UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended ~~September~~March 3031, ~~2015~~2016

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

For the transition period from to

000-55083

(Commission File Number)

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 Number)
Incorporation or Organization)

14757 S. Cicero Ave.

Midlothian, IL 60445

(708) 687-7400

(Address, including Zip Code and Telephone Number, including Area Code

of Registrant’s Principal Executive Officers)

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 No o

Yes x No o

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 Smaller reporting company x (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

~~Yes~~Registrant ohad No2,157,340 xcommon shares outstanding at May 12, 2016

Registrant had 2,195,457 common shares outstanding at November 12, 2015

Table of Contents

AJS BANCORP, INC.

FORM 10-Q

Table of Contents

		~~Page~~	Page
		~~Number~~	Number
PART I - Financial Information
Item 1. Financial Statements (Unaudited)
Consolidated Statements of Financial Condition		1	1
Consolidated Unaudited Statements of Operations		2	2
Consolidated Unaudited Statements of Comprehensive Income (Loss)		3
Consolidated Unaudited Statements of Comprehensive Income			3
Consolidated Unaudited Statements of Cash Flows		4	4
Consolidated Unaudited Statements of Stockholders’ Equity		6	5
Notes to Consolidated Unaudited Financial Statements		7	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	31	25
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	52	38
Item 4.	Controls and Procedures	52	38
PART II - Other Information
Item 1.	Legal Proceedings	52	38
Item 1A.	Risk Factors	52	39
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	52	39
Item 3.	Defaults ~~Upon~~upon Senior Securities	53	39
Item 4.	Mine Safety Disclosures	53	39
Item 5.	Other Information	53	39
Item 6.	Exhibits	53	39
Signatures		54	40

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AJS BANCORP, INC.

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

~~SEPTEMBER 30~~MARCH 31, ~~2015~~2016 AND DECEMBER 31, ~~2014~~2015

(Dollars in thousands, except per share data)

	September 30,			December 31,
	March 31,			December 31,
	2015			2014
	2016			2015
	(Unaudited)
ASSETS
Cash and cash equivalents	$	2935,~~807~~049		$	3229,~~898~~922
Securities available-for-sale	4844,~~085~~477			5449,~~214~~942
Securities held-to-maturity (fair value: 2015 -$333; 2014 - $341)	327			331
Securities held-to-maturity (fair value: 2016 -$277; 2015 - $332)	275			326
Loans, net (allowance: 2015 — $1,085; 2014 - $1,103)	115,697			114,130
Loans, net (allowance: 2016 — $901; 2015 - $988)	113,272			114,423
Federal Home Loan Bank stock	1,291			1,768
FHLB of Chicago stock	1,291			1,291
Premises and equipment	3,~~517~~407			3,~~623~~464
Bank-owned life insurance	5,~~849~~942			5,~~706~~896
Other real estate owned	~~1,249~~307			~~1,751~~307
Accrued interest receivable	~~425~~418			~~438~~434
Other assets	2,~~736~~611			2,~~664~~930
Total assets	$	~~208~~207,~~983~~049		$	~~217~~208,~~523~~935
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities
Deposits	$	~~166~~167,~~534~~505		$	~~166~~165,~~249~~649
Federal Home Loan Bank advances	52,000			125,000
Advance payments by borrowers for taxes and insurance	1,~~190~~591			2,~~068~~135
Other liabilities and accrued interest payable	2,~~530~~461			32,~~084~~659
Total liabilities	~~175~~173,~~254~~557			~~183~~175,~~401~~443
Employee Stock Ownership Plan (ESOP) repurchase obligation	~~988~~1,153			~~909~~994
Stockholders’ equity
Stockholders’ equity:
Preferred stock, $.01 par value, 50,000,000 shares authorized; none issued	—			—
Common stock, $.01 par value, 100,000,000 shares authorized; 2,195,457 shares outstanding at September 30, 2015 and 2,218,863 shares outstanding at December 31, 2014	22			22
Common stock, $.01 par value, 100,000,000 shares authorized; 2,167,040 shares outstanding at March 31, 2016 and 2,193,440 shares outstanding at December 31, 2015	22			22
Additional paid-in capital	1312,~~364~~816			13,~~731~~352
Retained earnings	20,~~832~~872			2120,~~126~~802
Accumulated other comprehensive income (loss)	4897			(20221		)
Unearned stock awards	(~~475~~455		)	(~~596~~444		)
Unearned ESOP shares	(1,~~050~~013		)	(1,~~050~~013		)
Total stockholders’ equity	32,~~741~~339			3332,~~213~~498
Total liabilities and stockholders’ equity	$	~~208~~207,~~983~~049		$	~~217~~208,~~523~~935

See accompanying notes to consolidated unaudited financial statements.

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AJS BANCORP, INC.

CONSOLIDATED UNAUDITED STATEMENTS OF OPERATIONS

THREE ~~AND NINE~~ MONTHS ENDED ~~SEPTEMBER 30~~MARCH 31, ~~2015~~2016 AND ~~SEPTEMBER 30, 2014~~2015

(Dollars in thousands, except per share data)

	Three Months Ended						~~Nine Months Ended~~
	September 30,						September 30,
	March 31,
	2015			2014			2015			2014
	2016			2015
Interest and dividend income:
Loans	$	1,~~127~~086		$	1,~~151~~119		$	~~3,367~~		$	~~3,561~~
Securities	~~169~~171			~~199~~175			~~513~~			~~660~~
Interest-earning deposits and other	18			19			53			48
Interest-earning deposits	39			19
Total interest income	1,~~314~~296			1,~~369~~313			~~3,933~~			~~4,269~~
Interest expense:
Deposits	~~144~~139			~~176~~146			~~438~~			~~503~~
Federal Home Loan Bank advances and other	33			84			114			260
Federal Home Loan Bank advances	20			49
Total interest expense	~~177~~159			~~260~~195			~~552~~			~~763~~
Net interest income	1,137			1,~~109~~118			~~3,381~~			~~3,506~~
Provision for loan losses	—			207			130			687
Provision (credit) for loan losses	(60		)	15
Net interest income after provision for loan losses	1,137			902			3,251			2,819
Net interest income after provision (credit) for loan losses	1,197			1,103
Non-interest income:
Service fees	7464			7367			~~215~~			~~211~~
Rental income	18			1819			56			56
Earnings on bank-owned life insurance	4746			4948			~~143~~			~~147~~
Security gains	—			56			74			123
Gain on sale of securities	35			74
Other real estate owned gains (losses)	—			740			(19		)	756
Gain (loss) on sale of other real estate owned	—			(19		)
Other	3114			2130			94			52
Total non-interest income	~~170~~177			~~957~~219			~~563~~			~~1,345~~
Non-interest expense:
Compensation and employee benefits	~~551~~565			~~655~~603			~~1,749~~			~~1,766~~
Occupancy expense	211			173			576			537
Occupancy	191			184
Data processing expense	86			84			263			259
Data processing	89			90
Advertising and promotion	2015			911			42			38
Professional and regulatory	8270			~~122~~93			~~264~~			~~388~~
Postage and supplies	2127			2125			68			70
Bank security	2927			28			89			89
Federal deposit insurance	4737			4847			~~143~~			~~184~~
Other real estate owned expense/impairment	876			4229			~~324~~			67
Other	~~120~~113			~~156~~115			~~348~~			~~429~~
Total non-interest expense	1,~~254~~140			1,~~338~~225			~~3,866~~			~~3,827~~
Income (loss) before income taxes	53			521			(52		)	337
Income before income taxes	234			97
Income tax expense (benefit)	6			192			(66		)	(1,699		)
Income tax expense	62			22
Net income	$	47172		$	~~329~~75		$	14		$	~~2,036~~
Earnings per share:
Basic	$	0.0208		$	0.1504		$	~~.01~~		$	~~0.92~~
Diluted	$	0.0208		$	0.1504		$	~~.01~~		$	~~0.92~~

See accompanying notes to consolidated unaudited financial statements.

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AJS BANCORP, INC.

CONSOLIDATED UNAUDITED STATEMENTS OF COMPREHENSIVE INCOME ~~(LOSS)~~

THREE ~~AND NINE~~ MONTHS ENDED ~~SEPTEMBER 30~~MARCH 31, ~~2015~~2016 AND ~~SEPTEMBER 30, 2014~~2015

(Dollars in thousands)

	Three Months Ended						~~Nine Months Ended~~
	September 30,						September 30,
	March 31,
	2015			2014			2015			2014
	2016			2015
Net income	$	47172		$	~~329~~75		$	14		$	~~2,036~~
Other comprehensive income (loss):
Other comprehensive income:
Unrealized gains (losses) on securities available-for-sale:
Unrealized holding gains (losses) arising during the period	~~339~~558			~~(170~~157		)	~~187~~			~~460~~
Reclassification adjustment for (gains) losses included in net income	—(35		)	(5674		)	~~(74~~		)	~~(123~~		)
Related income tax (expense) benefit	(~~132~~205		)	91(34		)	~~(45~~		)	~~(134~~		)
Total other comprehensive income (loss)	207			(135		)	68			203
Total other comprehensive income	318			49
Comprehensive income (loss)	$	254		$	194		$	82		$	2,239
Comprehensive income	$	490		$	124

See accompanying notes to consolidated unaudited financial statements.

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AJS BANCORP, INC.

CONSOLIDATED UNAUDITED STATEMENTS OF CASH FLOWS

~~NINE~~THREE MONTHS ENDED ~~SEPTEMBER 30~~MARCH 31, ~~2015~~2016 AND ~~SEPTEMBER 30, 2014~~2015

(Dollars in thousands)

	Nine Months Ended
	Three Months Ended
	September 30,
	March 31,
	2015			2014
	2016			2015
Cash flows from operating activities:
Net income	$	14172		$	~~2,036~~75
Adjustments to reconcile net income to net cash provided by (used in) operating activities
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation	~~142~~61			~~176~~58
Provision for loan losses	130			687
Provision (credit) for loan losses	(60		)	15
Net amortization of securities	~~184~~49			~~196~~64
Stock award and option expense	~~115~~39			5441
Earnings on bank-owned life insurance	(~~143~~46		)	(~~147~~48		)
(Gain) loss on sale of securities available-for-sale	(74		)	(123		)
(Gain) loss on sale of securities	(35		)	(74		)
(Gain) loss on the sale of other real estate owned	19—			~~(756~~19		)
Other real estate owned impairment	359			86
Reversal of valuation allowance on deferred taxes	—			(1,701		)
Changes in:
Accrued interest receivable and other assets	~~(59~~131		)	~~(80~~70		)
Accrued interest payable and other liabilities	(~~598~~198		)	(34713		)
Net cash provided by operating activities	89			394
Net cash provided by (used in) operating activities	113			(493		)
Cash flows from investing activities:
Securities available-for-sale
Securities available-for-sale:
Purchases	(204,~~959~~000		)	(217,~~964~~000		)
Sales	3,~~306~~241			113,~~297~~306
Calls, maturities and principal payments	236,~~788~~783			173,~~163~~913
Loan originations, purchases and repayments, net	(21,~~016~~211		)	~~4,724~~(520		)
Proceeds from sale of other real estate	~~455~~—			~~1,959~~344
Improvements to other real estate owned	~~(12~~—		)	—(12		)
Purchase of equipment, net	(364		)	(~~211~~3		)
Net cash provided by investing activities	47,~~526~~231			~~12,968~~28
Cash flows from financing activities:
Net change in deposits	~~285~~1,856			~~(1,510~~933		)
Maturities of FHLB advances	(73,000		)	(37,000		)
Redemption of FHLB stock	477			—
Repurchase of common stock	(427		)	(278		)
Repurchase of common stock	(282		)	(681		)
Dividends paid on common stock	(102		)	(103		)
Dividends paid on common stock	(308		)	(925		)
Net change in advance payments by borrowers for taxes and insurance	(544		)	(573		)
Net change in advance payments by borrowers for taxes and insurance	(878		)	(1,050		)
Net cash used in financing activities	(2,217		)	(7,021		)
Net cash used in financing activities	(7,706		)	(7,166		)
Net change in cash and cash equivalents	5,127			(7,486		)
Cash and cash equivalents at beginning of year	29,922			32,898
Cash and cash equivalents at end of period	$	35,049		$	25,412
Supplemental disclosures of cash flow information:
Cash paid during the period for - Interest	$	166		$	211
Supplemental noncash disclosures:
Transfers from loans to real estate owned	$	—		$	216

See accompanying notes to consolidated unaudited financial statements.

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AJS BANCORP, INC.

CONSOLIDATED UNAUDITED STATEMENTS OF CASH FLOWS (Continued)

	Nine Months Ended
	September 30,
	2015			2014
Net change in cash and cash equivalents	(3,091		)	6,196
Cash and cash equivalents at beginning of year	32,898			22,281
Cash and cash equivalents at end of period	$	29,807		$	28,477
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest	$	569		$	771
Income taxes	—			1
Supplemental noncash disclosures:
Transfers from loans to real estate owned	$	319		$	86
Loans provided for sales of other real estate owned	—			$	25
Transfers of negative advance payment for borrower’s tax and insurance balances to loans	—			$	154

See accompanying notes to consolidated unaudited financial statements.

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AJS BANCORP, INC.

CONSOLIDATED UNAUDITED STATEMENTS OF STOCKHOLDERS’ EQUITY

~~NINE~~THREE MONTHS ENDED ~~SEPTEMBER 30~~MARCH 31, ~~2015~~2016 AND YEAR ENDED DECEMBER 31, ~~2014~~2015

(Dollars in thousands, except per share data)

										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
Balance at January 1, 2015	$	22		$	13,731		$	21,126		$	(20	)	$	(596	)	$	(1,050	)	$	33,213
Allocation of stock awards of 56,267 shares	1			674			—			—			(675		)	—			—
Allocation of stock awards of 6,000 shares	89			—			—			(89		)	—			—
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
Allocation of stock awards of 6,000 shares	—			89			—			—			(89		)	—			—
Forfeited stock awards of 9,612 shares	—			(115		)	—			—			115			—			—
Issuance of 863 shares for exercise of 4,200 stock options, net of 3,337 shares surrendered	—			—			—			—			—			—			—
Stock awards earned	—			—			—			—			95126			—			95126
Stock options compensation	—			2026			—			—			—			—			2026
Common stock repurchases of 20,657 shares	—			(~~282~~310		)	—			—			—			—			(~~282~~310		)
Reclassification due to changes in fair value of common stock in ESOP subject to contingent repurchase obligation	—			(7985		)	—			—			—			—			(7985		)
Net income	—			—			1486			—			—			—			1486
Cash dividends of $0.15	—			—			(308		)	—			—			—			(308		)
Cash dividends of $0.20	—			—			(410		)	—			—			—			(410		)
Other comprehensive income	—			—			—			68(201		)	—			—			68(201		)
Balance at September 30, 2015	$	22		$	13,364		$	20,832		$	48		$	(475	)	$	(1,050	)	$	32,741
ESOP shares earned	—			16			—			—			—			37			53
Balance at December 31, 2015	$	22		$	13,352		$	20,802		$	(221	)	$	(444	)	$	(1,013	)	$	32,498
Allocation of stock awards of 3,000 shares	—			44			—			—			(44		)	—			—
Stock awards earned	—			—			—			—			33			—			33
Stock options compensation	—			6			—			—			—			—			6
Common stock repurchases of 29,400 shares	—			(427		)	—			—			—			—			(427		)
Reclassification due to changes in fair value of common stock in ESOP subject to contingent repurchase obligation	—			(159		)	—			—			—			—			(159		)
Net income	—			—			172			—			—			—			172
Cash dividends of $0.05	—			—			(102		)	—			—			—			(102		)
Other comprehensive income	—			—			—			318			—			—			318
Balance at March 31, 2016	$	22		$	12,816		$	20,872		$	97		$	(455	)	$	(1,013	)	$	32,339

6See accompanying notes to consolidated financial statements

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AJS BANCORP, INC.

NOTES TO 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.

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AJS BANCORP, INC.

NOTES TO 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:

September 30, 2015

March 31, 2016

Gross

Amortized

Unrealized

Fair

Cost

Gains

Losses

Value

U.S. government-sponsored entities

89,~~000~~265

(13

)

89,~~003~~268

Residential agency mortgage-backed

4035,~~006~~053

~~217~~215

(~~141~~59

)

4035,~~082~~209

Total

4844,~~006~~318

221

(~~142~~62

)

4844,~~085~~477

December 31, 2014

December 31, 2015

Gross

Amortized

Unrealized

Fair

Cost

Gains

Losses

Value

U.S. government-sponsored entities

1110,~~000~~265

3—

(1050

)

10,~~993~~215

Residential agency mortgage-backed

4340,~~248~~041

~~188~~75

(~~215~~389

)

4339,~~221~~727

Total

5450,~~248~~306

~~191~~75

(~~225~~439

)

5449,~~214~~942

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AJS BANCORP, INC.

NOTES TO 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:

	September 30, 2015
	March 31, 2016
			Gross		Gross
	Amortized		Unrecognized		Unrecognized		Fair
	Cost		Gains		Losses		Value
Residential agency mortgage-backed	$	75	$	—	$	—	$	75
State and municipal	~~320~~270		62		—		~~326~~272
Total	$	~~327~~275	$	62	$	—	$	~~333~~277

	December 31, 2014
	December 31, 2015
			Gross		Gross
	Amortized		Unrecognized		Unrecognized		Fair
	Cost		Gains		Losses		Value
Residential agency mortgage-backed	$	116	$	—	$	—	$	116
State and municipal	320		106		—		~~330~~326
Total	$	~~331~~326	$	106	$	—	$	~~341~~332

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AJS BANCORP, INC.

NOTES TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS

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

NOTE 2 - SECURITIES (Continued)

Expected maturities of securities at ~~September~~March 3031, ~~2015~~2016 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	$	89,~~000~~265	$	89,~~003~~268	$	~~260~~270	$	~~265~~272
Due after five years through ten years	—		—		60		61
Residential agency mortgage-backed	35,053		35,209		5		5
Residential agency mortgage-backed	40,006		40,082		7		7
Total	$	44,318	$	44,477	$	275	$	277
Total	$	48,006	$	48,085	$	327	$	333

Securities with a carrying value of approximately $8,~~836~~318 and $108,~~161~~504 at ~~September~~March 3031, ~~2015~~2016 and December 31, ~~2014~~2015, respectively 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 nine~~ months ended ~~September~~March 3031, ~~2015~~2016 and ~~2014~~2015 are listed below:

	Three Months		~~Nine~~Three Months		~~Three Months~~		~~Nine Months~~
	Ended		Ended		~~Ended~~		~~Ended~~
	September 30,		September 30,		September 30,		September 30,
	March 31,		March 31,
	2015		2015		2014		2014
	2016		2015
Proceeds from sale	$	—3,241	$	3,306	$	~~3,889~~	$	~~11,297~~
Gross realized gains	—35		74		56		~~123~~

109

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AJS BANCORP, INC.

NOTES TO 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:

	September 30, 2015
	March 31, 2016
	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	$	1,999	$	(1	)	$	—	$	—		$	1,999	$	(1	)
U.S. government-sponsored entities	$	4,262	$	(3	)	$	—	$	—		$	4,262	$	(3	)
Residential agency mortgage-backed	12,~~941~~286		(32		)	117,~~080~~984		(~~138~~57		)	1310,~~021~~270		(~~141~~59		)
Total temporarily impaired	$	36,~~940~~548	$	(45	)	$	117,~~080~~984	$	(~~138~~57	)	$	1514,~~020~~532	$	(~~142~~62	)

	December 31, 2014
	December 31, 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	$	4,992	$	(8	)	$	998	$	(2	)	$	5,990	$	(10	)
U.S. government-sponsored entities	$	10,215	$	(50	)	$	—	$	—		$	10,215	$	(50	)
Residential agency mortgage-backed	316,~~112~~516		(10117		)	1312,~~750~~969		(~~205~~272		)	1629,~~862~~485		(~~215~~389		)
Total temporarily impaired	$	826,~~104~~731	$	(18167	)	$	1412,~~748~~969	$	(~~207~~272	)	$	2239,~~852~~700	$	(~~225~~439	)

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.

1110

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AJS BANCORP, INC.

NOTES TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS

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

NOTE 3 - LOANS

Loans were as follows:

	September 30,					December 31,
	March 31,					December 31,
	2015					2014
	2016					2015
	Amount			Percent		Amount			Percent
Mortgage:
One—to-four family	$	100,701		86.3	%	$	97,214		84.4	%
One–to-four family	$	99,853		87.5	%	$	100,127		86.9	%
Multi-family and commercial	87,~~791~~995			7.50		98,~~493~~663			87.35
Home equity	6,~~943~~114			65.04		86,~~069~~408			75.05
Consumer and other	~~214~~75			0.21		~~349~~76			0.31
	116,649			100.0	%	115,125			100.0	%
	114,037			100.0	%	115,274			100.0	%
Allowance for loan losses	(~~1,085~~901		)			(~~1,103~~988		)
Net deferred costs and other	~~133~~136					~~108~~137
Loans, net	$	~~115~~113,~~697~~272				$	114,~~130~~423

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

	For the Three Months Ended September 30, 2015
	For the Three Months Ended March 31, 2016
				Multi-family
	One—to-Four			and			Home		Consumer
	One–to-Four			and			Home		Consumer
	Family			Commercial			Equity		and Other		Total
Allowances for loan losses:
Beginning balance	$	~~846~~722		$	~~214~~250		$	2016	$	—	$	~~1,080~~988
Provision for loan losses	—			—			—		—		—
Provision (credit) for loan losses	15			(75		)	—		—		(60		)
Charge-offs	(835		)	—			—		—		(835		)
Recoveries	137			—1			—		—		138
Total ending allowance balance	$	~~851~~709		$	~~214~~176		$	2016	$	—	$	~~1,085~~901

	For the Three Months Ended March 31, 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 (credit) for loan losses	37			(21		)	(1		)	—		15
Charge-offs	(45		)	(7		)	—			—		(52		)
Recoveries	2			2			—			—		4

Total ending allowance balance	$	816		$	233		$	21		$	—	$	1,070

Table of Contents

AJS BANCORP, INC.

NOTES TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS

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

NOTE 3- LOANS (Continued)

	For the Nine Months Ended September 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	(160		)	(7		)	—			—		(167		)
Recoveries	17			2			—			—		19
Total ending allowance balance	$	851		$	214		$	20		$	—	$	1,085

	For the Three Months Ended September 30, 2014
				Multi-family
	One—to-Four			and			Home		Consumer
	Family			Commercial			Equity		and Other		Total
Allowances for loan losses:
Beginning balance	$	925		$	253		$	25	$	1	$	1,204
Provision for loan losses	—			207			—		—		207
Charge-offs	(47		)	(160		)	—		—		(207		)
Recoveries	1			1			—		—		2
Total ending allowance balance	$	879		$	301		$	25	$	1	$	1,206

	For the Nine Months Ended September 30, 2014
Allowances for loan losses:
Beginning balance	$	823		$	466		$	109		$	1	$	1,399
Provision for loan losses	161			610			(84		)	—		687
Charge-offs	(108		)	(778		)	—			—		(886		)
Recoveries	3			3			—			—		6
Total ending allowance balance	$	879		$	301		$	25		$	1	$	1,206

Table of Contents

AJS BANCORP, INC.

NOTES TO 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:

September 30, 2015

March 31, 2016

Multi-Family

Consumer

One—to-Four

and

Home

and

One–to-Four

and

Home

and

Family

Commercial

Equity

Other

Total

Allowance for loan losses:

Loans individually evaluated for impairment

~~214~~209

—

~~214~~209

Loans collectively evaluated for impairment

~~637~~500

~~214~~176

2016

—

~~871~~692

Total ending allowance balance

~~851~~709

~~214~~176

2016

—

~~1,085~~901

Loans:

Loans individually evaluated for impairment

1,~~537~~553

~~697~~674

—

2,~~234~~227

Loans collectively evaluated for impairment

9998,~~164~~300

87,~~094~~321

6,~~943~~114

~~214~~75

~~114~~111,~~415~~810

Total ending loans balance

~~100~~99,~~701~~853

87,~~791~~995

6,~~943~~114

~~214~~75

~~116~~114,~~649~~037

	December 31, 2014
	December 31, 2015
			Multi-Family				Consumer
	One-to-Four		and		Home		and
	Family		Commercial		Equity		Other		Total
Allowance for loan losses:
Loans individually evaluated for impairment	$	~~234~~211	$	—	$	—	$	—	$	~~234~~211
Loans collectively evaluated for impairment	~~588~~511		~~259~~250		2216		—		~~869~~777
Total ending allowance balance	$	~~822~~722	$	~~259~~250	$	2216	$	—	$	~~1,103~~988
Loans:
Loans individually evaluated for impairment	$	1,~~564~~577	$	~~899~~684	$	—	$	—	$	2,~~463~~261
Loans collectively evaluated for impairment	9598,~~650~~550		87,~~594~~979		86,~~069~~408		~~349~~76		~~112~~113,~~662~~013
Total ending loans balance	$	97100,~~214~~127	$	98,~~493~~663	$	86,~~069~~408	$	~~349~~76	$	115,~~125~~274

1412

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AJS BANCORP, INC.

NOTES TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS

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

NOTE 3- LOANS (Continued)

	As of September 30, 2015						As of December 31, 2014
	As of March 31, 2016						As of December 31, 2015
					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	$	401	$	288	$	—	$	410	$	297	$	—
One–to-four family	$	380	$	314	$	—	$	400	$	333	$	—
Multi-family and commercial	~~987~~979		~~697~~674		—		~~1,185~~983		~~899~~684		—
Home equity	—		—		—		—				—
Consumer and other	—		—		—		—		—		—
Subtotal	1,~~388~~359		~~985~~988		—		1,~~595~~383		1,~~196~~017		—
With an allowance recorded:
One—to-four family	1,291		1,249		214		1,300		1,267		234
One–to-four family	1,279		1,239		209		1,282		1,244		211
Multi-family and commercial	—		—		—		—
Home equity	—		—		—		—		—		—
Consumer and other	—		—		—		—		—		—
Subtotal	1,~~291~~279		1,~~249~~239		~~214~~209		1,~~300~~282		1,~~267~~244		~~234~~211
Total	$	2,~~679~~638	$	2,~~234~~227	$	~~214~~209	$	2,~~895~~665	$	2,~~463~~261	$	~~234~~211

	For the Three Months						For the Three Months
	Ended September 30, 2015						Ended September 30, 2014
	Ended March 31, 2016						Ended March 31, 2015
	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	$	290	$	3	$	—	$	299	$	3	$	—
One–to-four family	$	324	$	2	$	—	$	296	$	5	$	—
Multi-family and commercial	~~703~~679		—6		9—		~~1,787~~809		1—		6
Home equity	—		—		—				—		—
Consumer and other	—		—		—				—		—
Subtotal	~~993~~1,003		38		9—		21,~~086~~105		45		6

1513

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AJS BANCORP, INC.

NOTES TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS

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

NOTE 3 - LOANS (Continued)

	For the Three Months						For the Three Months
	Ended September 30, 2015						Ended September 30, 2014
	Ended March 31, 2016						Ended March 31, 2015
	Average		Interest		Cash		Average		Interest		Cash
	Recorded		Income		Basis		Recorded		Income		Basis
	Investment		Recognized		Recognized		Investment		Recognized		Recognized
With an allowance recorded:
One—to-four family	1,253		12		—		1,175		17		—
One–to-four family	1,242		14		—		1,263		15		—
Multi-family and commercial	—		—		—		—		—		—
Home equity	—		—		—				—		—
Consumer and other	—		—		—		—		—		—
Subtotal	1,~~253~~242		1214		—		1,~~175~~263		1715		—
Total	$	2,~~246~~245	$	1522	$	9—	$	32,~~261~~368	$	2120	$	6

	For the Nine Months						For the Nine Months
	Ended September 30, 2015						Ended September 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	$	292	$	12	$	—	$	199	$	10	$	—
Multi-family and commercial	708		—		21		1,911		1		12
Home equity	—		—		—		—		—		—
Subtotal	1,000		12		21		2,110		11		12
With an allowance recorded:
One—to-four family	1,255		39		—		1,276		47		—
Multi-family and commercial	—		—		—		191		—		—
Home equity	—		—		—		—		—		—
Subtotal	1,255		39		—		1,467		47		—
Total	$	2,255	$	51	$	21	$	3,577	$	58	$	12

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

Table of Contents

AJS BANCORP, INC.

NOTES TO 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
	September 30,		December 31,		September 30,		December 31,
	March 31,		December 31,		March 31,		December 31,
	2015		2014		2015		2014
	2016		2015		2016		2015
One—to-four family	$	1,128	$	1,886	$	—	$	—
One–to-four family	$	1,081	$	968	$	—	$	—
Multi-family and commercial	~~697~~565		~~900~~350		—		—
Home equity	345		~~192~~5		—		—
Consumer and other	—		—		—		—
Total	$	1,~~859~~651	$	21,~~978~~323	$	—	$	—

~~The following tables present the aging of the recorded investment in past due loans by class of loans:~~14

	September 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	$	572	$	207	$	220	$	999	$	99,702	$	100,701
Multi-family and commercial	—		196		—		196		8,595		8,791
Home equity	—		34		—		34		6,909		6,943
Consumer and other	—		—		—		—		214		214
Total	$	572	$	437	$	220	$	1,229	$	115,420	$	116,649

	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

Table of Contents

AJS BANCORP, INC.

NOTES TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS

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

NOTE 3 - LOANS (Continued)

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

	March 31, 2016
	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	$	492	$	411	$	228	$	1,131	$	98,722	$	99,853
Multi-family and commercial	232		—		224		456		7,539		7,995
Home equity	5		—		—		5		6,109		6,114
Consumer and other	—		—		—		—		75		75

Total	$	729	$	411	$	452	$	1,592	$	112,445	$	114,037

	December 31, 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	$	833	$	159	$	330	$	1,322	$	98,805	$	100,127
Multi-family and commercial	297		—		—		297		8,366		8,663
Home equity	18		—		5		23		6,385		6,408
Consumer and other	—		—		—		—		76		76

Total	$	1,148	$	159	$	335	$	1,642	$	113,632	$	115,274

Troubled Debt Restructurings

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

	September 30,			December 31,
	March 31,			December 31,
	2015			2014
	2016			2015
Accrual status	$	1,~~225~~654		$	1,~~431~~880
Non-accrual status	~~1,009~~573			~~1,032~~381
	2,234			2,463
	2,227			2,261
Specific reserves allocated	(~~214~~209		)	(~~234~~211		)
Net	$	2,~~020~~018		$	2,~~229~~050

No additional loan commitments were outstanding to these borrowers at September 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.15

The following tables present loans by class modified as troubled debt restructurings that occurred during the nine months ended September 30, 2015:

		Pre-Modification		Post-Modification
		Outstanding		Outstanding
	Number of	Recorded		Recorded
	Loans	Investment		Investment
September 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 restructuring described above was evaluated for impairment prior to modification, did not result in an increase in the allowance for loan losses upon modification, and resulted in no additional charge-offs for the three and nine months ended September 30, 2015. There were no new troubled debt restructurings made during the three months ended September 30, 2015 and the three and nine months ended September 30, 2014.

Table of Contents

AJS BANCORP, INC.

NOTES TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS

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

NOTE 3 - LOANS (Continued)

ANo additional loan iscommitments ~~considered~~were outstanding to bethese inborrowers ~~payment~~at ~~default~~March 31, ~~once~~2016 itand isDecember 31, ~~30 days contractually past due under the modified terms~~2015. ~~The~~ ~~following~~Loans ~~table~~are ~~presents~~returned ~~the~~to ~~loan~~accrual bystatus ~~class~~after ~~modified as~~ a ~~troubled~~period ~~debt~~of ~~restructuring~~satisfactory ~~for which there was a~~ payment ~~default~~performance ~~within~~under ~~twelve~~the ~~months~~terms ~~following~~of the ~~modification~~restructuring, ~~during~~but ~~the~~no ~~nine~~earlier ~~months~~than ~~ended~~six ~~September 30, 2015~~months.

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

There were no new troubled debt restructurings made during the three months ended March 31, 2016 and 2015. There were no troubled debt restructurings for which there was a payment default within twelve months following the modification during the three months ended March 31, 2016 and 2015. There was one troubled debt restructuring in the amount of $202 for which there was a payment default during the three months ended March 31, 2016 and it was placed on non-accrual status.

~~There~~The ~~were~~terms noof ~~troubled~~certain ~~debt~~other ~~restructurings~~loans ~~for~~were ~~which~~modified ~~there~~during ~~was~~the athree ~~payment default within twelve~~ months ~~following~~ended ~~the~~March 31, ~~modification~~2016 ~~during the three~~ and ~~nine~~2015 ~~months~~that ~~ended~~did ~~September 30,~~not ~~2014.~~meet ~~There~~the ~~were~~definition noof a troubled debt ~~restructurings~~restructuring. ~~for~~These ~~which~~loan ~~there~~balances ~~was~~were anot ~~payment~~material ~~default~~in ~~during~~ the three months ended ~~September~~March 3031, 2016 and 2015.

The terms of certain other loans were modified during the three and nine months ended September 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 nine months ended September 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.

Table of Contents

AJS BANCORP, INC.

NOTES TO 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 September 30, 2015 and December 31, 2014, the risk category of loans by class of loans was as follows:16

	September 30, 2015
			Special
	Pass		Mention		Substandard		Doubtful		Total
One —to- four family	$	97,136	$	—	$	3,565	$	—	$	100,701
Multi-family and commercial	1,329		141		7,321		—		8,791
Home equity	6,875		—		68		—		6,943
Consumer and other	214		—		—		—		214
Total	$	105,554	$	141	$	10,954	$	—	$	116,649

Table of Contents

AJS BANCORP, INC.

NOTES TO 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

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 March 31, 2016 and December 31, 2015, the risk category of loans by class of loans was as follows:

	March 31, 2016
			Special
	Pass		Mention		Substandard		Doubtful		Total

One –to- four family	$	98,805	$	—	$	1,048	$	—	$	99,853
Multi-family and commercial	5,474		133		2,388		—		7,995
Home equity	6,077		—		37		—		6,114
Consumer and other	75		—		—		—		75

Total	$	110,431	$	133	$	3,473	$	—	$	114,037

	December 31, 2015
			Special
	Pass		Mention		Substandard		Doubtful		Total

One–to-four family	$	99,193	$	—	$	934	$	—	$	100,127
Multi-family and commercial	2,677		137		5,849		—		8,663
Home equity	6,370		—		38		—		6,408
Consumer and other	76		—		—		—		76

Total	$	108,316	$	137	$	6,821	$	—	$	115,274

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.~~17

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AJS BANCORP, INC.

NOTES TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS

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

NOTE 4 - FAIR VALUES (Continued)

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.

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.

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AJS BANCORP, INC.

NOTES TO 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 September 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:~~18

September 30, 2015

Quoted Prices in

Significant

Active Markets

Other

Significant

For Identical

Observable

Unobservable

Assets

Inputs

Total

(Level 1)

(Level 2)

(Level 3)

Securities available-for-sale

U.S. government-sponsored entities

8,003

—

8,003

—

Residential agency mortgage-backed

40,082

—

40,082

—

December 31, 2014

Quoted Prices in

Significant

Active Markets

Other

Significant

For Identical

Observable

Unobservable

Assets

Inputs

Total

(Level 1)

(Level 2)

(Level 3)

Securities available-for-sale

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 nine months ended September 30, 2015 and the year ended December 31, 2014.

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AJS BANCORP, INC.

NOTES TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS

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

NOTE 4 - FAIR VALUES (Continued)

At March 31, 2016 and December 31, 2015, the Company had no liabilities measured at fair value. Assets measured at fair value on a recurring basis are summarized below:

March 31, 2016

Quoted Prices in

Significant

Active Markets

Other

Significant

For Identical

Observable

Unobservable

Assets

Inputs

Total

(Level 1)

(Level 2)

(Level 3)

Securities available-for-sale

U.S. government-sponsored entities

9,268

—

9,268

—

Residential agency mortgage-backed

35,209

—

35,209

—

December 31, 2015

Quoted Prices in

Significant

Active Markets

Other

Significant

For Identical

Observable

Unobservable

Assets

Inputs

Total

(Level 1)

(Level 2)

(Level 3)

Securities available-for-sale

U.S. government-sponsored entities

10,215

—

10,215

—

Residential agency mortgage-backed

39,727

—

39,727

—

There were no transfers between Level 1 and Level 2 during the three months ended March 31, 2016 and the year ended December 31, 2015.

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

	September 30, 2015
	March 31, 2016
			Quoted Prices in		Significant
			Active Markets		Other		Significant
			For Identical		Observable		Unobservable
			Assets		Inputs		Inputs
	Total		(Level 1)		(Level 2)		(Level 3)
Other real estate owned:
One—to-four family	$	143	$	—	$	—	$	143
One–to-four family	$	144	$	—	$	—	$	144
Multi-family and commercial	~~166~~163		—		—		~~166~~163

	December 31, 2014
	December 31, 2015
			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~~$	144	—$	—	—$	—	~~412~~$	144
Multi-family and commercial	~~1,299~~163		—		—		~~1,299~~163

At September 30, 2015, other real estate owned, which is carried at fair value less estimated costs to sell, had a carrying amount of $1,778, net of a valuation allowance of $529, resulting in a write-down of $359 during the nine months ended September 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 2014.19

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.

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AJS BANCORP, INC.

NOTES TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS

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

NOTE 4 - FAIR VALUES (Continued)

At March 31, 2016 and December 31, 2015, other real estate owned, which is carried at fair value less estimated costs to sell, had a carrying amount of $310, net of a valuation allowance of $3.

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

	September 30, 2015
	March 31, 2016
			Valuation		Range
	Fair Value		Technique(s)	Unobservable Input(s)	(Weighted Average)
Other real estate owned:
One-to-four family	$	~~143~~144	Sales comparison approach	Adjustment for differences between the comparable sales	~~(24.5)~~0 -3 15.78% (-75.826%)
Multi-family and commercial	~~166~~163		Sales comparison approach	Adjustment for differences between the comparable sales	~~5.7~~0 -55 24.47% (3411.27%)

At September 30, 2015, the Bank also had a commercial real estate owned property with a carrying value of $940,000, which is supported by an approved cash purchase offer. As of December 31, 2014, the value was supported by an appraisal, and was included in the level 3 assets in the below table as of 12/31/2014.

	December 31, 2015
			Valuation		Range
	Fair Value		Technique(s)	Unobservable Input(s)	(Weighted Average)
Other real estate owned:
One-to-four family	$	144	Sales comparison approach	Adjustment for differences between the comparable sales	0 - 15.8% (5.6%)

Multi-family and commercial	163		Sales comparison approach	Adjustment for differences between the comparable sales	0 - 24.7% (11.7%)

	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%)

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AJS BANCORP, INC.

NOTES TO 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.

	September 30, 2015
	March 31, 2016
	Carrying		Fair Value Measurements Using:
	Amount		Level 1		Level 2		Level 3		Total
Financial assets
Financial assets:
Cash and cash equivalents	$	2935,~~807~~049	$	2935,~~807~~049	$	—	$	—	$	2935,~~807~~049
Securities held-to-maturity	~~327~~275		—		~~333~~277		—		~~333~~277
Loans, net	~~115~~113,~~697~~272		—		—		~~114~~112,~~734~~709		~~114~~112,~~734~~709
FHLB stock	1,291		N/A		N/A		N/A		N/A
Accrued interest receivable	~~425~~418		—		1627		~~409~~391		~~425~~418
Financial liabilities
Financial liabilities:
Non-interest-bearing deposits	$	2123,~~754~~077	$	2123,~~754~~077	$	—	$	—	$	2123,~~754~~077
Interest-bearing deposits	144,~~780~~428		—		144,~~954~~599		—		144,~~954~~599
FHLB advances	52,000		—		52,~~055~~004		—		52,~~055~~004
Advances from borrowers for taxes	1,190		—		1,190		—		1,190
Advance payments by borrowers for taxes and insurance	1,591		—		1,591		—		1,591
Accrued interest payable	5		—		5		—		5
	December 31, 2015
	Carrying		Fair Value Measurements Using:
	Amount		Level 1		Level 2		Level 3		Total
Financial assets:
Cash and cash equivalents	$	29,922	$	29,922	$	—	$	—	$	29,922
Securities held-to-maturity	326		—		332		—		332
Loans, net (less impaired loans)	114,423		—		—		112,263		112,263
FHLB stock	1,291		N/A		N/A		N/A		N/A
Accrued interest receivable	434		—		27		407		434
Financial liabilities:
Non-interest-bearing deposits	$	23,132	$	23,132	$	—	$	—	$	23,132
Interest-bearing deposits	142,517		—		142,560		—		142,560
FHLB advances	5,000		—		5,023		—		5,023
Advance payments by borrowers for taxes and insurance	2,135		—		2,135		—		2,135
Accrued interest payable	11		—		11		—		11

	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		N/A
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

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AJS BANCORP, INC.

NOTES TO 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.

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AJS BANCORP, INC.

NOTES TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS

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

NOTE 4 - FAIR VALUES (Continued)

(c) FHLB Stock

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

(d) Loans

The 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.

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AJS BANCORP, INC.

NOTES TO 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 fixed rate 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~~Advances ~~Sold~~from ~~Under~~Borrowers ~~Agreements~~for ~~to Repurchase~~Taxes

The carrying ~~amounts~~values of ~~securities~~advances ~~sold~~from ~~under~~borrowers ~~agreements~~for totaxes ~~repurchase~~ approximate fair value ~~resulting~~and inare aclassified as Level 2 ~~classification~~.

(i) ~~Advances~~Accrued ~~From~~Interest ~~Borrowers For Taxes~~Payable

The carrying values of 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.

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AJS BANCORP, INC.

NOTES TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS

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

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 nine months~~ ended ~~September~~March 3031, ~~2015~~2016 and ~~2014~~2015:

	Three Months						Nine Months
	Three Months Ended
	September 30,						September 30,
	March 31,
	2015			2014			2015			2014
	2016			2015
Basic
Net income	$	47172		$	~~329~~75		$	14		$	~~2,036~~
Distributed earnings allocated to participated securities	2(3		)	(3		)	7			3
Undistributed earnings allocated to participated securities	(1		)	51			(7		)	13
Net earnings allocated to common shareholders	$	46168		$	~~321~~73		$	14		$	~~2,020~~
Weighted average common shares outstanding including participating securities	2,~~087~~075,~~361~~972			2,~~252~~102,~~924~~028			~~2,094,192~~			~~2,228,180~~
Less: Participating securities	(3843,~~780~~784		)	(56,267		)	~~(48,947~~		)	~~(21,641~~		)
Weighted-average common shares outstanding for basic	2,~~048~~032,~~581~~188			2,~~196~~045,~~657~~761			~~2,045,245~~			~~2,206,539~~
Basic earnings per common share	$	0.0208		$	0.1504		$	~~0.01~~		$	~~0.92~~
Diluted
Net earnings allocated to common stock	$	46		$	321		$	14		$	2,020
Net earnings allocated to common shareholders	$	168		$	73
Weighted average common shares outstanding for basic	2,~~048~~032,~~581~~188			2,~~196~~045,~~657~~761			~~2,045,245~~			~~2,206,539~~
Add: dilutive effects of assumed exercise of stock options and stock awards	1511,~~167~~223			—			~~11,831~~			—
Weighted-average common shares outstanding for diluted	2,~~063~~043,~~748~~411			2,~~196~~045,~~657~~761			~~2,057,076~~			~~2,206,539~~
Diluted earnings per common share	$	0.0208		$	0.1504		$	~~0.01~~		$	~~0.92~~

At ~~September~~March 3031, ~~2015~~2016 and ~~2014~~2015, there were 14,000 and 1,375 anti-dilutive stock options, respectively.

Employee stock ownership plan shares are considered outstanding for this calculation unless unearned. At ~~September~~March 3031, ~~2015~~2016 and ~~2014~~2015, there were ~~105~~101,~~032~~281 and ~~108~~105,~~783~~032 shares unearned from the employee stock ownership plan, respectively.

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AJS BANCORP, INC.

NOTES TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS

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

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 ~~September~~March 3031, ~~2015~~2016, 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~~During ~~were~~the ~~118,132~~three ~~options~~months ~~granted~~ended ~~in May~~March ~~2014~~31, ~~with~~2016, athere ~~strike~~were ~~price~~no ofoptions, ~~$11.99~~granted, 4vested,~~000~~ ~~options~~forfeited ~~granted~~or inexercised ~~June 2015 with a strike price of $15.00~~ and 101,~~000~~375 options ~~granted~~ with a strike price of $1420.~~85.~~72 ~~During the nine months ended September 30, 2015, there were 23,624 options vested, 16,800 options forfeited, 4,200 options were exercised, and no options~~ expired. Total unrecognized compensation expense for stock options was $~~100~~87 as of ~~September~~March 3031, ~~2015~~2016. Compensation expense totaled $206 and $97 for the ~~nine~~three months ended ~~September~~March 3031, ~~2015~~2016 and ~~2014~~2015, respectively. Management expects outstanding options to vest over the weighted average remaining vesting period of 3.83 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 and 6,000 shares in August 2015.~~ During the ~~nine~~three months ended ~~September~~March 3031, ~~2015~~2016, there were 113,~~251~~000 awards ~~vested~~granted, and ~~9,612~~no awards vested, forfeited or expired. Total unrecognized compensation expense for awards was $~~475~~455 as of ~~September~~March 3031, ~~2015~~2016. Compensation expense totaled $9533 and $4534 for the ~~nine~~three months ended ~~September~~March 3031, ~~2015~~2016 and ~~2014~~2015, respectively. Management expects outstanding awards to vest over the weighted average remaining vesting period of 3.84 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; 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.

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~~information~~The ~~about~~allowance ~~specific~~consists ~~borrower~~of ~~situations;~~specific and ~~estimated~~general ~~collateral~~components. The ~~values,~~specific ~~economic~~component ~~conditions,~~relates to loans that are individually classified as impaired or loans otherwise classified as substandard or doubtful. The general component covers non-impaired loans and ~~other~~is based on actual historical loss experience determined by portfolio loan segment adjusted for current factors. ~~Allocations~~This ofactual ~~the~~loss ~~allowance~~experience ~~may~~is besupplemented ~~made~~with ~~for~~other ~~specific~~economic ~~loans,~~factors ~~but~~based on the ~~entire~~risks ~~allowance~~present ~~is available~~ for ~~any~~each portfolio loan ~~that~~segment, insuch ~~our~~as ~~judgment,~~real ~~should~~estate betrends ~~charged~~and ~~off~~national and local economic conditions. ~~Loan~~As ~~losses~~greater risk is associated with loans classified as special mention and substandard that are ~~charged~~not ~~against~~impaired, the ~~allowance~~Company ~~when~~considers wethe ~~believe~~actual ~~that~~historical loss experience by loan segment, the ~~uncollectibility~~levels of aloans ~~loan~~classified ~~balance~~as isspecial ~~confirmed~~mention and substandard, and the trends in the collateral associated with these classifications.

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 Tax Asset. The 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 period 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 net income of $47172,000, or $0.0208 per share, for the three months ended ~~September~~March 3031, ~~2015~~2016 compared to net income of $~~329~~75,000, or $0.1504 per share, for the same period in ~~2014~~2015. ~~Our~~The increase in net income for the ~~nine~~three months ended ~~September~~March 3031, ~~2015~~2016 compared to the prior year period was mainly attributable to a $1475,000 decrease in the provision for loan losses, orand an $~~0.01~~85,000 ~~per~~decrease ~~share~~in non-interest expense, ~~compared~~partially tooffset by a decrease in non-interest income as a result of $39,000 decline in gain on sale of securities and a $40,000 increase in income tax expense.

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~~net~~Comparison ~~income~~ of ~~$2.0~~Financial ~~million,~~Condition orat ~~$0.92 per share, for the same period in 2014. The decrease in net income for the three months ended September~~March 3031, ~~2015~~2016 ~~compared to the prior year period was mainly attributable to a $740,000 decrease in other real estate owned gains, partially offset by a decline in the provision for loan losses of $207,000~~ and ~~a $186,000 decrease in income tax expense. The decline in net income for the nine month period ended September~~December 3031, 2015 compared to the prior year period was mainly attributable to the $1.7 million reversal of the remaining deferred tax asset valuation allowance in the second quarter of 2014, a $775,000 decrease in other real estate owned gains, higher other real estate owned expense/impairment of $257,000, and a decline in net interest income of $125,000. These decreases were partially offset by a decline in the provision for loan losses of $557,000 for the nine months ended September 30, 2015 compared to the nine months ended September 30, 2014.

~~Comparison~~Assets. Total consolidated assets as of ~~Financial~~March 31, ~~Condition~~2016 atwere ~~September~~$207.0 million, a decrease of $1.9 30million, ~~2015~~or ~~and~~0.9%, from $208.9 million at December 31, ~~2014~~2015. The decrease was due to declines in securities available-for-sale and net loans, partially offset by an increase in cash and cash equivalents.

~~Assets.~~Cash ~~Total~~and ~~consolidated~~cash ~~assets~~equivalents asincreased ~~of September 30, 2015 were~~ $~~209~~5.01 million, aor ~~decrease~~17.1%, ofto $835.5 0 million, orat ~~3.9%~~March 31, 2016 from $~~217~~29.59 million at December 31, ~~2014~~2015. The ~~decrease~~primary ~~was~~reason ~~due~~for tothe ~~declines~~increase in cash and cash equivalents, was due to increased liquidity as a result of a $5.5 million decrease in the securities available-for-sale portfolio, a $1.2 million decrease in net loans, and ~~other~~a ~~real~~$1.9 ~~estate~~million ~~owned~~increase in deposits, partially offset by anthe ~~increase~~repayment inof ~~net~~maturing ~~loans~~Federal Home Loan Bank (FHLB) advances of $3.0 million.

~~Cash~~Securities ~~and~~available-for-sale ~~cash equivalents~~ decreased $35.15 million, or 910.49%, to $2944.85 million at ~~September~~March 3031, ~~2015~~2016 from $3249.9 million at December 31, ~~2014~~2015. The ~~primary~~decrease ~~reason~~was ~~for~~primarily ~~the~~due ~~decline~~to insecurities ~~cash~~available-for-sale ~~and~~principal ~~cash~~repayments, ~~equivalents~~calls ~~was~~and ~~due~~sales ~~to the repayment~~ of ~~maturing~~$10.0 ~~Federal~~million ~~Home~~exceeding ~~Loan~~new ~~Bank~~securities ~~(FHLB)~~purchases ~~advances~~ of $74.0 million ~~and~~due to a ~~$1.6~~lack ~~million~~of ~~increase~~suitable inreinvestment ~~net~~alternatives ~~loans~~and ~~during~~an increase in the ~~nine~~fair ~~months~~value ~~ended~~of ~~September 30,~~available-for-sale ~~2015,~~securities ~~partially~~of ~~offset~~$523,000 byas a ~~$6.1~~result ~~million~~of the decrease in interest rates during the ~~securities~~three ~~available-for-sale~~months ~~portfolio~~ended March 31, 2016.

~~Securities~~Net ~~available-for-sale~~loans decreased $6.1.2 million, or 111.31%, to $48113.13 million at ~~September~~March 3031, ~~2015~~2016 from $54114.24 million at December 31, ~~2014~~2015. The decrease was primarily ~~due~~attributable to ~~securities~~declines ~~available-for-sale~~in ~~principal~~our ~~repayments,~~multifamily ~~calls~~and commercial real estate and ~~sales~~home ofequity ~~$27~~loan portfolios during the three months ended March 31, 2016.1 ~~million~~Multifamily ~~exceeding~~and ~~new~~commercial ~~securities~~real ~~purchases~~estate ofloans declined $21668,000, or 7.7%, to $8.0 million ~~and~~at aMarch 31, ~~decrease~~2016 infrom ~~the~~$8.7 ~~unrealized~~million ~~loss~~at onDecember 31, ~~available-for-sale~~2015. ~~securities~~Home ofequity loans decreased $~~112~~294,000, asor a4.6%, ~~result~~to of$6.1 ~~the~~million at March 31, 2016 from $6.4 million at December 31, 2015. The decrease in ~~interest~~the ~~rates~~multifamily ~~during~~and ~~the~~commercial ~~nine~~real ~~months~~estate ~~ended~~loan ~~September 30,~~portfolio ~~2015~~was due to aggressive price competition for these loans in the Bank’s marketplace.

~~Net~~Liabilities. ~~loans~~Total ~~increased~~liabilities decreased $1.69 million, or 1.41%, to $~~115~~173.76 million at ~~September~~March 3031, ~~2015~~2016 from $~~114~~175.14 million at December 31, ~~2014~~2015. The ~~increase~~decrease ~~was primarily attributable to an increase~~ in ~~our~~total ~~one-to~~liabilities four-family residential portfolio, partially offset by declines in our multifamily and commercial real estate and home equity portfolios during the nine months ended September 30, 2015. One-to four-family residential loans increased $3.5 million, or 3.6%, to $100.7 million at September 30, 2015 from $97.2 million at December 31, 2014. The increase was primarily due to ~~increased~~declines ~~borrower demand to lock~~ in ~~current~~FHLB ~~low~~advances ~~interest~~and ~~rates~~advance ~~prior~~payments toby ~~anticipated~~borrowers ~~increases~~for intaxes ~~interest rates in future periods as well as the seasonal increase in home sales in the spring~~ and ~~summer. Multifamily and commercial real estate loans declined $702~~insurance,~~000,~~ orpartially ~~7.4%,~~offset toby ~~$8.8~~an ~~million~~increase at September 30, 2015 from $9.5 million at December 31, 2014. Home equity loans decreased $1.1 million, or 14.0%, to $6.9 million at September 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~~deposits.

Deposits. Total deposits increased $1.9 million, or 1.1%, to $167.5 million at March 31, 2016 from $165.6 million at December 31, 2015. Money market accounts increased $1.4 million, or 22.5%, to $6.4 million at March 31, 2016 from $5.0 million at December 31, 2015 due to an increase in municipal deposits. Passbook account balances grew $752,000, or 1.1%, to $70.2 million at March 31, 2016 from $69.5 million at December 31, 2015. NOW and checking account balances increased $535,000, or 1.5%, to $35.0 million at March 31, 2016 from $34.5 million at December 31, 2015. The increase in our money market accounts and lower cost core deposits, which we consider being our passbook, NOW and checking accounts, were partially offset by a decrease in our certificates of deposit. Higher cost certificates of deposit decreased $881,000, or 1.6%, to $55.8 million at March 31, 2016 from $56.7

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~~Federal Home Loan Bank stock decreased $477,000, or 27.0%, to $1.3~~ million at ~~September~~December 3031, 2015 ~~from $1~~.8 ~~million~~The atdecline ~~December 31,~~in ~~2014~~the asbalance weof ~~sold~~certificates ~~shares~~ of ~~FHLB~~deposit ~~stock~~was ~~back~~attributable to ~~the~~legacy ~~FHLB. The~~certificate ~~decrease~~of ~~was~~deposit ~~primarily~~customers ~~due~~seeking tohigher ~~changes~~yields ~~in the membership stock requirement~~ as ~~specified~~accounts inre-priced ~~the~~to ~~FHLB~~current oflower ~~Chicago’s~~market ~~capital~~interest ~~plan~~rates ~~which~~upon ~~allowed~~maturity ~~excess~~and/or ~~stock~~moving tomaturing becertificates ~~available~~into ~~for~~more ~~repurchase~~liquid socore ~~that~~deposit ~~those~~accounts ~~funds~~in ~~could~~anticipation beof ~~deployed~~higher ~~elsewhere~~interest ~~in the organization~~rates.

~~Other~~FHLB ~~real~~Advances. ~~estate~~FHLB ~~owned~~of Chicago advances decreased $~~502~~3.0 million,~~000,~~ or 2860.70%, to $1.2.0 million at ~~September~~March 3031, ~~2015~~2016 from $15.70 million at December 31, ~~2014~~2015. We ~~The~~repaid ~~decrease~~our ~~was~~maturing ~~primarily~~FHLB ~~due~~advance toof $~~474,000~~3.0 inmillion ~~sales~~with ~~of three one-to four- family residential properties which resulted in~~ a ~~loss~~weighted ofaverage ~~$19,000~~interest ~~and~~rate ~~write-downs~~ of ~~$359,000~~2.71% onduring ~~two~~the ~~commercial~~three ~~real~~months ~~estate~~ended ~~properties~~March 31, ~~partially~~2016. ~~offset~~The byremaining ~~additions~~$2.0 tomillion ~~other~~FHLB ~~real estate owned~~ of ~~two~~Chicago ~~one-to~~advance ~~four-family~~at ~~residential~~March 31, ~~properties~~2016 ~~and~~carries a ~~commercial~~fixed ~~real~~rate ~~estate property for a total~~ of ~~$319,000~~2.32% ~~during~~and ~~the~~matures ~~nine~~in ~~months ended September~~May ~~30, 2015~~2016.

~~Liabilities~~ESOP Repurchase Obligation. ~~Total~~The ~~liabilities~~ESOP ~~decreased~~repurchase ~~$8.1~~obligation ~~million~~increased $159,000, or 416.40%, to $~~175~~1.315 million at ~~September~~March 3031, ~~2015~~2016 from $~~183.4~~993,000 ~~million~~ at December 31, ~~2014~~2015. The ~~decrease~~increase ~~in total liabilities~~ was primarily due to ~~declines~~an increase in ~~FHLB~~the ~~advances~~market ~~and~~value ~~advance~~of ~~payments~~the byvested ~~borrowers~~portion ~~for~~of ~~taxes~~the ~~and~~common ~~insurance~~stock held in the ESOP.

~~Deposits~~Stockholders’ Equity. Total ~~deposits~~stockholders’ ~~increased~~equity decreased $~~285~~159,000, or 0.25%, to $~~166~~32.53 million at ~~September~~March 3031, ~~2015~~2016 from $~~166~~32.25 million at December 31, ~~2014~~2015. ~~Passbook~~The ~~account~~Company ~~balances~~repurchased ~~grew $2.7 million~~29,400 orcommon ~~4.1%,~~shares ~~to $68.0 million~~ at ~~September 30,~~an ~~2015~~average ~~from~~price of $6514.454 ~~million~~per atshare ~~December 31,~~from ~~2014.~~the ~~NOW~~third ~~and~~stock ~~checking~~repurchase ~~account~~program ~~balances~~for ~~increased~~a ~~$1.9~~total ~~million,~~cost orof ~~6.0%, to~~ $~~33.8 million at September 30~~427,000 ~~2015~~and ~~from~~paid ~~$31.9~~cash ~~million~~dividends aton ~~December 31,~~common ~~2014.~~stock ~~The~~of ~~increase in our lower cost core deposits~~$102,000 which wewere ~~consider~~partially tooffset beby ~~our~~net ~~checking,~~income ~~passbook~~of $172,000 and ~~NOW accounts were partially offset by~~ a decrease in ~~our~~the ~~money~~unrealized ~~market~~loss ~~accounts~~on ~~and~~securities ~~certificates~~classified ofas ~~deposit.~~available-for-sale ~~Money~~of ~~market accounts decreased~~ $~~963~~318,000, orfor ~~15.0%,~~the tothree ~~$5.5~~months ~~million~~ended ~~at September~~March 3031, ~~2015~~2016. ~~from~~In ~~$6.4~~addition, ~~million~~an atincrease ~~December 31,~~in ~~2014.~~the ~~Higher~~ESOP ~~cost~~repurchase ~~certificates~~obligation ofresulted ~~deposit~~in ~~decreased~~a $~~3.3 million~~159,000 ordecrease ~~5.3%,~~in tostockholders’ ~~$59~~equity.3 ~~million~~Book atvalue ~~September 30,~~per ~~2015~~share ~~from~~was $6214.692 ~~million~~ at ~~December~~March 31, ~~2014.~~2016 ~~The decline in the balance of certificates of deposit was attributable to legacy certificates of deposit customers seeking higher yields~~ as ~~accounts~~compared ~~re-priced~~ to ~~current~~$14.82 ~~lower~~at ~~market~~December 31, ~~interest rates upon maturity and/or moving maturing certificates into more liquid core deposit accounts in anticipation of higher interest rates~~2015.

FHLB Advances. FHLB of Chicago advances decreased $7.0 million, or 58.3%, to $5.0 million at September 30, 2015 from $12.0 million at December 31, 2014. Due to our excess liquidity, we repaid our maturing FHLB advances of $7.0 million with a weighted average interest rate of 2.24% during the nine months ended September 30, 2015. Outstanding FHLB of Chicago advances at September 30, 2015 were fixed-rate with maturities of less than one year with a weighted average interest rate of 2.55%.

ESOP Repurchase Obligation. The ESOP repurchase obligation increased $79,000, or 8.7% to $988,000 at September 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.

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Stockholders’ Equity. Total stockholders’ equity decreased $472,000, or 1.4%, to $32.7 million at September 30, 2015 from $33.2 million at December 31, 2014. The Company repurchased shares of 20,657 at an average price of $13.66 per share from the second and third stock repurchase programs for a total cost of $282,000 and paid dividends on common stock of $308,000, which were partially offset by net income of $14,000, and a decrease in the unrealized loss on securities classified as available-for-sale of $68,000 for the nine months ended September 30, 2015. Book value per share was $14.91 at September 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):

	September 30,			December 31,
	March 31,			December 31,
	2015			2014
	2016			2015
Loans 90 days or more past due and still accruing	$	—		$	—
Non-accrual troubled debt restructurings	~~1,009~~573			~~1,032~~381
Non-accrual loans (excludes troubled debt restructurings)	~~850~~1,078			~~1,946~~942
Total non-performing loans	$	1,~~859~~651		$	21,~~978~~323
Other real estate owned	~~1,249~~307			~~1,751~~307
Total non-performing assets	$	31,~~108~~858		$	41,~~729~~630
Non-performing assets to total assets	10.4990		%	20.1778		%
Non-performing loans to total loans	1.5945			21.5915
Allowance for loan losses to non-performing loans	5854.3661			3774.0468
Allowance for loan losses to total loans	0.9379			0.9686

Non-performing Assets and Allowance for Loan Losses. We had non-performing assets of $3.1 million, or 1.49% of total assets, as of September 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 sales of $474,000 of three one-to four-family residential other real estate owned properties and write-downs of $359,000 on two commercial real estate properties, partially offset by additions of two one-to four-family residential properties and a commercial real estate property for a total of $319,000 during the nine months ended September 30, 2015. Net charge-offs for the nine months ended September 30, 2015 and September 30, 2014 were $148,000 and $880,000, respectively. The allowance for loan losses totaled $1.1 million at both September 30, 2015 and December 31, 2014. This represents a ratio of the allowance for loan losses to total loans of 0.93% at September 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 for29

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~~impairment~~Non-performing Assets and Allowance for Loan Losses. We had non-performing assets of $1.9 million, or 0.90% of total assets, as of March 31, 2016 and $1.6 million, or 0.78% of total assets, as of December 31, 2015. The increase in nonperforming assets during the ~~continued~~quarter ~~reduced~~was ~~risk~~primarily ~~profile~~due to an increase in nonaccrual loans with three loans aggregating $457,000 being placed on nonaccrual during the quarter. Net charge-offs for the three months ended March 31, 2016 and March 31, 2015 were $27,000 and $48,000 respectively. The allowance for loan losses totaled $901,000 at March 31, 2016 and $988,000 at December 31, 2015. This represents a ratio of the allowance for loan ~~portfolio~~losses to total loans of 0.79% at March 31, 2016 and ~~improvements~~0.86% at December 31, 2015. The slight decrease in ~~economic~~the ~~conditions~~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, a $3.3 million decrease in the level of classified assets which have higher loss factors assigned, and the continued reduced risk profile of the loan portfolio.

At ~~September~~March 3031, ~~2015~~2016, we had 2224 one- to four-family residential loans, one home equity loan, and four multifamily and commercial real estate loans with an aggregate principal balance of $1.97 million, none of which had an individual principal balance in excess of $500,000 on nonaccrual status. At December 31, ~~2014~~2015, we had 2726 one- to four-family residential loans, ~~five~~and home equity ~~loans,~~lines ~~and~~of ~~five~~credit ~~multifamily and commercial real estate loans~~ with an aggregate principal balance of $~~3.0 million~~973,000 ~~none~~and ofhad ~~which~~three ~~had~~commercial real estate loans with an ~~individual~~aggregate principal balance ~~in excess~~ of $~~500~~350,000, on ~~nonaccrual status~~non-accrual.

At ~~September~~March 3031, ~~2015~~2016, we had ~~three~~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 $2.2 million, of which $~~1.0~~573,000 ~~million~~ was on non-accrual status. At December 31, ~~2014~~2015, we had 1011 one-to four- family residential loans and ~~five~~four ~~multifamily and~~ commercial real estate loans classified as troubled debt restructurings with an aggregate principal balance of $2.52 million of which $~~1.0~~381,000 ~~million~~ was on non-accrual status.

At ~~September~~December 3031, 2015, we had a $3.5 million commercial real estate loan secured by a golf course located in Flossmoor, Illinois which was performing in accordance with its terms and was on accrual status but was classified as substandard. 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 that the borrower’s ~~displayed~~improved ~~well-defined~~financial ~~credit~~condition ~~weaknesses~~supports ~~that~~the ~~may~~expected ~~jeopardize~~ full collection of principal and interest ~~if not corrected~~. As a result, the loan iswas classified as ~~substandard~~a pass credit as of ~~September~~March 3031, ~~2015~~2016. ~~However, the loan was performing in accordance with its terms and is on accrual status.~~

AtAlthough ~~September 30, 2015,~~ we ~~had~~record ~~another~~our ~~real~~non-performing ~~estate~~assets ~~owned~~at ~~property of $940,000 representing a 3.35% participation in an indoor water park/ hotel complex. During~~ the ~~quarter~~estimated ~~ended~~fair ~~September 30,~~value ~~2015~~of the property ~~manager~~or ~~received~~underlying ~~two~~collateral ~~offers~~less ~~from~~costs ~~third parties~~ to ~~purchase the property~~sell, ~~subject~~there tomay ~~customary~~be ~~due~~additional ~~diligence.~~losses Inon ~~October 2015,~~these ~~the~~loans ~~participants voted to accept the lower cash offer~~ and ~~authorized~~other ~~the~~real ~~property~~estate ~~manager~~owned toproperties ~~proceed~~in ~~with~~ the ~~due diligence and drafting of the sale agreement~~future. ~~As a result, we recorded an additional $104,000 write-down during the third quarter of 2015 to reflect the expected net realizable value upon the sale.~~

~~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.~~30

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Comparison of Operating Results for the Three Months Ended ~~September~~March 3031, ~~2015~~2016 and ~~September~~March 3031, ~~2014~~2015

General. Net income for the three months ended ~~September~~March 3031, ~~2015~~2016 was $47172,000, aan ~~decrease~~increase of $~~282~~97,000, or 85129.7%, compared to net income of $~~329~~75,000 for the three months ended ~~September~~March 3031, ~~2014~~2015. The ~~decline~~increase was mainly attributable to a decline in the provision for loan losses of $~~740~~75,000, ~~decrease~~and inan ~~other~~$85,000 ~~real~~decrease ~~estate~~in ~~owned~~non-interest ~~gains~~expense, partially offset by a ~~decline~~decrease in ~~the~~non-interest ~~provision~~income ~~for~~primarily ~~loan~~due ~~losses~~to ofa $~~207~~39,000, andecline ~~$84,000~~in ~~decrease~~gain inon ~~non-interest~~sale ~~expense~~of securities and a $~~186~~40,000 ~~decrease~~increase in income tax expense.

Net Interest Income. Net interest income increased by $2819,000 to $1.1 million for the three months ended ~~September~~March 3031, ~~2015~~2016, as compared to the same period in ~~2014~~2015. The ~~net~~increase ~~interest~~was ~~margin~~due ~~increased~~to bya 1910 basis points, toor 24.374% ~~for~~improvement in the ~~three~~net ~~months~~interest ~~ended~~margin ~~September 30, 2015 compared~~ to 2.1836% for the three months ended ~~September~~March 3031, ~~2014,~~2016 ~~and~~compared ~~the net interest rate spread increased 22 basis points~~ to 2.26% for the ~~three~~same ~~months~~period ~~ended~~in ~~September 30~~2015, ~~2015~~partially ~~compared~~offset toby a 2.048% ~~for~~decline ~~the~~in ~~three~~average ~~months~~interest-earning ~~ended September 30, 2014~~assets.

Interest Income. Total interest income ~~decreased~~was ~~$55,000,~~stable orat ~~4.0%, to~~ $1.3 million for the three months ended ~~September~~March 3031, ~~2015~~2016 ~~from~~and $12015.~~4 million for the same period in 2014.~~ The slight decrease was primarily due to a $125.06 million, or 52.98% decrease in average interest-earning assets, partially offset by a ~~five~~four basis point increase in the average yield on interest-earning assets. ~~The~~to ~~average yield on interest- earning assets was~~ 2.7469% for the three months ended ~~September~~March 3031, ~~2015~~2016 as compared to 2.6965% for the same period in ~~2014~~2015. The decline in the average balance of interest-earning assets was primarily due to using the proceeds from calls and repayments of lower yielding securities available-for-sale portfolio and deposit inflows for funding the repayment of maturing FHLB advances ~~and modest deposit outflows~~.

Interest income from loans decreased by $2433,000, or 2.09%, to $1.1 million for the three months ended ~~September~~March 3031, ~~2015~~2016, ~~from~~compared ~~$1.2~~to ~~million for~~ the ~~three~~same ~~months~~period ~~ended~~in ~~September 30, 2014~~2015. The decline in interest income from loans was due to aan ~~nine~~11 basis ~~point~~points decrease in the average ~~loan~~ yield. ~~The average yield~~ on loans ~~decreased~~ to 3.8778% for the three months ended ~~September~~March 3031, ~~2015~~2016 from 3.9489% for the same period in ~~2014~~2015. 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~~multifamily and commercial real estate loans as a result of the prolonged low interest rate environment.

38Interest income from securities decreased $4,000, or 2.3%, to $171,000 for the three months ended March 31, 2016, from $175,000 for the three months ended March 31, 2015. The decrease primarily resulted from a $7.5 million, or 13.8% decrease in the average securities balance, partially offset by a 17 basis points increase in the average securities yield for the three months ended March 31, 2016 as compared to the same period in 2015, as proceeds from maturing securities were used to repay FHLB advances. The average yield on securities increased to 1.45% for the three months ended March 31, 2016 from 1.28% for the same period in 2015.

Interest Expense. Interest expense decreased by $36,000, or 31.9%, to $159,000 for the three months ended March 31, 2016, from $195,000 for the same period in 2015. The primary reasons for the decrease were due to the $6.9 million, or 4.5% decrease in the average balance of interest- bearing liabilities and an eight basis points decline in the average interest rate paid for interest-bearing liabilities.

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~~Interest~~Average ~~income~~interest ~~from~~bearing ~~securities~~liabilities ~~decreased~~were $~~30,000, or 15~~147.~~1%,~~3 tomillion ~~$169,000~~and ~~for the three months ended September 30, 2015, from~~ $~~199,000~~154.2 million for the three months ended ~~September~~March 3031, ~~2014. The~~2016 ~~decrease~~and primarily resulted from a $10.0 million, or 17.1% decrease in the average securities balance, partially offset by a three basis point increase in the average securities yield for the three months ended SeptemberMarch 3031, 2015, ~~as compared to the same period in 2014~~respectively. The ~~average~~decrease ~~yield~~was onprimarily ~~securities~~due ~~increased~~ to ~~1.39% for~~ the ~~three~~repayment ~~months~~of ~~ended~~maturing ~~September 30,~~FHLB ~~2015~~advances ~~from~~and ~~1.36%~~lower ~~for~~deposit ~~the same period in 2014~~balances.

Interest ~~Expense. Interest~~ expense on deposits decreased by $837,000, or 314.98%, to $~~177~~139,000 for the three months ended ~~September~~March 3031, ~~2015~~2016, from $~~260~~146,000 for the same period in ~~2014~~2015. ~~The~~ Our ~~primary~~average ~~reasons~~cost ~~for~~of ~~the~~deposits ~~decrease~~decreased ~~were~~one ~~due~~basis point to 0.39% for the ~~$11.7~~three ~~million~~months ended March 31, or2016 17from 0.140% ~~decrease~~for in the ~~average~~three ~~balance~~months ofended March 31, 2015. Average interest- bearing ~~liabilities~~deposit ~~and~~balances adecreased 17$2.4 ~~basis~~million ~~points~~to ~~decline~~$143.8 inmillion for the ~~average~~three ~~interest~~months ~~rate~~ended ~~paid~~March 31, ~~for~~2016, ~~interest-bearing~~from ~~liabilities~~$146.2 ~~Average~~million ~~interest~~for ~~bearing~~the ~~liabilities~~same ~~were~~period in 2015 due primarily to a $~~148~~5.95 million decrease in the average balance of certificates of deposit and a $~~160~~1.68 million ~~for~~decrease in the ~~three~~average ~~months~~balance ~~ended~~of ~~September 30~~money market accounts, ~~2015~~partially ~~and~~offset ~~September 30,~~by ~~2014,~~a ~~respectively~~$4.0 million increase in the average balance of passbook accounts. The decrease ~~was~~in ~~primarily~~the ~~due~~average balance of certificates of deposit was attributable to ~~the~~legacy ~~repayment~~certificates of ~~maturing~~deposit ~~FHLB~~customers ~~advances~~seeking higher yields as accounts re-price to current lower market interest rates upon maturity and/or ~~modest~~moving maturing certificates into more liquid core deposit ~~outflows~~accounts in anticipation of higher interest rates.

Interest expense on ~~deposits~~FHLB advances decreased by $3229,000, or 1859.2%, to $~~144~~20,000 for the three months ended ~~September~~March 3031, ~~2015~~2016, from $~~176~~49,000 for the same period in ~~2014~~2015. ~~Our~~ ~~average~~The ~~cost~~primary ofreason ~~deposits decreased eight basis points to 0.40%~~ for the ~~three months ended September 30, 2015 from 0.48% for the three months ended September 30, 2014. The~~ decrease inwas ~~our~~a 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 $24.25 million ~~to $143.9 million for the three months ended September 30~~, ~~2015,~~or ~~from $146~~56.13% ~~million for the same period in 2014 due primarily to a $5.1 million~~ decrease in the average balance of ~~certificates~~FHLB of ~~deposit~~Chicago ~~and~~advances adue ~~$1.9~~to ~~million decrease in~~ the ~~average~~repayment ~~balance~~ of ~~money~~maturing ~~market~~FHLB ~~accounts~~advances, ~~partially~~and ~~offset by~~ a ~~$4.3~~16 ~~million~~basis ~~increase~~point ~~in the average balance of passbook accounts. The~~ decrease in the average ~~balance~~cost of ~~certificates~~FHLB ofadvances ~~deposit was attributable~~ to ~~legacy~~2.29% ~~certificates~~for ofthe ~~deposit~~three ~~customers~~months ~~seeking~~ended ~~higher~~March 31, ~~yields~~2016 asdue ~~accounts re-priced~~ to ~~current~~the ~~lower~~payoff ~~market interest rates upon maturity and/or moving maturing certificates into more liquid core deposit accounts in anticipation~~ of higher ~~interest~~cost ~~rates~~advances.

~~Interest~~Average ~~expense on FHLB advances decreased $51~~Balances,~~000,~~ orNet ~~60.7%,~~Interest toIncome ~~$33,000~~and ~~for~~Yields ~~the~~Earned ~~three~~and ~~months~~Rates ended September 30, 2015, from $84,000 for the same period in 2014. The primary reason for the decrease was a $9.5 million, or 65.5% decrease in the average balance of FHLB of Chicago advances, partially offset by a 32 basis point increase in the average cost of FHLB advances to 2.56% due to the payoff of lower cost advances. The decrease in average balance was due to the repayment of maturing FHLB advances.Paid

39The table on the following page sets forth the average balance sheet, average annualized yield and cost, and certain other information for the three months ended March 31, 2016 and 2015. All average balances are monthly average balances. No tax equivalent adjustments were made. Non-accruing loans have been included in the table as loans carrying a zero yield. The annualized yields set forth below include the effect of deferred fees, discounts, and premiums that are amortized or accreted to interest income or expense.

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	For the Three Months Ended September 30,
	For the Three Months Ended March 31,
	2015							2014
	2016							2015
	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	$	2529,~~716~~112		$	1636	0.2549	%	$	26,~~688~~690		$	17	0.25	%
Securities	4847,~~497~~136			~~169~~171		1.3945		5854,~~526~~652			~~199~~175		1.3628
Loans receivable	~~116~~114,~~475~~976			1,~~127~~086		3.8778		~~116~~115,~~965~~048			1,~~151~~119		3.9489
Federal Home Loan Bank common stock	1,291			2		0.62		1,768			2		0.45
FHLB common stock	1,291			3		0.93		1,768			2		0.45
Total interest-earning assets	~~191~~192,~~979~~515			1,~~314~~296		2.7469		~~203~~198,~~947~~158			1,~~369~~313		2.6965
Total non-interest-earning assets	1615,391							16,~~672~~625
Total assets	$	~~208~~207,~~370~~906						$	~~220~~214,~~619~~783
Interest-bearing liabilities:
Passbook accounts	$	6869,~~010~~645		2731		0.1618	%	$	6365,~~723~~641		2425		0.15	%
NOW accounts	11,~~556~~419			—		—		1110,~~089~~573			—		—
Money market accounts	46,~~755~~343			—3		—0.19		68,~~666~~128			—		—
Certificates of deposit	5956,~~595~~398			~~117~~105		0.7974		6461,~~659~~858			~~152~~121		0.9478
Total deposits	143,~~916~~805			~~144~~139		0.4039		146,~~137~~195			~~176~~146		0.4840
Federal Home Loan Bank of Chicago advances	5,000			33		2.64		14,500			84		2.32
FHLB of Chicago advances	3,500			20		2.29		8,000			49		2.45
Total interest-bearing liabilities	~~148~~147,~~916~~305			~~177~~159		0.4843		~~160~~154,~~637~~195			~~260~~195		0.6551
Non-interest-bearing demand deposits-checking accounts	$	2122,~~963~~583						$	1922,~~939~~072
Other liabilities	45,~~858~~541							45,~~490~~508
Total liabilities	175,~~737~~429							~~185~~181,~~066~~775
Stockholders’ Equity	32,~~633~~477							3533,~~553~~008
Total liabilities and stockholders’ equity	$	~~208~~207,~~370~~906						$	~~220~~214,~~619~~783
Net interest income				$	1,137						$	1,~~109~~118
Net interest rate spread (1)						2.26	%						2.0414	%
Net interest-earning assets (2)	$	4345,~~063~~210						$	43,~~310~~963
Net interest margin (3)						2.3736	%						2.1826	%
Average interest-earning assets to average interest-bearing liabilities	~~128~~130.9269		%					~~126~~128.9651		%

(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 establish 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 noa $60,000 credit to the provision for loan losses for the three months ended ~~September~~March 3031, ~~2015~~2016 and a $~~207~~15,000 provision for the three months ended ~~September~~March 3031, ~~2014~~2015. The ~~lack~~credit ~~of a~~ provision was due to a decline in historical loss factors, reduction in the level of substandard assets and having net ~~recoveries~~charge-offs for the current quarter of $527,000 compared to $48,000 in 2015. The allowance for loan losses was $~~1.1 million~~901,000, or 0.9379% of total loans, at ~~September~~March 3031, ~~2015~~2016 compared to $~~1.1 million~~988,000, or 0.9686% of total loans, at December 31, ~~2014~~2015. The decrease in the allowance for loan losses as a ~~percent~~percentage of total loans was due to a decline in the historical loss factors on one- to-four family, multifamily and commercial real estate loans collectively evaluated for impairment, ~~the~~a ~~continued~~$3.3 ~~reduced~~million ~~risk~~decrease ~~profile~~in ofloans ~~the~~classified ~~loan~~as ~~portfolio~~substandard which have higher loss factors assigned, and ~~improvements~~the incontinued ~~economic~~reduced ~~conditions~~risk inprofile of the ~~Bank’s~~loan ~~market area.~~portfolio,

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 and provide for 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 ~~September~~March 3031, ~~2015~~2016 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 $~~787~~42,000 to $~~170~~177,000 for the three months ended ~~September~~March 3031, ~~2015~~2016, from $~~957~~219,000 for the three months ended ~~September~~March 3031, ~~2014~~2015. The decrease was primarily due to a $~~740~~39,000 ~~and $56,000~~ decrease in ~~gains~~gain inon ~~other~~securities ~~real~~sales ~~estate~~due ~~owned,~~to ~~and~~less ~~securities~~ sales, ~~respectively~~activity in 2016.

Non-Interest Expense. Non-interest expense decreased $8485,000, or 6.39%, to $1.31 million for the three months ended ~~September~~March 3031, ~~2015~~2016, as compared to the same period in ~~2014~~2015. The decrease was primarily due to a $~~104~~38,000 decrease in compensation and employee benefits expense, ~~and~~ a $4023,000 decline in professional and regulatory expense, ~~partially~~and ~~offset by~~ a $4523,000 ~~increase~~decrease in other real estate owned expense/impairment.

Compensation and employee benefits expense decreased $~~104~~38,000, or 156.93% to $~~551~~565,000 for the three months ended ~~September~~March 3031, ~~2015~~2016, from $~~655~~603,000 for the same period in ~~2014~~2015. The primary reasons for the decrease were lower compensation expense related to reduced headcount, ~~lower bonus accruals~~ and decreases in medical insurance, payroll tax and stock related compensation expenses.

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Professional and regulatory expense decreased $4023,000 to $8270,000 for the three months ended ~~September~~March 3031, ~~2015~~2016 from $~~122~~93,000 for the same period in ~~2014~~2015. The decrease was primarily due to ~~reporting~~lower ~~efficiencies~~legal, ~~from~~audit ~~the~~and ~~Company’s~~SEC ~~second year~~ reporting ~~as a public company and the Bank’s improved overall regulatory condition~~fees.

Other real estate owned expense/impairment ~~increased~~decreased $4523,000 to $876,000 for the three months ended ~~September~~March 3031, ~~2015~~2016, from $4229,000 for the three months ended ~~September~~March 3031, ~~2014~~2015. The ~~increase~~decrease was primarily due to ~~write-downs~~lower ofcarrying ~~$154,000~~costs onprimarily ~~two~~due ~~commercial~~to ~~properties,~~the ~~partially~~sale ~~offset~~in bythe ~~$51,000~~fourth quarter of ~~operating~~2015 ~~income~~of ~~received~~the ~~from~~Bank’s ~~one~~largest ofother ~~its~~real ~~commercial~~estate ~~properties~~owned property.

Income Tax Expense. We recorded an income tax expense of $662,000 for the three months ended ~~September~~March 3031, ~~2015~~2016 ~~and~~compared anto income tax expense of $~~192~~22,000 for the three months ended ~~September~~March 3031, ~~2014~~2015. The ~~decrease~~increase in the income tax expense was primarily due to the $~~468~~137,000 ~~decrease~~increase in income before income taxes for the ~~third~~first quarter of ~~2015~~2016 compared to the same period in ~~2014~~2015.

Comparison of Operating Results for the Nine Months Ended September 30, 2015 and September 30, 2014

General. Net income for the nine months ended September 30, 2015 was $14,000, a decrease of $2.0 million, or 99.3%, from net income of $2.0 million for the nine months ended September 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, a $775,000 decrease in other real estate owned gains, higher other real estate owned expense/impairment of $257,000, and a decline in net interest income of $125,000. These decreases were partially offset by a decline in the provision for loan losses of $557,000 for the nine months ended September 30, 2015 compared to the nine months ended September 30, 2014.

Net Interest Income. Net interest income decreased by $125,000 to $3.4 million for the nine months ended September 30, 2015, from $3.5 million for the same period in 2014. The decrease was primarily due to an $8.7 million, or 4.2% decrease in the level of interest-earning assets, slightly offset by a one basis point improvement in the net interest margin to 2.31% from 2.30% for the nine months ended September 30, 2015 as compared to the same period in 2014.

Interest Income. Total interest income decreased $336,000, or 7.9%, to $3.9 million for the nine months ended September 30, 2015 from $4.3 million for the same period in 2014. The decrease was primarily due to the &8.7 million, or 4.2% decrease in average interest-earning assets and an 11 basis points decline in the average yield on interest- earning assets. The average yield on interest- earning assets was 2.69% for the nine months ended September 30, 2015 as compared to 2.80% for the same period in 2014. The decline was primarily a result of the 12 and 16 basis point decreases in the average yield on loans and securities, respectively.

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Interest income from loans decreased by $194,000, or 5.4%, to $3.4 million for the nine months ended September 30, 2015, from $3.6 million for the nine months ended September 30, 2014. The decline in interest income from loans was due to decreases in the average loan yield and average loan balance for the nine months ended September 30, 2015 as compared to the nine months ended September 30, 2014. The average yield on loans decreased to 3.87% for the nine months ended September 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 $3.7 million to $115.9 million for the nine months ended September 30, 2015 from $119.0 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 $147,000, or 22.3%, to $513,000 for the nine months ended September 30, 2015, from $660,000 for the nine months ended September 30, 2014. The decrease primarily resulted from a decrease in the average securities yield and average securities balance for the nine months ended September 30, 2015 as compared to the same period in 2014. The average yield on securities decreased to 1.32% for the nine months ended September 30, 2015 from 1.48% for the same period in 2014 due to the prolonged low interest rate environment. The average balance of securities decreased $7.7 million to $51.9 million for the nine months ended September 30, 2015 from $59.6 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 $211,000, or 27.7%, to $552,000 for the nine months ended September 30, 2015, from $763,000 for the same period in 2014. The primary reasons for the decrease were due to the $9.0 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 $151.1 million and $160.2 million for the nine months ended September 30, 2015 and September 30, 2014, respectively, while the average cost of interest bearing liabilities was 0.49% for the nine months ended September 30, 2015 as compared to 0.63% for the same period in 2014.

Interest expense on deposits decreased by $65,000, or 12.9%, to $438,000 for the nine months ended September 30, 2015, from $503,000 for the same period in 2014. Our average cost of deposits decreased six basis points to 0.40% for the nine months ended September 30, 2015 from 0.46% for the nine months ended September 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 were relatively unchanged at $144.9 million for the nine months ended September 30, 2015, compared to $145.0 million for the same period in 2014 due primarily to the increase in the average balance of passbook accounts of $3.0 million. The increase was primarily due to customer preferences in moving maturing certificate of deposit balances to more liquid core deposit products.

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Interest expense on FHLB advances decreased $146,000, or 56.2%, to $114,000 for the nine months ended September 30, 2015, from $260,000 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, partially offset by a 17 basis point increase in the average cost of FHLB advances to 2.45%. Average balances of FHLB of Chicago advances decreased $9.0 million to $6.2 million for the nine months ended September 30, 2015 from $15.2 million for the same period in 2014. The decrease was due to the repayment of maturing FHLB advances.

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	For the Nine Months Ended September 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	$	25,434		$	47	0.24	%	$	23,081		$	42	0.24	%
Securities	51,930			513		1.32		59,593			660		1.48
Loans receivable	115,888			3,367		3.87		118,965			3,561		3.99
Federal Home Loan Bank of Chicago common stock	1,482			6		0.54		1,768			6		0.45
Total interest-earning assets	194,734			3,933		2.69		203,407			4,269		2.80
Total non-interest-earning assets	16,482							16,034
Total assets	$	211,216						$	219,441
Interest-bearing liabilities:
Passbook accounts	$	66,770		79		0.16	%	$	63,723		70		0.15	%
NOW accounts	10,988			—		—		10,624			—		—
Money market accounts	6,375			1		—		6,557			—		—
Certificates of deposit	60,777			358		0.79		64,109			433		0.90
Total deposits	144,910			438		0.40		145,013			503		0.46
Federal Home Loan Bank of Chicago advances	6,200			114		2.45		15,200			260		2.28
Total interest-bearing liabilities	151,110			552		0.49		160,213			763		0.63
Non-interest-bearing demand deposits-checking accounts	$	22,057						$	19,654
Other liabilities	5,234							4,748
Total liabilities	178,401							184,615
Stockholders’ Equity	32,815							34,826
Total liabilities and stockholders’ equity	$	211,216						$	219,441
Net interest income				$	3,381						$	3,506
Net interest rate spread (1)						2.20	%						2.17	%
Net interest-earning assets (2)	$	43,624						$	43,194
Net interest margin (3)						2.31	%						2.30	%
Average interest-earning assets to average interest-bearing liabilities	128.87		%					126.96		%

(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 establish 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 nine months ended September 30, 2015 and $687,000 for the nine months ended September 30, 2014. The allowance for loan losses was $1.1 million, or 0.93% of total loans, at September 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 and provide for 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 September 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 $782,000 to $563,000 for the nine months ended September 30, 2015, from $1.3 million for the nine months ended September 30, 2014. The decrease was primarily due to a $775,000 decrease in other real estate owned gains due to a large commercial real estate parcel that was sold in 2014.

Non-Interest Expense. Non-interest expense increased $39,000, or 1.0%, to $3.9 million for the nine months ended September 30, 2015, from $3.8 million for the nine months ended September 30, 2014. The increase was primarily due to $257,000 of higher other real estate owned expense/impairment, partially offset by a $124,000 decrease in professional and regulatory expense, a $41,000 decrease in federal deposit insurance expense, and an $81,000 decrease in other non-interest expense items. The decrease in other non-interest expense was due to less legal expenses related to problem loans and lack of costs associated with flood damage at a branch location in 2014.

Other real estate owned expense/impairment increased $257,000 to $324,000 for the nine months ended September 30, 2015, from $67,000 for the nine months ended September 30, 2014. The increase was primarily due to write-downs of $359,000 on two commercial properties, partially offset by

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$51,000 of operating income received from one of the commercial properties and having lower expenses due to a $1.0 million commercial property that was sold in the third quarter of 2014.

Professional and regulatory expense decreased $124,000 to $264,000 for the nine months ended September 30, 2015 from $388,000 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 $41,000 to $143,000 for the nine months ended September 30, 2015 from $184,000 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 $66,000 for the nine months ended September 30, 2015 and an income tax benefit of $1.7 million for the nine months ended September 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 42.34% and 4142.87% for the ~~nine~~three months ended ~~September~~March 3031, ~~2015~~2016 and for the year ended December 31, ~~2014~~2015, respectively. We adjust our liquidity levels to fund deposit outflows, pay real estate taxes on mortgage loans, ~~repay~~to ~~borrowings~~fund ~~and~~the torepayment ~~fund~~of borrowings and loan commitments. We also adjust liquidity as appropriate to meet our 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 $2632.1 million at ~~September~~March 3031, ~~2015~~2016 and $2926.57 million at December 31, ~~2014~~2015.

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.

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 ~~September~~March 3031, ~~2015~~2016, we had $52.0 million in advances outstanding and were eligible to borrow an additional $6970.70 million from the FHLB of Chicago. At ~~September~~March 3031, ~~2015~~2016, we had no balance outstanding on the $5.0 million line of credit at JP Morgan Chase. The $2.0 million in FHLB advances outstanding at March 31, 2016 mature in May 2016.

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~~million~~Our ~~line~~cash flows are comprised of ~~credit~~three atclassifications: JPcash ~~Morgan~~flows ~~Chase~~from operating activities, investing activities, and financing activities. ~~The~~ Net cash provided by operating activities was $~~5.0~~113,000 ~~million~~for the three months ended March 31, 2016 compared to the $493,000 used in ~~FHLB~~the ~~advances~~three ~~outstanding~~months atended ~~September~~March 3031, 2015,. ~~are~~The increase in cash provided by operating activities in 2016 compared to used in 2015 was primarily due ~~within~~to ~~one~~2015 period including a $540,000 reduction in dividend payable related to the special $.25 cash dividend declared in 2014 and paid in the first quarter of 2015, and higher net income in the March 31, 2016 quarter compared to the prior year period.

~~Our~~Net cash ~~flows~~provided ~~are~~by ~~comprised~~investing activities, which consists primarily of ~~three~~disbursements ~~classifications:~~for ~~cash~~loan ~~flows~~originations ~~from~~and ~~operating~~the ~~activities~~purchase of securities, ~~investing~~offset ~~activities~~by principal collections on loans, proceeds from the sales, calls, repayments and ~~financing~~maturities ~~activities~~of securities, was $7.2 million for the three months ended March 31, 2016. Net cash provided by ~~operating~~investing activities was $8928,000 for the ~~nine~~three months ended ~~September~~March 3031, 2015. ~~compared~~During tothe ~~$394~~three months ended March 31,~~000~~ 2016, we purchased $4.0 million and sold $3.2 million in securities classified as available-for sale, and during the ~~nine~~three months ended ~~September~~March 3031, ~~2014~~2015, we purchased $7.0 million and sold $3.3 million in securities classified as available-for-sale.

Net cash used byin ~~investing~~financing activities, ~~which~~consisting ~~consists~~ primarily of ~~disbursements~~deposit ~~for~~account ~~loan originations and the purchase of securities~~activity, ~~offset~~FHLB byadvance ~~principal~~and ~~collections~~stock ~~on loans~~activity, ~~proceeds~~repurchases ~~from~~of the ~~sales,~~Company’s ~~calls~~common stock, ~~repayments~~ and ~~maturities~~dividends ofpaid ~~securities~~to our stockholders, was $42.52 million ~~for~~and ~~the nine months ended September 30, 2015. Net cash provided by investing activities was~~ $137.0 million for the ~~nine~~three months ended ~~September~~March 3031, ~~2014.~~2016 ~~During~~and ~~the nine months ended September~~March 3031, 2015, ~~we purchased $21~~respectively.0 ~~million~~The ~~and~~decrease ~~sold~~in ~~$3.3~~cash ~~million~~used in ~~securities classified as available-for sale, and during~~ the ~~nine~~2016 ~~months~~period ~~ended~~was ~~September 30,~~primarily ~~2014,~~due weto ~~purchased~~ $224.0 million ~~and sold $11.3 million~~ in ~~securities~~lower ~~classified~~FHLB asadvance ~~available-for-sale~~repayments.

~~Net~~At ~~cash~~March 31, ~~used~~2016, inwe ~~financing~~had ~~activities,~~outstanding ~~consisting~~commitments ~~primarily~~ of ~~deposit~~$2.3 ~~account~~million ~~activity,~~to ~~FHLB~~originate ~~advance~~loans. This ~~and~~amount ~~stock~~does ~~activity,~~not ~~repurchases~~include the unfunded portion of ~~the~~loans ~~Company’s~~in ~~common~~process. At ~~stock~~March 31, ~~and~~2016, ~~dividends~~certificates ~~paid~~of deposit scheduled to ~~our~~mature ~~stockholders,~~in ~~was~~less ~~$7.9~~than ~~million~~one ~~and~~year totaled $729.2 million. Based ~~for~~on ~~the~~prior ~~nine~~experience, ~~months~~management ~~ended~~believes ~~September 30,~~that ~~2015~~a ~~and~~significant ~~September 30~~portion of such deposits will remain with us, ~~2014~~although there can be no assurance that this will be the case. In addition, ~~respectively~~the cost of such deposits may be significantly higher upon renewal in a rising interest rate environment.

AtWe ~~September 30,~~are ~~2015,~~required ~~we had outstanding commitments of $2.9 million~~ to ~~originate~~maintain ~~loans. This~~liquid ~~amount~~assets ~~does not include the unfunded portion of loans~~ in ~~process. At~~an ~~September 30,~~amount ~~2015,~~that ~~certificates~~would ofensure ~~deposit~~our ~~scheduled~~safe toand ~~mature~~sound ~~in less than one year totaled $32~~operation.~~0 million.~~ ~~Based~~Our onliquidity ~~prior~~ratio ~~experience,~~at ~~management believes that a significant portion of such deposits will remain with us~~March 31, ~~although~~2016 ~~there~~was ~~can be no assurance that this will be the case~~43. ~~In addition, the cost of such deposits may be significantly higher upon renewal in a rising interest rate environment~~7%.

We are required to maintain liquid assets in an amount that would ensure our safe and sound operation. Our liquidity ratio at September 30, 2015 was 41.8%.

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Regulatory Capital

~~Basel~~Prior ~~III~~to ~~Capital~~20105, ~~Rules~~capital requirements did not apply to savings and loan holding companies. InBeginning ~~July 2013~~in 2015, as the ~~OCC~~Company is a Small Savings and Loan Holding Company under the ~~other~~Federal ~~federal~~Reserve’s ~~bank~~policy statement with consolidated assets under $1 billion, regulatory ~~agencies~~capital ~~published~~requirements ~~final~~apply ~~rules (~~only to the ~~“Basel~~Bank. ~~III~~The ~~Capital~~Bank ~~Rules”)~~is ~~that~~subject ~~implement,~~to inregulatory ~~part,~~capital ~~agreements~~requirements ~~reached~~administered by ~~the~~federal ~~Basel~~banking ~~Committee~~agencies. Capital onadequacy ~~Banking~~guidelines ~~Supervision~~and, ~~(“Basel~~additionally ~~Committee”)~~for inbanks, ~~“Basel~~prompt ~~III:~~corrective Aaction ~~Global~~regulations, ~~Regulatory~~involve ~~Framework~~quantitative ~~for~~measures ~~More~~of ~~Resilient~~assets, ~~Banks~~liabilities, and ~~Banking~~certain ~~Systems”~~off-balance-sheet ~~(“Basel~~items ~~III”)~~calculated under regulatory accounting practices. Capital amounts and ~~imposed~~classifications ~~new~~are also subject to qualitative judgments by regulators. Failure to meet capital requirements can initiate regulatory action. The final rules implementing Basel Committee on Banking Supervision’s capital guidelines for U.S. banks (Basel III rules) became effective for the Bank, ~~effective~~on January 1, 2015. ~~The~~with ~~Federal~~full ~~Reserve~~compliance ~~has~~with ~~amended~~all ~~its~~of ~~“Small~~the ~~Bank~~requirements ~~Holding~~being ~~Company”~~phased ~~policy~~in ~~statement~~over toa ~~exempt~~multi-year ~~savings~~schedule, and ~~loan~~fully ~~holding~~phased ~~companies~~in ~~with~~by ~~less~~January 1, ~~than~~2019. Beginning $1in 2016, a Capital Conservation Buffer (CCB) requirement became effective for banking organizations.0 ~~billion~~The inCCB ~~assets~~is ~~from~~designed to establish a capital range above minimum requirements. to insure

The Basel III Capital Rules provide for the following minimum capital to risk-weighted assets ratios beginning 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.36

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~~banks from 0%periods ~~for~~of ~~U.S.~~stress ~~government~~ and ~~agency~~impose ~~securities,~~constraints toon ~~600%~~distributions ~~for~~and ~~certain~~discretionary ~~equity~~bonus ~~exposures,~~payments ~~and~~if ~~resulting~~capital inlevels ~~higher~~fall ~~risk~~below ~~weights~~the ~~for~~institution- aspecific ~~variety~~capital ofbuffer ~~asset classes~~level. In ~~particular,~~The ~~the~~CCB ~~Basel~~in ~~III~~2016 ~~Capital~~is ~~Rules provide~~0.625% ~~stricter~~and ~~rules related~~increases to0.625% ~~the~~annually ~~risk~~through ~~weighting~~2019 ofto ~~past~~2.5%. ~~due~~The ~~and~~net ~~certain~~unrealized ~~commercial~~gain ~~real~~or ~~estate~~loss ~~loans, as well as~~ on ~~some~~available ~~equity~~for ~~investment~~sale ~~exposures~~securities, ~~and~~is ~~replace~~not ~~the~~included ~~existing~~in ~~credit rating approach for determining~~ the ~~risk~~computation ~~weighting~~ of ~~securitization~~regulatory ~~exposures~~capital. ~~with~~Management anbelieves ~~alternative~~as ~~approach~~of inMarch 31, ~~which~~2016 ~~senior~~and ~~securitization~~December 31, ~~tranches~~2015, ~~are assigned a risk weight associated with~~ the ~~underlying~~Bank ~~exposure~~meets ~~and~~all ~~requiring~~capital aadequacy ~~banking~~requirements ~~organization~~ to ~~hold~~which ~~capital~~it ~~for~~is ~~the senior tranche based on the risk weight of the underlying exposures~~subject. ~~Under~~ ~~the~~There ~~revised~~are ~~approach,~~no ~~for~~conditions ~~subordinate~~or ~~securitization~~events ~~tranches,~~since athat ~~banking~~notification ~~organization~~that ~~must~~management ~~hold~~believes ~~capital~~have ~~for~~changed the ~~subordinate~~institution’s ~~tranche, as well as all more senior tranches for which the subordinate tranche provides credit support~~category.

~~With~~At ~~respect to the Bank~~March 31, ~~the~~2016 ~~Basel~~and ~~III Capital Rules~~December ~~revise~~31, 2015, the ~~“prompt~~most ~~corrective~~recent ~~action”~~regulatory ~~(“PCA”)~~notifications ~~regulations~~categorized ~~adopted pursuant to Section 38 of~~ the ~~Federal~~Bank ~~Deposit~~as ~~Insurance~~well ~~Act~~capitalized ~~by:~~under ~~(i) introducing~~the aregulatory ~~CET1~~framework ~~ratio~~for ~~requirement~~prompt atcorrective ~~each~~action ~~PCA~~capital ~~category (other than critically undercapitalized), with the required CET1 ratio being 6~~ratios.5% The ~~for~~following ~~well-capitalized~~table ~~status;~~summarizes ~~(ii) increasing~~ the ~~minimum~~Bank’s ~~Tier 1~~ capital ~~ratio~~amounts ~~requirement~~and ~~for each category~~ratios, together with ~~the minimum tier 1~~ capital ~~ratio~~adequacy ~~for~~requirements ~~well-capitalized~~including ~~status being 8.0% (as compared to~~ the ~~former~~related ~~6.0%);~~CCB, ~~and~~under ~~(iii) eliminating~~regulatory ~~the~~requirements ~~current~~as ~~provision that a bank with a composite supervisory rating~~ of 1March 31, ~~may~~2016, ~~have a 3.0% leverage ratio~~ and ~~still be adequately capitalized. The Basel III Capital Rules~~December do31, ~~not change the total risk-based capital requirement for any PCA category.~~2015:

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 September 30, 2015, and under pre-Basel III regulatory requirements as of December 31, 2014.

	Actual				Required For Capital Adequacy Purposes				To Be Well Capitalized under Regulatory Requirements
As of March 31, 2016	Amount		Ratio		Amount		Ratio		Amount		Ratio

Total risk-based capital to risk-weighted assets	$	29,063	34.21	%	$	7,326	8.625	%	$	8,494	10.0	%
Tier I (core) capital to risk- weighted assets	28,162		33.15		5,628		6.625		6,796		8.0
Common equity tier I capital to risk-weighted assets	28,162		33.15		4,353		5.125		5,521		6.5
Tier I (core) capital to adjusted total assets	28,162		13.76		9,464		4.625		10,231		5.0

									To Be Well
	Actual				Required For Capital Adequacy Purposes				To Be Well Capitalized under Regulatory Requirements
					Required				Capitalized
As of December 31, 2015	Amount		Ratio		Amount		Ratio		Amount		Ratio
					For Capital				Under Basel III
Total risk-based capital to risk-weighted assets	$	28,878	33.16	%	$	6,967	8.0	%	$	8,709	10.0	%
					Adequacy Purposes				Regulatory
Tier I (core) capital to risk- weighted assets	27,890		32.03		5,225		6.0		6,967		8.0
	Actual				Under Basel III				Requirements
Common equity tier I capital to risk-weighted assets	27,890		32.03		3,919		4.5		5,661		6.5
	Amount		Ratio		Amount		Ratio		Amount		Ratio
Tier I (core) capital to adjusted total assets	27,890		13.42		8,313		4.0		10,391		5.0
As of September 30, 2015
Total risk-based capital to risk-weighted assets	$	28,891	32.62	%	$	7,096	8.0	%	$	8,870	10.0	%
Tier I (core) capital to risk- weighted assets	27,851		31.40		5,322		6.0		7,096		8.0
Common equity tier I capital to risk-weighted assets	27,851		31.40		3,991		4.5		5,765		6.5
Tier I (core) capital to adjusted total assets	27,851		13.51		8,246		4.0		10,308		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

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 consolidated 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):

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.

	March 31,				December 31,
	2016				2015
	Fixed		Variable		Fixed		Variable
	Rate		Rate		Rate		Rate

Commitments to make loans	$	2,131	$	150	$	2,920	$	—
Unused lines of credit and letters of credit	180		7,685		165		7,520

~~Off-Balance~~Commitments ~~Sheet~~to ~~Arrangements. In~~make ~~the~~loans ~~normal~~are ~~course~~generally ofmade ~~operations,~~for weperiods ~~engage~~of in120 adays ~~variety~~or ofless. At ~~financial~~March 31, ~~transactions that~~2016, inthe ~~accordance~~fixed ~~with~~rate ~~generally~~loan ~~accepted~~commitments ~~accounting~~had ~~principles~~interest ~~are~~rates ~~not~~ranging ~~recorded~~from in2.75% ~~our~~to ~~consolidated~~4.50% ~~financial~~and ~~statements. These~~the ~~transactions~~commitments ~~involve,~~are to ~~varying~~extend ~~degrees, elements of~~ credit, ~~interest~~ranging ~~rate~~from ~~and~~10 ~~liquidity~~to ~~risk~~30 years. ~~Such~~The ~~transactions~~variable ~~are~~rate ~~used~~loan ~~primarily~~commitments toare ~~manage~~for ~~customers’~~home ~~requests~~equity ~~for~~lines ~~funding~~of ~~and~~credit ~~take~~tied to the ~~form~~prime ofrate ~~loan~~at ~~commitments,~~an ~~unused~~initial ~~lines~~rate of ~~credit~~3.50% ~~and~~for ~~standby~~a ~~letters~~term of ~~credit~~5 years.

~~The~~For ~~contractual~~the ~~amount~~three ofmonths ~~financial~~ended ~~instruments~~March 31, ~~with~~2016 and the year ended December 31, 2015, we did not engage in any off-balance -sheet ~~risk~~transactions ~~was~~other asthan ~~follows~~loan ~~(dollars~~origination commitments, unused lines of credit and standby letters of credit in ~~thousands):~~the normal course of our lending activities.

	September 30,				December 31,
	2015				2014
	Fixed		Variable		Fixed		Variable
	Rate		Rate		Rate		Rate
Commitments to make loans	$	2,867	$	—	$	1,827	$	221
Unused lines of credit and letters of credit	189		7,470		181		8,633

Commitments to make loans are generally made for periods of 120 days or less. At September 30, 2015, the fixed rate loan commitments had interest rates ranging from 2.75% to 4.50% and the commitments are to extend credit ranging from 10 to 20 years.

For the nine months ended September 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 ~~September~~March 3031, ~~2015~~2016 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 ~~September~~March 3031, ~~2015~~2016, 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.

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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.

The Company’s stock repurchases for the three months ended ~~September~~March 3031, ~~2015~~2016 were as follows:

				Total # of shares	Maximum # of
Period	Total # of share purchased	Average price paid per share		Total # of shares purchased as part of publicly announced plans or programs	Maximum # of shares that may yet be purchased
	Total #	Average		purchased as part	shares that
January 1 - 31, 2016	12,200	$	14.59	12,200	95,526
	of share	price paid		of publicly announced	may yet
February 1 — 29, 2016	17,200	$	14.50	17,200	78,326
Period	purchased	per share		plans or programs	be purchased
March 1 — 31, 2016	—	$	—	—	78,326
July 1 - 31, 2015	—	$	—	—	109,972
Total	29,400	$	14.54	29,400	78,326
August 1 – 31, 2015	229	$	14.50	229	109,743
September 1 – 30, 2015	—	$	—	—	109,743
Total	229	$	14.50	229	109,743

52Item 3. Defaults upon Senior Securities

~~Table~~Not ~~of Contents~~applicable.

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

Item 6. Exhibits

		Description
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 of Principal Executive Officer and Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101		The following materials from AJS Bancorp, Inc.’s Form 10-Q report for the quarter ended ~~September~~March 3031, ~~2015~~2016, formatted in XBRL pursuant to Rule 405 of Regulation S-T: (i) Consolidated Statements of Financial Condition, (ii) Consolidated Statements of Operations, (iii) Consolidated Statements of Comprehensive Income, (~~Loss),(~~iv) Consolidated Statements of Stockholders’ Equity, (v) Consolidated Statements of Cash Flows, and, (vi) 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:	November 13, 2015
	Date: May 13, 2016
	By:	/s/ Jerry A. Weberling
		Jerry A. Weberling,
		Executive Vice President and
		Chief Financial Officer
	Date:	November 13, 2015
	Date: May 13, 2016

5440

Filing Compare · AJS Bancorp, Inc.