-Scholes) model. Expected volatilities are based on historical volatilities of the Company’s common stock. The expected term of options granted is based on historical data and represents the period of time that options granted are expected to be outstanding, which takes into account that the options are not transferrable. The risk-free interest rate for the expected term of the option is based on the U.S. treasury yield curve in effect at the time of grant. There were 118,132 options granted in May 2014 with a strike price of $11.99 and 4,000 options granted in June 2015 with a strike price of $15.00. During the six months ended June 30, 2015, there were 23,624 options vested, 12,000 options forfeited, no options were exercised, and no options expired. Total unrecognized compensation expense for stock options was $100 as of June 30, 2015. Compensation expense totaled $14 and $2 for the six months ended June 30, 2015 and June 30, 2014, respectively. Management expects outstanding options to vest over the remaining vesting period of 4.1 years.

For stock awards, the compensation cost is based on the grant date fair value of the award (as determined by quoted market prices) and is recognized over the vesting period. The Company’s stock awards vest based on a service period of five years. The unamortized cost of shares not yet earned (vested) is reported as a reduction of stockholders’ equity. The Company awarded 56,267 shares of stock in May 2014. During the six months ended June 30, 2015, there were 11,251 awards vested and 8,000 awards forfeited. Total unrecognized compensation expense for awards was $434 as of June 30, 2015. Compensation expense totaled $66 and $12 for the six months ended June 30, 2015 and June 30, 2014, respectively. Management expects outstanding awards to vest over the remaining vesting period of 4.0 years.

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

Forward-Looking Statements

This Quarterly Report on Form 10-Q contains certain forward-looking statements and information relating to the Company and the Bank that are based on the beliefs of management as well as assumptions made by and information currently available to management. Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts. They often include words like “believe,” “expect,” “anticipate,” “estimate,” and “intend” or future or conditional verbs such as “will,” “should,” “could,” or “may” and similar expressions or the negative thereof. Certain factors that could cause actual results to differ materially from expected results include, changes in the interest rate environment, changes in general economic conditions, legislative and regulatory changes that adversely affect the business of the Company and the Bank, and changes in the securities markets. Should one or more of these risks or uncertainties materialize or should underlying assumptions prove incorrect, actual results may vary materially from those described herein. We caution readers not to place undue reliance on forward-looking statements. The Company disclaims any obligation to revise or update any forward-looking statements contained in this Form 10-Q to reflect future events or developments.

Critical Accounting Policies

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. By their nature, changes in these assumptions and estimates could significantly affect our financial position or results of operations. Actual results could differ from those estimates.

On April 5, 2012, the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”) was signed into law. The JOBS Act contains provisions that, among other things, reduce certain reporting requirements for qualifying public companies. As an “emerging growth company” we may delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies. We intend to take advantage of the benefits of this extended transition period. Accordingly, our financial statements may not be comparable to companies that comply with such new or revised accounting standards.

Discussed below are selected critical accounting policies that are of particular significance to us.

Allowance for Loan Losses. The allowance for loan losses is a valuation allowance for probable incurred credit losses, increased by the provision for loan losses and decreased by charge-offs less recoveries. We estimate the allowance balance required using past loan loss experience; known and inherent losses in the nature and volume of the portfolio that are both probable and estimable;

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information about specific borrower situations; and estimated collateral values, economic conditions, and other factors. Allocations of the allowance may be made for specific loans, but the entire allowance is available for any loan that, in our judgment, should be charged off. Loan losses are charged against the allowance when we believe that the uncollectibility of a loan balance is confirmed.

The allowance consists of specific and general components. The specific component relates to loans that are individually classified as impaired or loans otherwise classified as substandard or doubtful.

Non-performing loans and impaired loans are defined differently. A loan is impaired when, based on current information and events, it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement. A loan is non-performing when it is on non-accrual or greater than 90 days past due. Some loans may be included in both categories, whereas other loans may only be included in one category. Our policy requires that all non-homogeneous loans past due greater than 90 days be classified as impaired and non-performing. However, performing loans may also be classified as impaired when we do not expect to collect all amounts due according to the contractual terms of the loan agreement even though the borrower may be current or less than 90 days past due on repaying a loan. Loans for which the terms have been modified resulting in a concession, and for which the borrower is experiencing financial difficulties, are considered troubled debt restructurings and classified as impaired.

Factors considered by us in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. We determine the significance of payment delays and payment shortfalls on case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed.

Multifamily and commercial real estate loans are individually evaluated for impairment. If a loan is impaired, a portion of the allowance is allocated so that the loan is reported, net, at the present value of estimated future cash flows using the loan’s existing rate or at the fair value of collateral if repayment is expected solely from the collateral. Large groups of smaller balance homogeneous loans, such as consumer and residential real estate loans are collectively evaluated for impairment, and accordingly, are not separately identified for impairment disclosures.

Troubled debt restructurings are separately identified for impairment disclosures and are measured at the present value of estimated future cash flows using the loan’s effective rate at inception. If a troubled debt restructuring is considered to be a collateral dependent loan, the loan is reported, net, at the fair value of the collateral. For troubled debt restructurings that subsequently default, we determine the amount of reserve in accordance with the accounting policy for the allowance for loan losses.

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The general component covers non-impaired loans and is based on actual historical loss experience determined by portfolio loan segment adjusted for current factors. This actual loss experience is supplemented with other economic factors based on the risks present for each portfolio loan segment, such as real estate trends and national and local economic conditions. As greater risk is associated with loans classified as special mention and substandard that are not impaired, the Company considers the actual historical loss experience by loan segment, the levels of loans classified as special mention and substandard, and the trends in the collateral associated with these classifications.

The following portfolio segments have been identified: One —to four-family, multifamily and commercial, home equity, consumer and other. Substantially all of the loans are secured by specific items of collateral including business assets, consumer assets, and commercial and residential real estate. Commercial real estate loans are expected to be repaid from cash flows from operations of businesses and consumer loans are expected to be repaid from personal cash flows. There are no significant concentrations of loans to any one industry or customer. Risk factors impacting loans in each of the portfolio segments include local and national real estate values, local and national economic factors affecting borrowers’ employment prospects and income levels, levels and movement of interest rates and general availability of credit, and overall economic sentiment.

Other Real Estate Owned. Assets acquired through or instead of loan foreclosure are initially recorded at fair value less costs to sell when acquired, establishing a new cost basis. If fair value declines subsequent to foreclosure, a valuation allowance is recorded through expense. Operating costs after acquisition are expensed.

Realization of Deferred Taxes. Future realization of a deferred tax asset ultimately depends on the existence of sufficient taxable income of the appropriate character (for example, ordinary income or capital gain) within the carry back and carry forward periods available under the tax law. We evaluate the future realization of the deferred tax asset on a quarterly basis and establish a valuation allowance predicated on consideration of future performance as well as tax planning strategies available to us. Tax-planning strategies are actions that we would take in order to prevent an operating loss or tax credit carry forward from expiring unused. In order for a tax-planning strategy to be considered, it must be prudent and feasible and result in realization of the deferred tax assets.

Fair Value of Financial Instruments. Fair values of financial instruments are estimated using relevant market information and other assumptions, as more fully disclosed in Note 4. Fair value estimates involve uncertainties and matters of significant judgment regarding interest rates, credit risk, prepayments, and other factors, especially in the absence of broad markets for particular items. Some of these estimates are not necessarily indicative of an exit price. Changes in assumptions or in market conditions could significantly affect the estimates.

Overview

We had a net loss of $108,000, or $0.05 loss per share, for the three months ended June 30, 2015 compared to net income of $1.5 million, or $0.66 earnings per share, for the same period in 2014. Our net loss for the six months ended June 30, 2015 was $33,000, or $0.02 loss per share, compared to

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net income of $1.7 million, or $0.77 earnings per share, for the same period in 2014. The decline during the three and six months ended June 30, 2015 as compared to the prior year periods was mainly attributable to the $1.7 million reversal of the deferred tax asset valuation allowance in the second quarter of 2014 and write-downs on other real estate owned of $205,000 during the second quarter 2015.

Comparison of Financial Condition at June 30, 2015 and December 31, 2014

Assets. Total consolidated assets as of June 30, 2015 were $208.5 million, a decrease of $9.0 million, or 4.2%, from $217.5 million at December 31, 2014. The decrease was due to declines in cash and cash equivalents, securities available-for-sale, and other real estate owned, partially offset by an increase in net loans.

Cash and cash equivalents decreased $8.4 million, or 25.5%, to $24.5 million at June 30, 2015 from $32.9 million at December 31, 2014. The primary reason for the decline in cash and cash equivalents was due to the repayment of maturing Federal Home Loan Bank (FHLB) advances of $7.0 million during the six months ended June 30, 2015.

Securities available-for-sale decreased $2.4 million, or 4.4%, to $51.8 million at June 30, 2015 from $54.2 million at December 31, 2014. The decrease was primarily due to securities available-for-sale principal repayments, calls and sales of $17.1 million exceeding new securities purchases of $15.0 million and an increase in the unrealized loss of available-for-sale securities of $139,000 as a result of the decrease in interest rates during the three months ended June 30, 2015.

Net loans increased $2.6 million, or 2.2%, to $116.7 million at June 30, 2015 from $114.1 million at December 31, 2014. The increase was primarily attributable to an increase in our one-to four-family residential portfolio, partially offset by declines in our multifamily and commercial real estate and home equity portfolios during the six months ended June 30, 2015. One-to four-family residential loans increased $3.4 million, or 3.5%, to $100.6 million at June 30, 2015 from $97.2 million at December 31, 2014. The increase was primarily due to borrower demand to lock in current low interest rates prior to anticipated increases in interest rates in future periods as well as the seasonal increase in home sales in the spring. Multifamily and commercial real estate loans declined $574,000, or 6.0%, to $8.9 million at June 30, 2015 from $9.5 million at December 31, 2014. Home equity loans decreased $214,000, or 2.7%, to $7.9 million at June 30, 2015 from $8.1 million at December 31, 2014. The decrease in the multifamily and commercial real estate loan portfolio was due to aggressive price competition for these loans in the Bank’s marketplace.

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Federal Home Loan Bank stock decreased $477,000, or 27.0%, to $1.2 million at June 30, 2015 from $1.7 million at December 31, 2014 as we sold shares of FHLB stock back to the FHLB. The decrease was primarily due to changes in the membership stock requirement as specified in the FHLB of Chicago’s capital plan which allowed excess stock to be available for repurchase so that those funds could be deployed elsewhere in the organization.

Other real estate owned decreased $451,000, or 25.8%, to $1.3 million at June 30, 2015 from $1.7 million at December 31, 2014. The decrease was primarily due to a $363,000 sale of a one-to four- family residential property which resulted in a loss of $19,000 and write-downs of $205,000 on two commercial real estate properties, partially offset by additions of a one-to four-family residential property and a commercial real estate property for a total of $216,000.

Liabilities. Total liabilities decreased $8.5 million, or 4.6%, to $174.9 million at June 30, 2015 from $183.4 million at December 31, 2014. The decrease in total liabilities was primarily due to declines in deposits and FHLB advances.

Deposits. Total deposits decreased $926,000, or 0.6%, to $165.3 million at June 30, 2015 from $166.2 million at December 31, 2014. Money market accounts decreased $2.0 million, or 31.2%, to $4.4 million at June 30, 2015 from $6.4 million at December 31, 2014. Higher cost certificates of deposit decreased $2.3 million, or 3.7%, to $60.2 million at June 30, 2015 from $62.5 million at December 31, 2014. The decline in the balance of certificates of deposit was attributable to legacy certificates of deposit customers seeking higher yields as accounts re-priced to current lower market interest rates upon maturity. The decrease in money market accounts and certificates of deposit were offset by an increase in our other lower cost core deposits, which we consider to be our checking, passbook and NOW accounts. Passbook account balances grew $2.3 million, or 3.6%, to $67.7 million at June 30, 2015 from $65.4 million at December 31, 2014. NOW and checking account balances increased $1.1 million, or 3.4%, to $32.9 million at June 30, 2015 from $31.9 million at December 31, 2014.

FHLB Advances. FHLB of Chicago advances decreased $7.0 million, or 58.3%, to $5.0 million at June 30, 2015 from $12.0 million at December 31, 2014. Due to the excess liquidity, we repaid our maturing FHLB advances of $7.0 million with a weighted average interest rate of 2.24% during the six months ended June 30, 2015. Outstanding FHLB of Chicago advances at June 30, 2015 were fixed-rate with maturities of one to two years with a weighted average interest rate of 2.41%.

ESOP Repurchase Obligation. The ESOP repurchase obligation increased $79,000, or 8.7% to $988,000 at June 30, 2015 from $909,000 at December 31, 2014. The increase was primarily due to an increase in the market value of the vested portion of the common stock held in the ESOP.

Stockholders’ Equity. Total stockholders’ equity decreased $655,000, or 2.0%, to $32.6 million at June 30, 2015 from $33.2 million at December 31, 2014. The decrease primarily resulted from our repurchased shares of 20,428 at an average price of $13.66 per share from the second and third stock

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repurchase programs for a total cost of $279,000 and dividends paid on common stock of $205,000, a net loss of $33,000, and an increase in the unrealized loss on securities classified as available-for-sale of $139,000 for the six months ended June 30 2015. Book value per share was $14.81 at June 30, 2015 as compared to $14.97 at December 31, 2014.

Asset Quality

The following table sets forth information with respect to our non-performing assets at the dates indicated (dollars in thousands):

	June 30,			December 31,
	2015			2014
Loans 90 days or more past due and still accruing	$	—		$	—
Non-accrual troubled debt restructurings	1,026			1,032
Non-accrual loans (excludes troubled debt restructurings)	1,337			1,946
Total non-performing loans	$	2,363		$	2,978
Other real estate owned	1,300			1,751

Total non-performing assets	$	3,663		$	4,729

Non-performing assets to total assets	1.76		%	2.17		%
Non-performing loans to total loans	2.01			2.59
Allowance for loan losses to non-performing loans	45.70			37.04
Allowance for loan losses to total loans	0.92			0.96

Non-performing Assets and Allowance for Loan Losses. We had non-performing assets of $3.7 million, or 1.76% of total assets, as of June 30, 2015 and $4.7 million, or 2.17% of total assets, as of December 31, 2014. The decrease in nonperforming assets was primarily attributable to the sale of a $363,000 one-to four-family residential other real estate owned property and write-downs of $205,000 on two commercial real estate properties, partially offset by additions of a one-to four-family residential property and a commercial real estate property for a total of $216,000 during the six months ended June 30, 2015. Net charge-offs for the six months ended June 30, 2015 and June 30, 2014 were $153,000 and $675,000, respectively. The allowance for loan losses totaled $1.1 million at both June 30, 2015 and December 31, 2014. This represents a ratio of the allowance for loan losses to total loans of 0.92% at June 30, 2015 and 0.96% at December 31, 2014. The slight decrease in the allowance for loan losses to total loans was due to a decline in the historical loss factors on multi-family and commercial real estate loans collectively evaluated for impairment, the continued reduced risk profile of the loan portfolio, and improvements in economic conditions.

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At June 30, 2015, we had 24 one- to four-family residential loans, three home equity loans, and four multifamily and commercial real estate loans with an aggregate principal balance of $2.4 million, none of which had an individual principal balance in excess of $500,000 on nonaccrual status. At December 31, 2014, we had 27 one- to four-family residential loans, five home equity loans, and five multifamily and commercial real estate loans with an aggregate principal balance of $3.0 million, none of which had an individual principal balance in excess of $500,000 on nonaccrual status.

At June 30, 2015, we had 10 one- to four-family residential loans and four multifamily and commercial real estate loans classified as troubled debt restructurings with an aggregate principal balance of $2.3 million of which $1.0 million was on non-accrual status. At December 31, 2014, we had 10 one-to four-family residential loans and five multifamily and commercial real estate loans classified as troubled debt restructurings with an aggregate principal balance of $2.5 million of which $1.0 million was on non-accrual status.

At June 30, 2015, we had a $3.6 million commercial real estate loan secured by a golf course located in Flossmoor, Illinois. Borrowers’ risk ratings are reassessed annually when the borrowers’ financial statements are received. Based on the most recent financial statements of the borrower, we determined the borrower displayed well-defined credit weaknesses that may jeopardize full collection of principal and interest if not corrected. As a result, the loan was classified as substandard as of June 30, 2015. However, the loan was performing in accordance with its terms and is on accrual status.

At June 30, 2015, we had another real estate owned property of $1.0 million representing a 3.4% participation in a $31.1 million indoor water park. As of June 30, 2015, the property was under a letter of intent by a third party to purchase the property.

Although we record our non-performing assets at the estimated fair value of the property or underlying collateral less costs to sell, there may be additional losses on these properties in the future.

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Comparison of Operating Results for the Three Months Ended June 30, 2015 and June 30, 2014

General. Net loss for the three months ended June 30, 2015 was $108,000 a decrease of $1.5 million, or 107.3%, compared to net income of $1.5 million for the three months ended June 30, 2014. The decline was mainly attributable to the $1.7 million reversal of the remaining deferred tax asset valuation allowance in the second quarter of 2014 and other real estate owned write-downs of $205,000 in the second quarter of 2015, partially offset by a decline in the provision for loan losses of $365,000 from second quarter 2014 to second quarter 2015.

Net Interest Income. Net interest income decreased by $46,000 to $1.1 million for the three months ended June 30, 2015, from $1.2 million for the same period in 2014. The net interest margin increased two basis points to 2.33% for the three months ended June 30, 2015 compared to 2.31% for the three months ended June 30, 2014, and the net interest rate spread increased six basis points to 2.23% for the three months ended June 30, 2015 compared to 2.17% for the three months ended June 30, 2014.

Interest Income. Total interest income decreased $120,000, or 8.4%, to $1.3 million for the three months ended June 30, 2015 from $1.4 million for the same period in 2014. The decrease was primarily due to a nine basis points decline in the average yield earned on interest earning assets. The average yield on interest earning assets was 2.71% for the three months ended June 30, 2015 as compared to 2.80% for the same period in 2014. The decline was primarily a result of the decrease in the average yield on loans and securities along with a change in the mix of interest-earning assets, which have shifted from loans and securities available-for-sale to a greater percentage of low-yielding cash and cash equivalents.

Interest income from loans decreased by $74,000, or 6.2%, to $1.1 million for the three months ended June 30, 2015, from $1.2 million for the three months ended June 30, 2014. The decline in interest income from loans was due to decreases in the average loan yield and average loan balance for the three months ended June 30, 2015 as compared to the three months ended June 30, 2014. The average yield on loans decreased to 3.85% for the three months ended June 30, 2015 from 3.99% for the same period in 2014. The decrease in the average yield on loans was primarily caused by lower yields earned on new loan originations and repayments of higher yielding seasoned loans as a result of the prolonged low interest rate environment. The average loan balance decreased by $3.3 million to $116.4 million for the three months ended June 30, 2015 from $119.7 million for the same period in 2014. The decrease in the average loan balance was primarily due to the aggressive price competition for multifamily and commercial real estate loans in the Bank’s marketplace.

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Interest income from securities decreased $45,000, or 20.7%, to $169,000 for the three months ended June 30, 2015, from $214,000 for the three months ended June 30, 2014. The decrease primarily resulted from a decrease in the average securities yield and average securities balance for the three months ended June 30, 2015 as compared to the same period in 2014. The average yield on securities decreased to 1.27% for the three months ended June 30, 2015 from 1.44% for the same period in 2014 due to the prolonged low interest rate environment. The average balance of securities decreased $5.8 million to $53.3 million for the three months ended June 30, 2015 from $59.1 million for the same period in 2014. The decrease in the average securities balance was due to securities principal repayments, calls, and sales exceeding new securities purchases.

Interest Expense. Interest expense decreased by $73,000, or 28.9%, to $180,000 for the three months ended June 30, 2015, from $253,000 for the same period in 2014. The primary reasons for the decrease were due to the $10.7 million decrease in the average balance of interest bearing liabilities and a 15 basis points decline in the average interest rate paid for interest bearing liabilities. Average interest bearing liabilities were $149.3 million and $160.0 million for the three months ended June 30, 2015 and June 30, 2014, respectively, while the average cost of interest bearing liabilities was 0.48% for the three months ended June 30, 2015 as compared to 0.63% for the same period in 2014.

Interest expense on deposits decreased by $19,000, or 11.4%, to $148,000 for the three months ended June 30, 2015, from $167,000 for the same period in 2014. Our average cost of deposits decreased five basis points to 0.41% for the three months ended June 30, 2015 from 0.46% for the three months ended June 30, 2014. The decrease in our average cost of deposits resulted from the continued change in the mix of our average deposits from higher-cost certificates of deposit to lower-cost core deposits. Average interest-bearing deposit balances decreased $698,000 to $144.3 million for the three months ended June 30, 2015, from $145.0 million for the same period in 2014 due primarily to a $2.9 million decrease in the average balance of certificates of deposit and a $821,000 decrease in the average balance of money market accounts, partially offset by a $3.0 million increase in the average balance of passbook accounts. The decrease in the average balance of certificates of deposit was attributable to legacy certificates of deposit customers seeking higher yields as accounts re-priced to current lower market interest rates upon maturity.

Interest expense on FHLB advances decreased $54,000, or 62.8%, to $32,000 for the three months ended June 30, 2015, from $86,000 for the same period in 2014. The primary reason for the decrease was a decrease in the average balance of FHLB of Chicago advances. Average balances of FHLB of Chicago advances decreased $10.0 million to $5.0 million for the three months ended June 30, 2015 from $15.0 million for the same period in 2014. The decrease was due to the repayment of maturing FHLB advances.

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	For the Three Months Ended June 30,
	2015							2014
	Average Outstanding Balance			Interest Earned/ Paid		Yield/ Cost (4)		Average Outstanding Balance			Interest Earned/ Paid		Yield/ Cost (4)
	(Dollars in thousands)
Interest-earning assets:
Interest-earning deposits in other financial institutions	$	21,875		$	14	0.24	%	$	22,729		$	15	0.26	%
Securities	53,316			169		1.27		59,127			213		1.44
Loans receivable	116,449			1,121		3.85		119,755			1,195		3.99
Federal Home Loan Bank of Chicago common stock	1,410			2		0.57		1,768			2		0.45
Total interest-earning assets	193,050			1,306		2.71		203,379			1,425		2.80
Total non-interest-earning assets	16,458							15,691
Total assets	$	209,508						$	219,070

Interest-bearing liabilities:
Passbook accounts	$	67,008		27		0.16	%	$	63,971		23		0.14	%
NOW accounts	10,588			—		—		10,613			—		—
Money market accounts	5,876			—		—		6,696			—		—
Certificates of deposit	60,853			121		0.80		63,743			144		0.90
Total deposits	144,325			148		0.41		145,023			167		0.46
Federal Home Loan Bank of Chicago advances	5,000			32		2.56		15,000			86		2.29
Total interest-bearing liabilities	149,325			180		0.48		160,023			253		0.63
Non-interest-bearing demand deposits-checking accounts	$	22,422						$	19,689
Other liabilities	5,004							5,042
Total liabilities	176,751							184,754
Stockholders’ Equity	32,757							34,316
Total liabilities and stockholders’ equity	$	209,508						$	219,070

Net interest income				$	1,126						$	1,172
Net interest rate spread (1)						2.23	%						2.17	%
Net interest-earning assets (2)	$	43,725						$	43,356
Net interest margin (3)						2.33	%						2.31	%
Average interest-earning assets to average interest-bearing liabilities	129.28		%					127.09		%

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

(2) Net interest-earning assets represent total interest-earning assets less total interest-bearing liabilities.

(3) Net interest margin represents net interest income divided by average total interest-earning assets.

(4) Annualized.

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Provision for Loan Losses. We established a provision for loan losses, which is charged to operations, at a level management believes is appropriate to absorb probable incurred credit losses in the loan portfolio. In evaluating the level of the allowance for loan losses, management considers historical loss experience, the types of loans and the amount of loans in the loan portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of any underlying collateral, and prevailing economic conditions. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available or as future events change. Based on our evaluation of these factors, we recorded a provision for loan losses of $115,000 for the three months ended June 30, 2015 and $480,000 for the three months ended June 30, 2014. The allowance for loan losses was $1.1 million, or 0.92% of total loans, at June 30, 2015 compared to $1.1 million, or 0.96% of total loans, at December 31, 2014. The decrease in the allowance for loan losses as a percent of total loans was due to a decline in the historical loss factors on multifamily and commercial real estate loans collectively evaluated for impairment, the continued reduced risk profile of the loan portfolio, and improvements in economic conditions in the Bank’s market area.

Management assesses the allowance for loan losses on a quarterly basis and makes provisions for loan losses as necessary in order to maintain the adequacy of the allowance. While management uses available information to recognize losses on loans, future loan loss provisions may be necessary based on changes in economic conditions. In addition, various regulatory agencies, as an integral part of their examination process, periodically review the allowance for loan losses and may require us to recognize additional provisions based on their judgment of information available to them at the time of their examination. The allowance for loan losses as of June 30, 2015 was maintained at a level that represents management’s best estimate of inherent losses in the loan portfolio, and such losses that were both probable and reasonably estimable.

Non-Interest Income. Non-interest income decreased $10,000 to $174,000 for the three months ended June 30, 2015, from $184,000 for the three months ended June 30, 2014. The decrease was primarily due to a $29,000 decrease in gains on securities sales offset by a $17,000 increase in other non-interest income items related to broker fees on correspondent loans.

Non-Interest Expense. Non-interest expense increased $99,000, or 7.7%, to $1.4 million for the three months ended June 30, 2015, from $1.3 million for the same period in 2014. The increase was primarily due to a $172,000 increase in other real estate owned expense/impairment and a $35,000 increase in compensation and employee benefits expense, partially offset by a $68,000 decline in professional and regulatory expense.

Other real estate owned expense/impairment increased $172,000 to $208,000 for the three months ended June 30, 2015, from $36,000 for the three months ended June 30, 2014. The increase was primarily due to write-downs of $205,000 on two commercial properties, partially offset by the reversal of $16,000 of real estate taxes paid by a third party on another real estate owned commercial property.

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Compensation and employee benefits expense increased $35,000 to $595,000 for the three months ended June 30, 2015, from $560,000 for the same period in 2014. The primary reason for the increase was due to the compensation expense related to the Equity Incentive Plan adopted in May of 2014. The Company recorded compensation expense related to the Equity Incentive Plan of $39,000 for the three months ended June 30, 2015 compared to $14,000 for the three months ended June 30, 2014.

Professional and regulatory expense decreased $68,000 to $89,000 for the three months ended June 30, 2015 from $157,000 for the same period in 2014. The decrease was primarily due to reporting efficiencies from the Company’s second year reporting as a public company and the Bank’s improved overall regulatory condition.

Income Tax Benefit. We recorded an income tax benefit of $94,000 for the three months ended June 30, 2015 and an income tax benefit of $1.9 million for the three months ended June 30, 2014. The decrease in the income tax benefit was primarily due to the reversal of the remaining deferred tax asset valuation allowance of $1.7 million during the second quarter of 2014.

Comparison of Operating Results for the Six Months Ended June 30, 2015 and June 30, 2014

General. Net loss for the six months ended June 30, 2015 was $33,000, a decrease of $1.7 million, or 101.9%, from net income of $1.7 million for the six months ended June 30, 2014. The decline was mainly attributable to the $1.7 million reversal of the remaining deferred tax asset valuation allowance in the second quarter of 2014, write-downs on other real estate owned of $205,000, and a decline in net interest income of $153,000, partially offset by a decline in the provision for loan losses of $350,000 from the six months ended June 30, 2014 to the six months ended June 30, 2015.

Net Interest Income. Net interest income decreased by $153,000 to $2.2 million for the six months ended June 30, 2015, from $2.4 million for the same period in 2014. The prolonged period of low interest rates and highly competitive loan environment continued to put downward pressure on the net interest margin and net interest rate spread. The net interest margin declined seven basis points to 2.29% for the six months ended June 30, 2015 compared to 2.36% for the six months ended June 30, 2014, and the net interest rate spread declined four basis points to 2.18% for the six months ended June 30, 2015 compared to 2.22% for the six months ended June 30, 2014.

Interest Income. Total interest income decreased $281,000, or 9.7%, to $2.6 million for the six months ended June 30, 2015 from $2.9 million for the same period in 2014. The decrease was primarily due to a 18 basis points decline in the average yield earned on interest earning assets. The average yield on interest earning assets was 2.67% for the six months ended June 30, 2015 as compared to 2.85% for the same period in 2014. The decline was primarily a result of the decrease in the average yield on loans and securities along with a change in the mix of interest-earning assets, which have shifted from loans and securities available-for-sale to a greater amount of low-yielding cash and cash equivalents.

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Interest income from loans decreased by $170,000, or 7.1%, to $2.2 million for the six months ended June 30, 2015, from $2.4 million for the six months ended June 30, 2014. The decline in interest income from loans was due to decreases in the average loan yield and average loan balance for the six months ended June 30, 2015 as compared to the six months ended June 30, 2014. The average yield on loans decreased to 3.87% for the six months ended June 30, 2015 from 4.01% for the same period in 2014. The decrease in the average yield on loans was primarily caused by lower yields earned on new loan originations and repayments of higher yielding seasoned loans as a result of the prolonged low interest rate environment. The average loan balance decreased by $4.3 million to $115.8 million for the six months ended June 30, 2015 from $120.1 million for the same period in 2014. The decrease in the average loan balance was primarily due to the aggressive price competition for multifamily and commercial real estate loans in the Bank’s marketplace.

Interest income from securities decreased $117,000, or 25.4%, to $344,000 for the six months ended June 30, 2015, from $461,000 for the six months ended June 30, 2014. The decrease primarily resulted from a decrease in the average securities yield and average securities balance for the six months ended June 30, 2015 as compared to the same period in 2014. The average yield on securities decreased to 1.28% for the six months ended June 30, 2015 from 1.52% for the same period in 2014 due to the prolonged low interest rate environment. The average balance of securities decreased $6.7 million to $53.9 million for the six months ended June 30, 2015 from $60.6 million for the same period in 2014. The decrease in the average securities balance was due to securities principal repayments, calls, and sales exceeding new securities purchases.

Interest Expense. Interest expense decreased by $128,000, or 25.4%, to $375,000 for the six months ended June 30, 2015, from $503,000 for the same period in 2014. The primary reasons for the decrease were due to the $8.1 million decrease in the average balance of interest bearing liabilities and a 14 basis points decline in the average interest rate paid for interest bearing liabilities. Average interest bearing liabilities were $152.0 million and $160.1 million for the six months ended June 30, 2015 and June 30, 2014, respectively, while the average cost of interest bearing liabilities was 0.49% for the six months ended June 30, 2015 as compared to 0.63% for the same period in 2014.

Interest expense on deposits decreased by $33,000, or 10.1%, to $294,000 for the six months ended June 30, 2015, from $327,000 for the same period in 2014. Our average cost of deposits decreased five basis points to 0.40% for the six months ended June 30, 2015 from 0.45% for the six months ended June 30, 2014. The decrease in our average cost of deposits resulted from the continued change in the mix of our average deposits from higher-cost certificates of deposit to lower-cost core deposits. Average interest-bearing deposit balances increased $747,000 to $145.3 million for the six months ended June 30, 2015, from $144.5 million for the same period in 2014 due primarily to the increase in the average balance of passbook accounts of $2.4 million. The increase was primarily due to our continued focus on increasing our lower-cost core deposits.

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Interest expense on FHLB advances decreased $95,000, or 54.0%, to $81,000 for the six months ended June 30, 2015, from $176,000 for the same period in 2014. The primary reason for the decrease in interest expense on FHLB advances was a decrease in the average balance of FHLB of Chicago advances. Average balances of FHLB of Chicago advances decreased $8.9 million to $6.7 million for the six months ended June 30, 2015 from $15.6 million for the same period in 2014. The decrease was due to the repayment of maturing FHLB advances.

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	For the Six Months Ended June 30,
	2015							2014
	Average Outstanding Balance			Interest Earned/ Paid		Yield/ Cost (4)		Average Outstanding Balance			Interest Earned/ Paid		Yield/ Cost (4)
	(Dollars in thousands)
Interest-earning assets:
Interest-earning deposits in other financial institutions	$	24,647		$	31	0.24	%	$	20,897		$	25	0.24	%
Securities	53,922			344		1.28		60,550			461		1.52
Loans receivable	115,802			2,240		3.87		120,127			2,410		4.01
Federal Home Loan Bank of Chicago common stock	1,564			4		0.51		1,768			4		0.45
Total interest-earning assets	195,935			2,619		2.67		203,342			2,900		2.85
Total non-interest-earning assets	16,519							15,851
Total assets	$	212,454						$	219,193

Interest-bearing liabilities:
Passbook accounts	$	66,250		55		0.17	%	$	63,834		46		0.14	%
NOW accounts	10,619			—		—		10,405			—		—
Money market accounts	7,044			—		—		6,539			—		—
Certificates of deposit	61,378			239		0.78		63,766			281		0.88
Total deposits	145,291			294		0.40		144,544			327		0.45
Federal Home Loan Bank of Chicago advances	6,714			81		2.41		15,571			176		2.26
Total interest-bearing liabilities	152,005			375		0.49		160,115			503		0.63
Non-interest-bearing demand deposits-checking accounts	$	22,140						$	19,579
Other liabilities	5,426							4,963
Total liabilities	179,571							184,657
Stockholders’ Equity	32,883							34,536
Total liabilities and stockholders’ equity	$	212,454						$	219,193

Net interest income				$	2,244						$	2,397
Net interest rate spread (1)						2.18	%						2.22	%
Net interest-earning assets (2)	$	43,930						$	43,227
Net interest margin (3)						2.29	%						2.36	%
Average interest-earning assets to average interest-bearing liabilities	128.90		%					127.00		%

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

(2) Net interest-earning assets represent total interest-earning assets less total interest-bearing liabilities.

(3) Net interest margin represents net interest income divided by average total interest-earning assets.

(4) Annualized.

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Provision for Loan Losses. We established a provision for loan losses, which is charged to operations, at a level management believes is appropriate to absorb probable incurred credit losses in the loan portfolio. In evaluating the level of the allowance for loan losses, management considers historical loss experience, the types of loans and the amount of loans in the loan portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of any underlying collateral, and prevailing economic conditions. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available or as future events change. Based on our evaluation of these factors, we recorded a provision for loan losses of $130,000 for the six months ended June 30, 2015 and $480,000 for the six months ended June 30, 2014. The allowance for loan losses was $1.1 million, or 0.92% of total loans, at June 30, 2015 compared to $1.1 million, or 0.96% of total loans, at December 31, 2014. The decrease in the allowance for loan losses as a percent of total loans was due to a decline in the historical loss factors on multifamily and commercial real estate loans collectively evaluated for impairment, the continued reduced risk profile of the loan portfolio, and improvements in economic conditions in the Bank’s market area.

Non-Interest Income. Non-interest income increased $5,000 to $393,000 for the six months ended June 30, 2015, from $388,000 for the six months ended June 30, 2014. The increase was primarily due to a $33,000 increase in other non-interest income items, partially offset by a $35,000 decrease in gains on other real estate owned sales.

Non-Interest Expense. Non-interest expense increased $123,000, or 4.9%, to $2.6 million for the six months ended June 30, 2015, from $2.5 million for the six months ended June 30, 2014. The increase was primarily due to write-downs on other real estate owned of $205,000 and an increase in compensation and employee benefits of $87,000, partially offset by a $84,000 decrease in professional and regulatory expense, a $40,000 decrease in federal deposit insurance expense, and a $45,000 decrease in other non-interest expense items.

Other real estate owned expense/impairment increased $212,000 to $237,000 for the six months ended June 30, 2015, from $25,000 for the six months ended June 30, 2014. The increase was primarily due to write-downs of $205,000 on two commercial properties.

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Compensation and employee benefits expense increased $87,000 to $1.2 million for the six months ended June 30, 2015 from $1.1 million for the same period in 2014. The primary reason for the increase was due to the compensation expense related to the Equity Incentive Plan adopted in May 2014. The Company recorded compensation expense related to the Equity Incentive Plan of $80,000 for the six months ended June 30, 2015 compared to $14,000 for the six months ended June 30, 2014.

Professional and regulatory expense decreased $84,000 to $182,000 for the six months ended June 30, 2015 from $266,000 for the same period in 2014. The decrease was primarily due to reporting efficiencies from the Company’s second year reporting as a public company and the Bank’s improved overall regulatory condition.

Federal deposit insurance expense decreased $40,000 to $96,000 for the six months ended June 30, 2015 from $136,000 for the same period in 2014. The decrease was due to the Bank’s improved overall regulatory condition.

Income Tax Benefit. We recorded an income tax benefit of $72,000 for the six months ended June 30, 2015 and an income tax benefit of $1.9 million for the six months ended June 30, 2014. The decrease in the income tax benefit was primarily due to the reversal of the remaining deferred tax asset valuation allowance of $1.7 million during the second quarter of 2014.

Liquidity and Capital Resources

We maintain liquid assets at levels we consider adequate to meet our liquidity needs. Our liquidity ratio averaged 42.4% and 41.8% for the six months ended June 30, 2015 and for the year ended December 31, 2014, respectively. We adjust our liquidity levels to fund deposit outflows, pay real estate taxes on mortgage loans, repay our borrowings and to fund loan commitments. We also adjust liquidity as appropriate to meet asset and liability management objectives.

Our primary sources of liquidity are deposits, amortization and prepayment of loans and mortgage-backed securities, maturities of investment securities and other short-term investments, and earnings and funds provided from operations. While scheduled principal repayments on loans and mortgage-backed securities are a relatively predictable source of funds, deposit flows and loan prepayments are greatly influenced by general interest rates, economic conditions, and competition. We set the interest rates on our deposits to maintain a desired level of total deposits. In addition, we invest excess funds in short-term interest-earning investments and other assets, which provide liquidity to meet lending requirements. Short-term interest-earning deposits with the Federal Reserve Bank of Chicago amounted to $20.9 million at June 30, 2015 and $29.5 million at December 31, 2014.

A significant portion of our liquidity consists of securities classified as available-for-sale and cash and cash equivalents, which are a product of our operating, investing and financing activities. Our primary sources of cash are principal repayments on loans and mortgage-backed securities and increases in deposit accounts, along with advances from the FHLB of Chicago.

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Liquidity management is both a daily and long-term function of business management. If we require funds beyond our ability to generate them internally, borrowing agreements exist with the FHLB of Chicago and JP Morgan Chase which provides an additional source of funds. At June 30, 2015, we had $5.0 million in advances outstanding and were eligible to borrow an additional $61.8 million from the FHLB of Chicago. At June 30, 2015, we had no balance outstanding on the $5.0 million line of credit at JP Morgan Chase. Of the $5.0 million in FHLB advances at June 30, 2015, $3.0 million is due within one year and $2.0 million is due between one to two years.

Our cash flows are comprised of three classifications: cash flows from operating activities, investing activities, and financing activities. Net cash used by operating activities was $83,000 for the six months ended June 30, 2015. Net cash provided by operating activities was $591,000 for the six months ended June 30, 2014.

Net cash used by investing activities, which consists primarily of disbursements for loan originations and the purchase of securities, offset by principal collections on loans, proceeds from the sales, calls, repayments and maturities of securities, was $356,000 for the six months ended June 30, 2015. Net cash provided by investing activities was $3.7 million for the six months ended June 30, 2014. During the six months ended June 30, 2015, we purchased $15.0 million and sold $3.3 million in securities classified as available-for sale, and during the six months ended June 30, 2014, we purchased $12.0 million and sold $7.4 million in securities classified as available-for-sale.

Net cash used in financing activities, consisting primarily of deposit account activity, FHLB advances, repurchases of the Company’s common stock, and dividends paid to our stockholders, was $7.9 million and $963,000 for the six months ended June 30, 2015 and June 30, 2014, respectively.

At June 30, 2015, we had outstanding commitments of $850,000 to originate loans. This amount does not include the unfunded portion of loans in process. At June 30, 2015, certificates of deposit scheduled to mature in less than one year totaled $33.1 million. Based on prior experience, management believes that a significant portion of such deposits will remain with us, although there can be no assurance that this will be the case. In addition, the cost of such deposits may be significantly higher upon renewal in a rising interest rate environment.

We are required to maintain liquid assets in an amount that would ensure our safe and sound operation. Our liquidity ratio at June 30, 2015 was 40.9%.

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Regulatory Capital

Basel III Capital Rules. In July 2013, the OCC and the other federal bank regulatory agencies published final rules (the “Basel III Capital Rules”) that implement, in part, agreements reached by the Basel Committee on Banking Supervision (“Basel Committee”) in “Basel III: A Global Regulatory Framework for More Resilient Banks and Banking Systems” (“Basel III”) and impose new capital requirements on the Bank, effective January 1, 2015. The Federal Reserve has amended its “Small Bank Holding Company” policy statement to exempt savings and loan holding companies with less than $1.0 billion in assets from capital requirements.

The Basel III Capital Rules provide for the following minimum capital to risk-weighted assets ratios as of January 1, 2015: a) 4.5% based upon common equity tier 1 capital (“CET1”); b) 6.0% based upon tier 1 capital; and c) 8.0% based upon total regulatory capital. A minimum leverage ratio (tier 1 capital as a percentage of total average assets) of 4.0% is also required under the Basel III Capital Rules. When fully phased in, the Basel III Capital Rules will additionally require institutions to retain a capital conservation buffer, composed of CET1, of 2.5% above these required minimum capital ratio levels. Banking organizations that fail to maintain the minimum 2.5% capital conservation buffer could face restrictions on capital distributions or discretionary bonus payments to executive officers. Restrictions would begin phasing in where the banking organization’s capital conservation buffer was below 2.5% at the beginning of a quarter, and distributions and discretionary bonus payments would be completely prohibited if no capital conservation buffer exists. When the capital conservation buffer is fully phased in on January 1, 2019, the Bank will effectively have the following minimum capital to risk-weighted assets ratios: a) 7.0% based upon CET1; b) 8.5% based upon tier 1 capital; and c) 10.5% based upon total regulatory capital.

The Basel III Capital Rules provide for a number of deductions from, and adjustments to, CET1. These include, for example, the requirement that mortgage servicing rights, deferred tax assets arising from temporary differences that could not be realized through net operating loss carrybacks and significant investments in non-consolidated financial entities be deducted from CET1 to the extent that any one such category exceeds 10% of CET1 or all such items, in the aggregate, exceed 15% of CET1.

Implementation of the deductions from, and other adjustments to, CET1 began on January 1, 2015 and will be phased-in over a 4-year period (beginning at 40% on January 1, 2015 and an additional 20% per year thereafter). The implementation of the capital conservation buffer will begin on January 1, 2016 at 0.625% and increase by 0.625% each subsequent January 1, until it reaches 2.5% on January 1, 2019.

The Basel III Capital Rules prescribe a new standardized approach for risk weightings that expand the risk-weighting categories from the former four Basel I-derived categories (0%, 20%, 50% and 100%) to a larger and more risk-sensitive number of categories, depending on the nature of the assets, generally

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ranging from 0% for U.S. government and agency securities, to 600% for certain equity exposures, and resulting in higher risk weights for a variety of asset classes. In particular, the Basel III Capital Rules provide stricter rules related to the risk weighting of past due and certain commercial real estate loans, as well as on some equity investment exposures, and replace the existing credit rating approach for determining the risk weighting of securitization exposures with an alternative approach in which senior securitization tranches are assigned a risk weight associated with the underlying exposure and requiring a banking organization to hold capital for the senior tranche based on the risk weight of the underlying exposures. Under the revised approach, for subordinate securitization tranches, a banking organization must hold capital for the subordinate tranche, as well as all more senior tranches for which the subordinate tranche provides credit support.

With respect to the Bank, the Basel III Capital Rules revise the “prompt corrective action” (“PCA”) regulations adopted pursuant to Section 38 of the Federal Deposit Insurance Act by: (i) introducing a CET1 ratio requirement at each PCA category (other than critically undercapitalized), with the required CET1 ratio being 6.5% for well-capitalized status; (ii) increasing the minimum Tier 1 capital ratio requirement for each category, with the minimum tier 1 capital ratio for well-capitalized status being 8.0% (as compared to the former 6.0%); and (iii) eliminating the current provision that a bank with a composite supervisory rating of 1 may have a 3.0% leverage ratio and still be adequately capitalized. The Basel III Capital Rules do not change the total risk-based capital requirement for any PCA category.

The Basel III Capital Rules will increase the required capital levels of the Bank. The Bank made the one-time, permanent election to continue to exclude the effects of accumulated other comprehensive income or loss items included in stockholders’ equity for the purposes of determining the regulatory capital ratios. The following table summarizes the Bank’s capital amounts and ratios, together with capital adequacy requirements, under Basel III regulatory requirements as of June 30, 2015, and under pre-Basel III regulatory requirements as of December 31, 2014.

									To Be Well
					Required				Capitalized
					For Capital				Under Basel III
					Adequacy Purposes				Regulatory
	Actual				Under Basel III				Requirements
	Amount		Ratio		Amount		Ratio		Amount		Ratio

As of June 30, 2015
Total risk-based capital to risk-weighted assets	$	28,825	31.78	%	$	7,256	8.0	%	$	9,071	10.0	%
Tier I (core) capital to risk-weighted assets	27,745		30.59		5,442		6.0		7,256		8.0
Common equity tier I capital to risk-weighted assets	27,745		30.59		4,082		4.5		5,896		6.5
Tier I (core) capital to adjusted total assets	27,745		13.38		8,292		4.0		10,365		5.0

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									To Be Well
					Required				Capitalized
					For Capital				Under Pre-Basel III
					Adequacy Purposes				Regulatory
	Actual				Pre-Basel III				Requirements
	Amount		Ratio		Amount		Ratio		Amount		Ratio
As of December 31, 2014
Total risk-based capital to risk-weighted assets	$	30,603	32.21	%	$	7,601	8.0	%	$	9,502	10.0	%
Tier I (core) capital to risk- weighted assets	29,500		31.05		3,801		4.0		5,701		6.0
Tier I (core) capital to adjusted total assets	29,500		13.67		8,630		4.0		10,787		5.0

Implementation of the Basel III Capital Rules effective January 1, 2015 did not have a material impact on the capital levels required for the Bank.

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, unused lines of credit and standby letters of credit.

The contractual amount of financial instruments with off-balance sheet risk was as follows (dollars in thousands):

	June 30,				December 31,
	2015				2014
	Fixed		Variable		Fixed		Variable
	Rate		Rate		Rate		Rate

Commitments to make loans	$	575	$	275	$	1,827	$	221
Unused lines of credit and letters of credit	186		7,305		181		8,633

Commitments to make loans are generally made for periods of 120 days or less. At June 30, 2015, the fixed rate loan commitments had interest rates ranging from 2.75% to 4.38% and the commitments are to extend credit ranging from 8 to 30 years.

For the six months ended June 30, 2015 and the year ended December 31, 2014, we did not engage in any off-balance-sheet transactions other than loan origination commitments, unused lines of credit and standby letters of credit in the normal course of our lending activities.

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Item 3. Quantitative and Qualitative Disclosures about Market Risk

Not required for smaller reporting companies.

Item 4. Controls and Procedures

As of the end of the period covered by this report, the Company carried out an evaluation, under the supervision and with the participation of the Company’s principal executive officer and principal financial officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures. Based on this evaluation, the Company’s principal executive officer and principal financial officer concluded that the Company’s disclosure controls and procedures are effective. In addition, there have been no changes in the Company’s internal control over financial reporting during the quarter ended June 30, 2015 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II — Other Information

Item 1. Legal Proceedings

At June 30, 2015, there were no material legal proceedings to which the Company is a party or of which any of its property is subject. From time to time, the Company is a party to various legal proceedings incident to its business.

Item 1A. Risk Factors

Not required for smaller reporting companies.

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

On March 17, 2015, the Board of Directors of the Company adopted a third stock repurchase program. Under the repurchase program, the Company may purchase up to 110,000 shares of its common stock, or approximately 5.0% of its then outstanding shares.

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The Company’s stock repurchases for the three months ended June 30, 2015 are as follows:

				Total # of shares	Maximum # of
	Total #	Average		purchased as part	shares that
	of share	price paid		of publicly announced	may yet
Period	purchased	per share		plans or programs	be purchased
April 1 -30, 2015	—	$	—	—	110,000
May 1 – 31, 2015	28	$	13.75	28	109,972
June 1 – 30, 2015	—	$	—	—	109,972
Total	28	$	13.75	28	109,972

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

Item 6. Exhibits

31.1: Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2: Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32: Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101: The following financial statements for the quarter ended June 30, 2015, formatted in XBRL pursuant to Rule 405 of Regulation S-T: (i) Consolidated Balance Sheets,

(ii) Consolidated Statements of Net Income and Comprehensive Income, (iii) Consolidated Statements of Cash Flows, and

(iv) The Notes to Consolidated Financial Statements.

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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.

	AJS Bancorp, Inc.


	By:	/s/ Thomas R. Butkus

		Thomas R. Butkus,

		Chairman of the Board,

		President, and Chief Executive Officer


	Date:	August 13, 2015


	By:	/s/ Pamela Favero

		Pamela Favero, Interim Chief Financial Officer


	Date:	August 13, 2015

AJS Bancorp, Inc. - FORM 10-Q - August 13, 2015

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AJS Bancorp, Inc. Reports