EXECUTIVE SUMMARY

The following discussion compares the financial condition of Park Bancorp, Inc. ("the Company") and its wholly owned subsidiaries, Park Federal Savings Bank ("the Bank") and PBI Development Corporation, and the Bank's subsidiaries, at March 31, 2009 to its financial condition at December 31, 2008 and the results of operations for the three months ended March 31, 2009 to the same period in 2008. This discussion should be read in conjunction with the interim financial statements and footnotes included herein.

13.

FINANCIAL CONDITION

Total assets at March 31, 2009 increased $8.7 million to $228.3 million from $219.6 million at December 31, 2008. Increases of $6.0 million in cash and cash equivalents and $2.9 million in securities available-for-sale during the quarter were the primary reasons for the change from December 31, 2008 as the Company concentrated on increasing its liquidity position.

The Company has seen an increase in loan delinquencies and nonperforming loans over the quarter due to higher unemployment levels and the continued weakening economy. If the recession worsens, the result could further negatively impact economic conditions in the Company's market areas and the Company could experience significantly higher delinquencies and credit losses.

The allowance for loan losses was $786,000 at March 31, 2009 compared to $775,000 at December 31, 2008 while nonperforming assets were $5.1 million and $2.7 million for the comparable periods. The Company believes that the increase in non-performing assets does not require an equivalent increase in the allowance for loan losses, as the Company's nonperforming assets are predominantly one-to-four family loans, of which the Company's actual loss history in the segment is limited.

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

                                                March 31,    December 31,
                                                  2009           2008
           Nonaccrual loans
           One-to-four-family                  $     2,614   $         780
           Multi-family                                689              -
           Commercial, construction and land           127              -
           Consumer and other                           -               -

           Total nonperforming loans                 3,430             780
           Real estate owned                         1,628           1,874


           Total nonperforming assets          $     5,058   $       2,654

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

                                                    03/31/09                                 12/31/08
                                                                Percent of                               Percent of
                                                                  Gross                                    Gross
                                                 Percent of      Loans to                 Percent of       Loans
                                                 Allowance        Total                   Allowance       to Total
                                                  to Total        Gross                    to Total        Gross
                                       Amount    Allowance        Loans         Amount    Allowance        Loans
One-to-four-family                    $    536       68.19  %       65.63  %   $    529       68.26  %       65.90  %
Multi-family                               115        14.63          14.30          108        13.93          13.73
Commercial, construction and land           63         8.02          12.47           62         8.00          13.42
Consumer and other                          72         9.16           7.60           76         9.81           6.95

Total allowance for loan losses       $    786      100.00  %      100.00  %   $    775      100.00  %      100.00  %

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Total liabilities at March 31, 2009 were $202.0 million, an increase of $9.3 million or 4.8%, compared to $192.7 million at December 31, 2008. The change was due primarily to an increase in deposits of $10.7 million or 7.8% from December 31, 2008. The Company reduced its borrowings from the Federal Home Loan Bank of Chicago during the quarter ended March 31, 2009 by $878,000.

Stockholders' equity decreased $537,000 to $26.3 million at March 31, 2009 from $26.9 million at December 31, 2008. The decrease was primarily attributable to the net loss for the quarter ended March 31, 2009 of $563,000.

RESULTS OF OPERATIONS

The net loss for the quarter ended March 31, 2009 was $563,000, an increase of $526,000 from the net loss of $37,000 for the comparable quarter in 2008. The change was due to increases in net interest income of $70,000, noninterest income of $7,000, and the federal income tax benefit of $67,000 offset by increases in the provision for loan losses of $30,000, and noninterest expense of $583,000.

Net interest income was $1.3 million for the three months ended March 31, 2009 compared to $1.2 million for the same quarter in 2008. Foregone interest on nonperforming loans during the first quarter of 2009 was $99,000. The average yield on interest-earning assets decreased 28 basis points to 5.47% for the quarter ended March 31, 2009 from 5.75% for the same period in 2008. The average cost of interest-bearing liabilities decreased 53 basis points to 2.91% from 3.44% for the quarters ended March 31, 2009 and 2008, respectively. The interest rate spread increased 26 basis points to 2.56% for the quarter ended March 31, 2009 from 2.30% for the comparable quarter in 2008 while the net interest margin increased to 2.67% from 2.50% for the same period.

15.

Management establishes provisions for loan losses, which are 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, peer group information, and prevailing economic conditions. This evaluation is inherently subjective, as it requires estimates that are susceptible to significant revision as more information becomes available or as future events change. Based on their review, a $30,000 loan loss provision was established for the quarter ended March 31, 2009. There was no provision for loan losses recorded for the quarter ended March 31, 2008.

Management assesses the allowance for loan losses on a quarterly basis and makes provisions for loan losses as necessary in order to maintain the allowance. While management uses available information to recognize losses on loans, future loan loss provisions may be necessary based on changes in economic conditions. In addition, various regulatory agencies, as an integral part of their examination process, periodically review the allowance for loan losses and may require us to recognize additional provisions based on their judgment of information available to them at the time of their examination. The allowance for loan losses as of March 31, 2009 is maintained at a level that represents management's best estimate of inherent losses in the loan portfolio, and such losses were both probable and reasonably estimable.

Noninterest income increased to $140,000 for the quarter ended March 31, 2009 from $133,000 for the quarter ended March 31, 2008. The increase was primarily due to an increase in revenue generated from deposit products.

Noninterest expense increased $583,000 to $2.1 million for the quarter ended March 31, 2009 from $1.5 million for the corresponding three month period in 2008. The increase for the quarter was primarily the result of a write-down of real estate owned of $251,000, a loss on security impairment of $178,000, and additional noninterest expenses in the 2009 as a result of the new 47th Street branch that opened in June 2008. The real estate owned was determined to be impaired in the first quarter of 2009 due to the demolition of the building on the property in 2009. The Company recognized the security impairment on its mutual fund investment, as management believed it could not forecast a recovery within a reasonable holding period for the investment.

The Company's federal income tax benefit was $67,000 for the three-month period ended March 31, 2009 compared to the federal income tax benefit of $57,000 for the three-month period ended March 31, 2008. The change in the income tax benefit was attributable to the decrease in income before income taxes, partially offset by a deferred tax asset valuation allowance recorded in 2009. The Company recognized a deferred tax asset valuation allowance due to uncertainty that deferred tax assets may not be fully realized.

LIQUIDITY AND CAPITAL RESOURCES

The Company's primary sources of funds are deposits, principal and interest payments on loans and securities, proceeds from maturities and calls of securities, FHLB advances, and securities sold under repurchase agreements. While maturities and scheduled amortization of loans and securities are predictable sources of funds, deposit flows and mortgage prepayments are greatly influenced by general interest rates, economic conditions, and competition. The Bank's most liquid assets are cash and short-term investments. The levels of these assets are dependent on the Bank's operating, financing, lending, and investing activities during any given period. The Bank's liquidity ratio was 21.38% at March 31, 2009.

The Company's cash flows are comprised of three primary classifications: cash flows from operating activities, investing activities, and financing activities. Net cash from operating activities were $(267,000) and $255,000 for the three months ended March 31, 2009 and 2008, respectively. Net cash from investing

16.

activities consisted primarily of disbursements for loan originations and the purchase of securities, offset by principal collections on loans, and proceeds from maturing securities and paydowns on mortgage-backed securities. Net cash from investing activities were $(3.2) million and $(5.4) million for the three months ended March 31, 2009 and 2008, respectively. Net cash from financing activities consisted primarily of the activity in deposit accounts, FHLB borrowings, and securities sold under repurchase agreements in addition to the purchase of treasury stock. The net cash from financing activities was $9.4 million and $3.7 million for the three months ended March 31, 2009 and 2008, respectively.

At March 31, 2009, the Bank exceeded all of its regulatory capital requirements with a Tier 1 (core) capital level of $23.7 million, or 10.48% of adjusted total assets, which is above the required level of $9.1 million, or 4.0%; and total risk-based capital of $24.5 million, or 19.45% of risk-weighted assets, which is above the required level of $10.1 million, or 8.0%. The Bank at March 31, 2009 was categorized as well capitalized. Management is not aware of any conditions or events since the most recent notification that would change the Bank's category.

At March 31, 2009, the Bank had outstanding commitments to originate mortgage loans of $2.1 million, commitments under unused lines of credit of $4.7 million and undisbursed portions of construction loans of $1.3 million. The Bank anticipates that it will have sufficient funds available to meet its current loan origination commitments. Certificate accounts that are scheduled to mature in less than one year from March 31, 2009 totaled $72.7 million. Management expects that a substantial portion of the maturing certificate accounts will be renewed at the Bank. However, if a substantial portion of these deposits is not retained, the Bank may utilize FHLB advances or raise interest rates on deposits to attract new accounts, which may result in higher levels of interest expense.