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UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

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Form 10-K

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

For the fiscal year ended December 31, 1999
1-13605
Commission File Number

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EFC BANCORP, INC.(Exact name of registrant as specified in its charter.)

|DELAWARE(State or Other Jurisdiction of Incorporation or Organization)      |  | 36-4193304(I.R.S. Employer Identification No.)
|--------------------------------------------------------------------------- |  | ----------------------------------------------
|1695 Larkin Avenue, Elgin, Illinois(Address of Principal Executive Offices) |  | 60123(Zip Code)                               

(847) 741-3900(Registrant's telephone number, including area code)

Common Stock, par value $.01 per shareSecurities registered pursuant to Section 12(b) of the Act

NoneSecurities registered pursuant to Section 12(g) of the Act

The American Stock Exchange(Name of exchange on which registered)

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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past
90 days.

(1) Yes /x/   No / /

(2) Yes /x/   No / /

Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant's
knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.

The
aggregate market value of the voting stock held by non-affiliates of the registrant, i.e., persons other than the directors and executive officers of the registrant,
was $44,400,000 based upon the last sales price as listed on The American Stock Exchange for March 10, 2000.

The
number of shares of Common Stock outstanding as of March 10, 2000 is: 4,944,320.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Proxy Statement for the 2000 Annual Meeting of Stockholders are incorporated by reference into Part III of this
Form 10-K.

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5



## 

INDEX

PART I

|                 |          |                                      |                                                                                       |    | Page No.
|---------------- | -------- | ------------------------------------ | ------------------------------------------------------------------------------------- | -- | --------
|                 | Item 1.  |                                      | Business                                                                              |    | 7       
|Additional Item. |          | Exectuive Officers of the Registrant |                                                                                       | 33
|                 | Item 2.  |                                      | Properties                                                                            |    | 34      
|                 | Item 3.  |                                      | Legal Proceedings                                                                     |    | 34      
|                 | Item 4.  |                                      | Submission of Matters to a Vote of Security Holders                                   |    | 34      
|PART II          |          |                                      |                                                                                       |   
|                 | Item 5.  |                                      | Market for the Company's Common Equity and Related Stockholder Matters                |    | 35      
|                 | Item 6.  |                                      | Selected Financial Data                                                               |    | 35      
|                 | Item 7.  |                                      | Management's Discussion and Analysis of Financial Condition and Results of Operations |    | 35      
|                 | Item 7A. |                                      | Quantitative and Qualitative Disclosures About Market Risk                            |    | 48      
|                 | Item 8.  |                                      | Financial Statements and Supplementary Data                                           |    | 49      
|                 | Item 9.  |                                      | Changes In and Disagreements With Accountants on Accounting and Financial Disclosures |    | 50      
|PART III         |          |                                      |                                                                                       |   
|                 | Item 10. |                                      | Directors and Executive Officers of the Registrant                                    |    | 50      
|                 | Item 11. |                                      | Executive Compensation                                                                |    | 50      
|                 | Item 12. |                                      | Security Ownership of Certain Beneficial Owners and Management                        |    | 50      
|                 | Item 13. |                                      | Certain Relationships and Related Transactions                                        |    | 50      
|PART IV          |          |                                      |                                                                                       |   
|                 | Item 14. |                                      | Exhibits, Financial Statement Schedules, and Reports on Form 8-K                      |    | 51      
|SIGNATURES       |          | 52                                  
|                 |          |                                      |                                                                                       |    |         

6



## 

PART I

Item 1. Business.



EFC Bancorp, Inc. (also referred to as the "Company" or "Registrant"), was incorporated under Delaware law on October 10, 1997. The Registrant
was formed to acquire Elgin Financial Savings Bank (formerly, Elgin Financial Center, S.B.) and subsidiaries, Elgin, Illinois, (the "Bank") as part of the Bank's conversion from a mutual to a stock
form of organization (the "Conversion"). In connection with the Conversion, the Company issued an aggregate of 7,491,434 shares of its common stock, par value $0.01 per share ("Common Stock") at a
purchase price of $10 per share, of which 6,936,513 shares were issued in a subscription offering and 554,921 shares were issued to the Elgin Financial Foundation (the "Foundation"), a charitable
foundation established by the Bank. The Company received approval to become a savings and loan holding company and is subject to regulation by the Office of Thrift Supervision ("OTS") and the
Securities and Exchange Commission ("SEC"). The Company's acquisition of the Bank occurred on April 3, 1998.

The
Bank is a community-oriented savings institution which was originally organized in 1924 as a federally-chartered mutual savings and loan association. The Bank reorganized in the
1980s to become Elgin Federal Financial Center, a federally-chartered mutual savings association, and again on July 1, 1996 to become Elgin Financial Center, S.B., an Illinois state-chartered
mutual savings bank. On July 17, 1998, the Bank changed its name to Elgin Financial Savings Bank. The Bank's principal business consists of the acceptance of retail deposits from the general
public in the areas surrounding its full-service branch offices and the investment of those deposits, together with funds generated from operations and borrowings, primarily in
one- to four-family residential mortgage loans and, to a lesser extent, multi-family and commercial real estate loans, construction and land loans, commercial business loans,
home equity loans, and automobile and passbook savings loans. The Bank originates all of its loans for investment. The Bank also invests primarily in government insured or guaranteed mortgage-backed
securities and U.S. Government obligations. The Bank's revenues are derived principally from the interest on its mortgage, consumer and commercial business loans and securities and from servicing
fees. The Bank's primary sources of funds are retail savings deposits and, to a lesser extent, advances from the Federal Home Loan Bank of Chicago (the "FHLB-Chicago").

Market Area

Headquartered in largely suburban Kane County, Illinois, the Bank has been, and intends to continue to be, a community-oriented financial institution offering
a variety of financial services to meet the needs of the communities it serves. The Bank currently operates four full-service banking facilities in Elgin and two full service facilities
located in West Dundee and Huntley, Illinois. The Bank is in the process of expanding its operations by adding a new full service branch facility in East Dundee, Illinois. This branch is expected to
be operational in late Spring, 2000. The Bank's primary lending and deposit gathering area is concentrated around the areas where its full-service banking facilities are located which the
Bank generally considers to be its primary market area.

Elgin
is located on U.S. Interstate 90 (the Northwest tollway) in the Fox River Valley approximately 38 miles northwest of downtown Chicago and 25 miles west of O'Hare International
Airport. Interstate 90
provides easy access to the City of Chicago and is a major corridor of suburban growth for Chicago. As the Chicago suburbs have expanded into Kane County, western Cook County and southern McHenry
County, Elgin has experienced a positive influx of new residents and employers. The economy in the Bank's primary market area has also historically benefitted from the presence of
well-known companies such as Motorola, Inc.; First Card; Panasonic; Sears and Ameritech Corp. Other employment and economic activity is provided by a variety of wholesale and retail
trade, hospitals and a riverboat gambling facility located on the Fox River in Elgin.

7



Competition

The Bank faces significant competition both in making loans and in attracting deposits. The State of Illinois has a high density of financial institutions,
many of which are branches of significantly larger institutions which have greater financial resources than the Bank, all of which are competitors of the Bank to varying degrees. The Bank's
competition for loans comes principally from savings banks, savings and loan associations, commercial banks, mortgage banking companies, credit unions, insurance companies and other financial service
companies. Its most direct competition for deposits has historically come from savings and loan associations, savings banks, commercial banks and credit unions. The Bank faces additional competition
for deposits from non-depository competitors such as the mutual fund industry, securities and brokerage firms and insurance companies. Competition may also increase as a result of the
lifting of restrictions on the interstate operations of financial institutions. There are approximately 15 financial institutions with operations in Elgin and approximately 30 financial institutions
with operations in the Bank's primary market area.

Lending Activities

Loan Portfolio Composition.The types of loans that the Bank may originate are subject to
federal and state laws and regulations. Interest rates charged by the Bank on loans are affected principally by the demand for such loans, the supply of money available for lending purposes and the
rates offered by its competitors. These factors are, in turn, affected by general and economic conditions, monetary policies of the federal government, including the Federal Reserve Board ("FRB"),
legislative tax policies and governmental budgetary matters.

The
Bank's loan portfolio primarily consists of first mortgage loans secured by one- to four-family residences most of which are located in its primary market
area. At December 31, 1999, the Bank's gross loan portfolio totalled $397.8 million, of which $283.3 million were one- to four-family residential mortgage
loans, or 71.2% of total loans. At such date, the remainder of the loan portfolio consisted of $44.8 million of multi-family loans, or 11.3% of total loans; $30.9 million of commercial
real estate loans, or 7.8% of total loans; $14.0 million of construction and land loans, or 3.5% of total loans; $13.3 million of commercial loans, or 3.4% of total loans; and
$11.5 million of consumer loans, or 2.8% of total loans consisting of $10.0 million of home equity lines of credit, $977,000 of secured and unsecured personal loans and $484,000 of
automobile loans. The Bank has not sold loans in recent years and had no mortgage loans held for sale at each of the five years ended December 31, 1999. At that same date, 53.8% of the Bank's
mortgage loans had adjustable interest rates, most of which were indexed to the one year Constant Maturity Treasury ("CMT") Index.

8



The
following table sets forth the composition of the Bank's loan portfolio in dollar amounts and in percentages of the respective portfolios at the dates indicated.

|                          |  | At December 31, |        
|------------------------- |  | --------------- | -------
|
|
|
|Mortgage loans:           |  |                 |        
|One- to four-family       |  | $               | 283,300
|Multi-family              |  |                 | 44,843 
|Commercial real estate    |  |                 | 30,870 
|Construction and land     |  |                 | 13,981 
|                          |  |                 |        
|Total mortgage loans      |  |                 | 372,994
|                          |  |                 |        
|Other loans:              |  |                 |        
|Home equity loans         |  |                 | 10,002 
|Commercial                |  |                 | 13,320 
|Auto loans                |  |                 | 484    
|Loans on savings accounts |  |                 | 421    
|Other                     |  |                 | 556    
|                          |  |                 |        
|Total other loans         |  |                 | 24,783 
|                          |  |                 |        
|Total loans receivable    |  |                 | 397,777
|                          |  |                 |        
|Less:                     |  |                 |        
|Unearned discounts        |  |                 |       
|Deferred loan fees        |  |                 | 225    
|Allowance for loan losses |  |                 | 1,545  
|                          |  |                 |        
|Loans receivable, net     |  | $               | 396,007
|                          |  |                 |        

9



Loan Originations.The Bank's mortgage lending activities are
conducted primarily by its loan personnel operating at its six branch offices. All loans originated by the Bank are underwritten by the Bank pursuant to the Bank's policies and procedures. The Bank
originates both adjustable-rate and fixed-rate mortgage loans, commercial loans and consumer loans. The Bank's ability to originate fixed- or adjustable-rate loans
is dependent upon the relative customer demand for such loans, which is affected by the current and expected future level of interest rates. It is the general policy of the Bank to retain all loans
originated in its portfolio.

During
the years ended December 31, 1999 and December 31, 1998, the Bank originated $35.4 million and $77.4 million of fixed-rate
one- to four-family residential mortgage loans, respectively, and for the years ended December 31, 1999 and December 31, 1998, the Bank originated
$46.3 million and $26.3 million of adjustable-rate one- to four-family residential mortgage loans, respectively, all of which were retained by the
Bank. Based upon the Bank's investment needs and market opportunities, the Bank participates and purchases loans, consisting primarily of one-to-four family and multi-family
real estate mortgage loans, secured by property located in Illinois, southern Wisconsin and, to a lesser extent, in Minnesota, and had $55.1 million of purchased loan participation interests at
December 31, 1999. See "Multi-Family and Commercial Real Estate Lending."

The
following tables set forth the Bank's loan originations, purchases and principal repayments for the periods indicated. All loans originated by the Bank are held for investment.
The Bank sold no loans during these periods.

|                                           |  | For the
Year Ended December 31, |        
|------------------------------------------ |  | ------------------------------- | -------
|
|
|Gross loans (1):                           |  |                                 |        
|Balance outstanding at beginning of period |  | $                               | 310,689
|                                           |  |                                 |        
|Loans originated (2):                      |  |                                 |        
|One-to four-family residential             |  |                                 | 81,712 
|Multi-family                               |  |                                 | 938    
|Commercial real estate                     |  |                                 | 8,027  
|Construction and land                      |  |                                 | 10,430 
|Home equity                                |  |                                 | 6,582  
|Commercial business                        |  |                                 | 12,657 
|Auto loans                                 |  |                                 | 402    
|Loans on savings accounts                  |  |                                 | 371    
|Other                                      |  |                                 | 725    
|                                           |  |                                 |        
|Total loans originated                     |  |                                 | 121,844
|Loans purchased                            |  |                                 | 38,996 
|                                           |  |                                 |        
|Total loans originated and purchased       |  |                                 | 160,840
|                                           |  |                                 |        
|Less:                                      |  |                                 |        
|Principal repayments                       |  |                                 | (76,629
|Transfers to real estate owned             |  |                                 | (168   
|Change in loans in process                 |  |                                 | 3,045  
|                                           |  |                                 |        
|Total loans receivable at end of period    |  | $                               | 397,777
|                                           |  |                                 |        

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10





Loan Maturity and Repricing.The following table shows the
contractual maturity of the Bank's loan portfolio at December 31, 1999. The table does not include prepayments or scheduled principal amortization. Prepayments and scheduled principal
amortization on mortgage loans totaled $76.6 million, $89.4 million and $62.9 million for the years ended December 31, 1999, 1998 and 1997, respectively. All loans
originated by the Bank are held for investment.

|                                    |  | At December 31, 1999
|----------------------------------- |  | --------------------
|
|
|Amounts due:                        |  |                     
|Within one year                     |  | $                   
|After one year:                     |  |                     
|More than one year to three years   |  |                     
|More than three years to five years |  |                     
|More than five years to 10 years    |  |                     
|More than 10 years to 20 years      |  |                     
|More than 20 years                  |  |                     
|                                    |  |                     
|Total due after December 31, 2000   |  |                     
|                                    |  |                     
|Total amount due (gross)            |  | $                   
|                                    |  |                     
|Less:                               |  |                     
|Deferred loan fees, net             |  |                     
|Allowance for loan losses           |  |                     
|                                    |  |                     
|Total loans, net                    |  | $                   
|                                    |  |                     

The following table sets forth at December 31, 1999, the dollar amount of gross loans receivable contractually due after
December 31, 2000, and whether such loans have fixed interest rates or adjustable interest rates.

|                          |  | Due After December 31, 2000
|------------------------- |  | ---------------------------
|
|
|Mortgage loans:           |  |                            
|One- to four-family       |  | $                          
|Multi-family              |  |                            
|Commercial real estate    |  |                            
|Construction and land     |  |                            
|                          |  |                            
|Total mortgage loans      |  |                            
|Home equity               |  |                            
|Commercial                |  |                            
|Auto loans                |  |                            
|Loans on savings accounts |  |                            
|Other                     |  |                            
|                          |  |                            
|Total loans               |  | $                          
|                          |  |                            

One- to Four-Family Lending.The Bank
currently offers both fixed-rate and adjustable-rate mortgage ("ARM") loans with maturities up to 30 years secured by one- to four-family
residences substantially all of which are located in the Bank's primary market area. One- to four-family mortgage loan originations are generally obtained from the Bank's
in-house loan representatives, from existing or past customers, through advertising, and through referrals from local builders, real estate brokers and attorneys. At December 31,
1999, the Bank's one- to four-family mortgage

11



loans
totaled $283.3 million, or 71.2%, of total loans. Of the one- to four-family mortgage loans outstanding at that date, 51.3% were fixed-rate mortgage
loans and 48.7% were ARM loans.

The
Bank currently offers fixed-rate mortgage loans with terms from 10 to 30 years. These loans have generally been priced at current market rates for such loans.
During the fourth quarter of 1998 the Bank began charging a fee to cover the cost of processing mortgage loans. The Bank currently offers a number of ARM loans with terms of up to 30 years and
interest rates which adjust every one, two or three years from the outset of the loan or which adjust annually after a three, five or seven year initial fixed period. The interest rates for the Bank's
ARM loans are indexed to the one year CMT Index. The Bank originates ARM loans with initially discounted rates, often known as "teaser rates." The Bank's ARM loans generally provide for periodic (not
more than 2%) and overall (not more than 6%) caps on the increase or decrease in the interest rate at any adjustment date and over the life of the loan. However, interest rates on the Bank's
residential ARM loans may never adjust to be less than the initial rate of interest charged on any such loan.

The
origination of adjustable-rate residential mortgage loans, as opposed to fixed-rate residential mortgage loans, helps reduce the Bank's exposure to
increases in interest rates. However, adjustable-rate loans generally pose credit risks not inherent in fixed-rate loans, primarily because as interest rates rise, the
underlying payments of the borrower rise, thereby increasing the potential for default. Periodic and lifetime caps on interest rate increases help to reduce the risks associated with
adjustable-rate loans but also limit the interest rate sensitivity of such loans.

In
June 1999, the Bank began purchasing one-to-four family first mortgage loans. As of December 31, 1999, $16.2 million of the loans had
been purchased and placed in the Bank's loan portfolio.

Multi-Family and Commercial Real Estate Lending.The Bank
originates multi-family and commercial real estate loans that are generally secured by five or more unit apartment buildings and properties used for business purposes such as small office buildings or
retail facilities located in the Bank's primary market area. The Bank's multi-family and commercial real estate underwriting policies provide that such real estate loans may be made in amounts up to
80% of the appraised value of the property, subject to the Bank's current loans-to-one-borrower limit, which at December 31, 1999 was $12.2 million.
The Bank's multi-family and commercial real estate loans may be made with terms up to 25 years and are offered with interest rates that adjust periodically. In reaching its decision on whether
to make a multi-family or commercial real estate loan, the Bank considers the net operating income of the property, the borrower's expertise, credit history and profitability and the value of the
underlying property. The Bank has generally required that the properties securing these real estate loans have debt service coverage ratios (the ratio of earnings before debt service to debt service)
of at least 1.20x. Environmental impact surveys are generally required for all commercial real estate loans. Generally, all multi-family and commercial real estate loans made to corporations,
partnerships and other business entities require personal guarantees by the principals. On an exception basis, the Bank may not require a personal guarantee on such loans depending on the
creditworthiness of the borrower and the amount of the downpayment and other mitigating circumstances. The Bank's multi-family real estate loan portfolio at December 31, 1999 was
$44.8 million, or 11.3% of total loans, and the Bank's commercial real estate loan portfolio at such date was $30.9 million, or 7.8% of total loans. The largest multi-family or
commercial real estate loan in the Bank's portfolio (excluding loan participation interests) at December 31, 1999 was a performing $3.5 million commercial real estate loan secured by an
office building located in St. Charles, Illinois.

The
Bank also purchases up to 90% participation interests in multi-family loans secured by real estate, most of which is located outside of the Bank's primary market area in southern
Wisconsin and Minnesota. When determining whether to participate in such loans, the Bank will underwrite its participation interest according to its own underwriting standards. The Bank will generally
hedge against participating in problematic loans by participating in those loans which have been in existence for one to two years and, accordingly, possess a positive payment history. At
December 31, 1999, the Bank had $29.3 million in multi-family real estate loan participation interests, or 65.4% of multi-family loans and 7.4% of total loans.

12



Loans
secured by multi-family and commercial real estate properties generally involve larger principal amounts and a greater degree of risk than one-to
four-family residential mortgage loans. Because payments on loans secured by multi-family and commercial real estate properties are often dependent on successful operation or management of
the properties, repayment of such loans may be subject to
adverse conditions in the real estate market or the economy. The Bank seeks to minimize these risks through its underwriting standards.

Construction and Land Lending.The Bank originates
fixed-rate construction loans for the development of residential property primarily located in the Bank's market area. Construction loans are offered primarily to experienced local
developers operating in the Bank's primary market area and, to a lesser extent, to individuals for the construction of their residence. The majority of the Bank's construction loans are originated
primarily to finance the construction of one- to four-family, owner-occupied residential real estate and, to a lesser extent, multi-family real estate properties located in the
Bank's primary market area. Construction loans are generally offered with terms up to 12 months and may be made in amounts up to 80% of the appraised value of the property, as improved.
Construction loan proceeds are disbursed periodically in increments as construction progresses and as inspections by the Bank's lending personnel warrant.

The
Bank also originates fixed-rate land loans to local developers for the purpose of developing the land for sale. Such loans are secured by a lien on the property, are
limited to 75% of the appraised value of the secured property and have terms of up to three years. The principal of the loan is reduced as lots are sold and released. The Bank's land loans are
generally secured by properties located in its primary market area. Generally, if the borrower is a corporation, partnership or other business entity, personal guarantees by the principals are
required.

At
December 31, 1999, the Bank's largest construction or land loan was a performing loan with a $1.7 million carrying balance secured by land for the development
commercial buildings in Carpentersville, Illinois. At December 31, 1999, the Bank had $14.0 million of construction and land loans which amounted to 3.5% of the Bank's total loans.

Construction
and land financing is generally considered to involve a higher degree of credit risk than long-term financing on improved, owner-occupied real estate. Risk of
loss on a construction loan is dependent largely upon the accuracy of the initial estimate of the property's value at completion of construction or development compared to the estimated cost
(including interest) of construction and other assumptions, including the estimated time to sell residential properties. If the estimate of value proves to be inaccurate, the Bank may be confronted
with a project, when completed, having a value which is insufficient to assure full repayment.

Commercial Business Lending.The Bank also originates
commercial business loans in the forms of term loans and lines of credit to small- and medium-sized businesses operating in the Bank's primary market area. Such loans are generally secured by
equipment, leases, inventory, accounts receivable and marketable securities; however, the Bank also makes unsecured commercial business loans. The maximum amount of a commercial business loan is
limited by the Bank's loans-to-one-borrower limit which, at December 31, 1999, was $12.2 million. Depending on the collateral used to secure the
loans, commercial loans are made in amounts up to 80% of the value of the property securing the loan. Term loans are generally offered with fixed rates of interest and terms of up to 10 years.
All term loans fully amortize during the term of such loan. Business lines of credit have adjustable rates of interest and terms of up to one year. Business lines of credit adjust on a daily basis and
are indexed to the prime rate as published inThe Wall Street Journal. The Bank also issues both secured and unsecured letters of credit to business
customers of the Bank. Acceptable collateral includes an assigned deposit account with the Bank, real estate or marketable securities. Letters of credit have a maximum term of 36 months.

In
making commercial business loans, the Bank considers primarily the financial resources of the borrower, the borrower's ability to repay the loan out of net operating income, the
Bank's lending history with the borrower and the value of the collateral. Generally, if the borrower is a corporation, partnership or other business entity, personal guarantees by the principals are
required. However, personal guarantees may not be required on such loans depending on the creditworthiness of the borrower and other mitigating circumstances. The Bank's largest commercial loan at
December 31, 1999 was $590,000. At such date, the Bank had $3.3 million of unadvanced commercial lines of credit.

13



At
December 31, 1999, the Bank had $13.3 million of commercial loans which amounted to 3.4% of the Bank's total loans.

Unlike
mortgage loans, which generally are made on the basis of the borrower's ability to make repayment from his or her employment or other income, and which are secured by real
property whose value tends to be more easily ascertainable, commercial loans are of higher risk and typically are made on the basis of the borrower's ability to make repayment from the cash flow of
the borrower's business. As a result, the availability of funds for the repayment of commercial loans may be substantially dependent on the success of the business itself. Further, any collateral
securing such loans may depreciate over time, may be difficult to appraise and may fluctuate in value.

Consumer Lending.Consumer loans at December 31, 1999
amounted to $11.5 million, or 2.9% of the Bank's total loans, and consisted primarily of home equity lines of credit and, to a significantly lesser extent, secured and unsecured personal loans
and new and used automobile loans. Such loans are generally originated in the Bank's primary market area and generally are secured by real estate, deposit accounts, personal property and automobiles.

Substantially
all of the Bank's home equity lines of credit are secured by second mortgages on owner-occupied single-family residences located in the Bank's primary market area. At
December 31, 1999, these loans totaled $10.0 million, or 2.5% of the Bank's total loans and 87.3% of consumer loans. Home equity lines of credit generally have adjustable-rates of
interest which adjust on a monthly basis. The adjustable-rate of interest charged on such loans is indexed to the prime rate as reported inThe Wall Street
Journal. Home equity lines of credit generally have an 18% lifetime limit on interest rates. Generally, the maximum combined LTV ratio on home equity lines of credit is 89.9%.
The underwriting standards employed by the Bank for home equity lines of credit include a determination of the applicant's credit history and an assessment of the applicant's ability to meet existing
obligations and payments on the proposed loan and the value of the collateral securing the loan. The stability of the applicant's monthly income may be determined by verification of gross monthly
income from primary employment and, additionally, from any verifiable secondary income. Creditworthiness of the applicant is of primary consideration.

The
Bank also originates other types of consumer loans consisting of secured and unsecured personal loans and new and used automobile loans. Secured personal loans are generally
secured by deposit accounts. Unsecured personal loans generally have a maximum borrowing limitation of $25,000 and generally require a debt ratio of 38%. Automobile loans have a maximum borrowing
limitation of 80% of the sale price of the automobile, except that existing customers of the Bank who meet certain underwriting criteria may borrow up to 100% of the sale price of the automobile. At
December 31, 1999, personal loans (both secured and unsecured) totaled $1.0 million or 0.3% of the Bank's total loans and 8.5% of consumer loans; and automobile loans totaled $484,000,
or 0.1% of total loans and 4.2% of consumer loans.

With
respect to automobile loans, full-time employees of the Bank, other than executive officers and directors, who satisfy certain lending criteria and the general
underwriting standards of the Bank receive an interest rate 1% less than that which is offered to the general public; provided, however, that the discounted interest rate is at no time less than 75
basis points above the Bank's overall cost of funds, rounded to the highest quarter percentage point.

Loans
secured by rapidly depreciable assets such as automobiles or that are unsecured entail greater risks than one- to four-family residential mortgage loans.
In such cases, repossessed collateral for a defaulted loan may not provide an adequate source of repayment of the outstanding loan balance, since there is a greater likelihood of damage, loss or
depreciation of the underlying collateral. Further, consumer loan collections on these loans are dependent on the borrower's continuing financial stability and, therefore, are more likely to be
adversely affected by job loss, divorce, illness or personal bankruptcy. Finally, the application of various federal and state laws, including federal and state bankruptcy and insolvency laws, may
limit the amount which can be recovered on such loans in the event of a default.

Loans-to-One Borrower Limitations.The
Illinois Savings Bank Act imposes limitations on the aggregate amount of loans that an Illinois chartered savings bank can make to any one borrower. Under the
Illinois Savings Bank Act the permissible amount of loans-to-one borrower is the greater of $500,000 (for a savings bank meeting its minimum

14



capital
requirements) or 20% of a savings bank's total capital plus general loan loss reserves. In addition, a savings bank may make loans in an amount equal to an additional 10% of the savings bank's
capital plus general loan loss reserves if the loans are 100% secured by readily marketable collateral. Under Illinois law, a savings bank's capital consists of capital stock and noncumulative
perpetual preferred stock, related paid-in capital, retained earnings and other forms of capital deemed to be qualifying capital by the Federal Deposit Insurance Corporation (the "FDIC").
Illinois law also permits an institution with capital in excess of 6% of assets to request permission of the Illinois Commissioner of Banks and Real Estate (the "Commissioner") to lend up to 30% of
the institution's total capital and general loan loss reserves to one borrower for the development of residential housing properties within Illinois. At December 31, 1999, the Bank's ordinary
limit on loans-to-one borrower under the Illinois Savings Bank Act was $12.2 million. The 30% limitation equaled $18.3 million at that date. At
December 31, 1999, the Bank's five largest groups of loans-to-one borrower ranged from $3.7 million to $7.1 million, with the largest single loan in such
groups being a $3.5 million loan secured by an office building located in St. Charles, Illinois. At December 31, 1999, there were no loans exceeding the 20% limitation. A substantial
portion of each large group of loans is secured by real estate. At December 31, 1999, all of such loans were performing in accordance with their terms.

Loan Approval Procedures and Authority.The Board of Directors
establishes the lending policies and loan approval limits of the Bank. The Board of Directors has established the Loan Committee (the "Committee") of the Board which considers and approves all loans
within its designated authority as established by the Board. In addition, the Board of Directors has authorized certain officers of the Bank (the "designated officers") to consider and approve all
loans within their designated authority as established by the Board.

Underwriting.With respect to all loans originated by the Bank,
it is the general policy of the Bank to retain all such loans in its portfolio. The Bank does not have a policy of underwriting its loans in conformance with the Federal National Mortgage Association
("FNMA") or Federal Home Loan Mortgage Corporation ("FHLMC") guidelines. Upon receipt of a completed loan application from a prospective borrower, a credit report is ordered and certain other
information is verified by an independent credit agency. If necessary, additional financial information may be required. An appraisal of real estate intended to secure a proposed loan generally is
required to be performed by the Bank's "in-house" appraisers or outside appraisers approved by the Bank. For proposed mortgage loans, the Board annually approves independent appraisers
used by the Bank and approves the Bank's appraisal policy. The Bank's policy is to obtain title and hazard insurance on all mortgage loans and flood insurance when necessary and the Bank may require
borrowers to make payments to a mortgage escrow account for the payment of property taxes.

In
an effort to increase its volume of one- to four-family loan originations, the Bank has adopted certain changes to its underwriting standards and loan
pricing strategies which may expose it to increased interest rate risk. Based upon the Bank's review of its existing underwriting standards, its minimal charge-off experience and the gain
on the sale of foreclosed real estate experienced in recent periods, management recently determined to increase its debt to equity ratios required on
one-to-four-family mortgage loans. At December 31, 1999, the Bank's ratio of nonperforming loans to total loans was 0.32%, and its ratio of nonperforming
assets to total assets was 0.28%. The Bank had $168,000 of real estate owned and real estate in judgment at December 31, 1999. Net charge-offs amounted to $39,000 and $46,000 in
1999 and 1998, respectively. See "Delinquent Loans, Classified Assets and Real Estate Owned."

The
Bank's one- to four-family lending policy permits the investment in mortgage loans where the borrower's monthly mortgage and prorated real estate tax
payments were less than 32% of the borrower's gross income, and where the borrower's total monthly obligations did not exceed 43% of the borrower's gross income. It is also the general practice of the
Bank not to require private mortgage insurance, though the Bank retains the right to require such insurance on any loan with a loan to value ratio in excess of 80.0%. All loans with loan to value
ratios in excess of 89.9% must have private
mortgage insurance, with the exception of its "First-Time Home Buyer" and "American Dream Loan" programs. In addition, the Bank had historically priced its one- to
four- family loans with loan to value ratios of between 80.0% and 89.9% at 50 basis points higher than loans with loan to value ratios of less than 80.0%, again in an effort to control the
origination of such loans. The Bank has eliminated the price differential between loans with loan to value ratios of less than 80.0% and between 80.0% and 89.90% as a means of attracting more
borrowers. The Bank

15



believes
that its underwriting standards are sufficient to allow it to adequately assess the creditworthiness of prospective borrowers. There can be no assurances, however, that increasing the
permissible debt coverage ratios and loan-to-value ratios permitted for borrowers will not result in the Bank experiencing increased delinquencies and defaults on loans.

Delinquent Loans, Classified Assets and Real Estate Owned

Delinquencies, Classified Assets and Real Estate Owned.Reports
listing all delinquent accounts are generated and reviewed by management on a monthly basis and the Board of Directors performs a monthly review of all loans or lending relationships delinquent
45 days or more. The procedures taken by the Bank with respect to delinquencies vary depending on the nature of the loan, period and cause of delinquency and whether the borrower is habitually
delinquent. When a borrower fails to make a required payment on a loan, the Bank takes a number of steps to have the borrower cure the delinquency and restore the loan to current status. The Bank
generally sends the borrower a written notice of non-payment after the loan is first past due. The Bank's guidelines provide that telephone, written correspondence and/or
face-to-face contact will be attempted to ascertain the reasons for delinquency and the prospects of repayment. When contact is made with the borrower at any time prior to
foreclosure, the Bank will attempt to obtain full payment, offer to work out a repayment schedule with the borrower to avoid foreclosure or, in some instances, accept a deed in lieu of foreclosure. In
the event payment is not then received or the loan not otherwise satisfied, additional letters and telephone calls generally are made. If the loan is still not brought current or satisfied and it
becomes necessary for the Bank to take legal action, which typically occurs after a loan is 90 days or more delinquent, the Bank will commence foreclosure proceedings against any real property
that secured the loan. If a foreclosure action is instituted and the loan is not brought current, paid in full, or refinanced before the foreclosure sale, the property securing the loan generally is
sold at foreclosure and, if purchased by the Bank, becomes real estate owned.

Federal
regulations and the Bank's internal policies require that the Bank utilize an internal asset classification system as a means of reporting problem and potential problem
assets. The Bank currently classifies problem and potential problem assets as "Substandard," "Doubtful" or "Loss" assets. An asset is considered Substandard if it is inadequately protected by the
current net worth and paying capacity of the obligor or of the collateral pledged, if any. Substandard assets include those characterized by the distinct possibility that the Bank will sustain some
loss if the deficiencies are not corrected. Assets classified as Doubtful have all of the weaknesses inherent in those classified Substandard with the added characteristic that the weaknesses present
make collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable and improbable. Assets classified as Loss are those considered
uncollectible and of such little value that their continuance as assets, without the establishment of a specific loss reserve, is not warranted. Assets which do not currently expose the Bank to a
sufficient degree of risk to warrant classification in one of the aforementioned categories but possess weaknesses are required to be designated "Special Mention."

When
the Bank classifies one or more assets, or portions thereof, as Substandard or Doubtful, it establishes a specific allowance for loan losses in an amount deemed prudent by
management unless the loss of principal appears to be remote. When the Bank classifies one or more assets, or portions thereof, as Loss, it either establishes a specific allowance for losses equal to
100% of the amount of the assets so classified or charges off such amount.

The
Bank's determination as to the classification of its assets and the amount of its allowances for loan losses is subject to review by the FDIC and Commissioner, which can order the
establishment of
additional general or specific loss allowances. The FDIC, in conjunction with the other federal banking agencies, adopted an interagency policy statement on the allowance for loan and lease losses.
The policy statement provides guidance for financial institutions on both the responsibilities of management for the assessment and establishment of adequate allowances and guidance for banking agency
examiners to use in determining the adequacy of general valuation guidelines. Generally, the policy statement recommends that institutions have effective systems and controls to identify, monitor and
address asset quality problems; that management has analyzed all significant factors that affect the collectibility of the portfolio in a reasonable manner; and that management has established
acceptable allowance evaluation processes that meet the objectives set forth in the policy statement. While the Bank believes that it has established an adequate allowance for loan losses, there can
be no assurance that regulators, in reviewing the Bank's loan portfolio, will not request the Bank

16



to
materially increase at that time its allowance for loan losses, thereby negatively affecting the Bank's financial condition and earnings at that time. Although management believes that adequate
specific and general loan loss allowances have been established, future provisions are dependent upon future events such as loan growth and portfolio diversification and, as such, further additions to
the level of the allowance for loan losses may become necessary.

The
Bank reviews and classifies its assets on a quarterly basis and the Board of Directors reviews the results of the reports on a quarterly basis. The Bank classifies its assets in
accordance with the management guidelines described above. At December 31, 1999, the Bank had $1.4 million, or 0.28%, of assets designated as Substandard, no loans were classified as
Doubtful or Loss. At December 31, 1999, these classified assets totaled $1.4 million, representing 0.36% of loans receivable.

The
following tables set forth delinquencies in the Bank's loan portfolio past due 60 days or more:

|                                    |  | At December 31, 1999 |  | At December 31, 1998 |     
|----------------------------------- |  | -------------------- |  | -------------------- | ----
|
|
|
|One- to four-family                 |  |                     |  | $                    |    
|Multi-family                        |  |                     |  |                      |    
|Commercial real estate              |  |                     |  |                      |    
|Consumer                            |  |                     |  |                      |    
|Home equity                         |  | 3                    |  |                      | 42  
|Commercial business                 |  |                     |  |                      |    
|                                    |  |                      |  |                      |     
|Total                               |  | 3                    |  | $                    | 42  
|                                    |  |                      |  |                      |     
|Delinquent loans to total loans (1) |  |                      |  |                      | 0.01
|                                    |  |                      |  |                      |     

|                                    |  | At December 31, 1997 | 
|----------------------------------- |  | -------------------- | 
|
|
|
|One- to four-family                 |  | 4                    | 
|Multi-family                        |  |                     | 
|Commercial real estate              |  |                     | 
|Commercial business                 |  | 2                    | 
|Home equity                         |  |                     | 
|Other                               |  |                     | 
|                                    |  |                      | 
|Total                               |  | 6                    | 
|                                    |  |                      | 
|Delinquent loans to total loans (1) |  |                      | 
|                                    |  |                      | 

---

17





Nonperforming Assets.The following table sets forth information regarding nonperforming loans,
REO and RIJ. At December 31, 1999, the Bank had $168,000 of REO and RIJ. It is the general policy of the Bank to cease accruing interest on loans 90 days or more past due and to fully
reserve for all previously accrued interest. For each of the five years ended December 31, 1999, the amount of additional interest income that would have been recognized on
non-accrual loans if such loans had continued to perform in accordance with their contractual terms was $46,000, $71,000, $49,000, $35,000, and $60,000, respectively.

|                                                      |  | At December 31, |      
|----------------------------------------------------- |  | --------------- | -----
|
|
|Nonperforming loans:                                  |  |                 |      
|Mortgage loans:                                       |  |                 |      
|One- to four-family                                   |  | $               | 1,042
|Multi-family                                          |  |                 |     
|Commercial real estate                                |  |                 | 226  
|Construction and land                                 |  |                 |     
|                                                      |  |                 |      
|Total mortgage loans                                  |  |                 | 1,268
|                                                      |  |                 |      
|Other loans:                                          |  |                 |      
|Home equity                                           |  |                 |     
|Commercial business loans                             |  |                 |     
|Auto loans                                            |  |                 |     
|Other                                                 |  |                 | 2    
|                                                      |  |                 |      
|Total other loans                                     |  |                 | 2    
|                                                      |  |                 |      
|Total nonperforming loans                             |  |                 | 1,270
|                                                      |  |                 |      
|Real estate owned, and in judgment net (1)            |  |                 | 168  
|                                                      |  |                 |      
|Total nonperforming assets                            |  | $               | 1,438
|                                                      |  |                 |      
|Nonperforming loans as a percent of loans (2)         |  |                 | 0.32 
|Nonperforming assets as a percent of total assets (3) |  |                 | 0.28 

---

Nonperforming
loans totaled $1.3 million as of December 31, 1999, and included nine one- to four-family loans, with an aggregate balance of
$1.0 million, one commercial real estate loan with a balance of $226,000 and one unsecured consumer loan with a balance of $2,000.

Allowance for Loan losses

The allowance for loan losses is maintained through provisions for loan losses based on management's on-going evaluation of the risks inherent in
its loan portfolio in consideration of the trends in its loan portfolio, the national and regional economies and the real estate market in the Bank's primary lending area. The allowance for loan
losses is maintained at an amount management considers adequate to cover estimated losses in its loan portfolio which are deemed probable and estimable based on information currently known to
management. The Bank's loan loss allowance determinations also incorporate factors and analyses which consider the potential principal loss associated with the loan, costs of acquiring the property
securing the loan through foreclosure or deed in lieu thereof, the periods of time involved with the acquisition and sale of such property, and costs and expenses associated with maintaining and
holding the property until sale and the costs associated with the Bank's inability to utilize funds for other income producing activities during the estimated holding period of the property.

18



Management
calculates a loan loss allowance sufficiency analysis quarterly based upon the loan portfolio composition, asset classifications, loan-to-value
ratios, potential impairments in the loan portfolio and other factors. The analysis is compared to actual losses, peer group comparisons and economic conditions. As of December 31, 1999, the
Bank's allowance for loan losses was $1.5 million, or 0.39%, of total loans and 121.7% of nonperforming loans as compared to $1.4 million, or 0.44%, of total loans and 136.5% of
nonperforming loans as of December 31, 1998. The Bank had total nonperforming loans of $1.3 million at December 31, 1999 as compared to $1.0 million at December 31,
1998 and nonperforming loans to total loans of 0.32% at December 31, 1999 and 1998. The Bank will continue to monitor and modify its allowance for loan losses as conditions dictate. Management
believes that, based on information available at December 31, 1999, the Bank's allowance for loan losses was sufficient to cover losses inherent in its loan portfolio at that time. Based upon
the Bank's plan to increase its emphasis on non-one- to four-family mortgage lending, the Bank expects to further increase its allowance for loan losses over future
periods depending upon the then current conditions. However, no assurances can be given that the Bank's level of allowance for loan losses will be sufficient to cover loan losses incurred by the Bank
or that future adjustments to the allowance for loan losses will not be necessary if economic and other conditions differ substantially from the economic and other conditions used by management to
determine the current level of the allowance for loan losses. In addition, the FDIC and the Commissioner, as an integral part of their examination processes, periodically review the Bank's allowance
for loan losses. Such agencies may require the Bank to make additional provisions for estimated loan losses based upon judgments different from those of management.

The
following table sets forth activity in the Bank's allowance for loan losses for the periods set forth in the table.

|                                                              |  | At or For the Year Ended December31, |      
|------------------------------------------------------------- |  | ------------------------------------ | -----
|
|
|Balance at beginning of period                                |  | $                                    | 1,373
|Provision for loan losses                                     |  |                                      | 211  
|Recoveries                                                    |  |                                      | 2    
|Total charge-offs                                             |  |                                      | (41  
|                                                              |  |                                      |      
|Balance at end of period                                      |  | $                                    | 1,545
|                                                              |  |                                      |      
|Allowance for loan losses as a percent of loans (1)           |  |                                      | 0.39 
|Allowance for loan losses as a percent of nonperforming loans |  |                                      | 121.7

---

19





The
following tables set forth the Bank's percent of allowance for loan losses to total allowance and the percent of loans to total loans in each of the categories listed at the dates
indicated.

|                                |  | At December 31, |      
|------------------------------- |  | --------------- | -----
|
|
|
|One- to four-family             |  | $               | 592  
|Multi-family                    |  |                 | 147  
|Commercial real estate          |  |                 | 318  
|Construction and land           |  |                 | 127  
|Home equity                     |  |                 | 100  
|Commercial business loans       |  |                 | 147  
|Auto loans                      |  |                 | 10   
|Loans on savings accounts       |  |                 |     
|Other                           |  |                 | 47   
|Unallocated                     |  |                 | 57   
|                                |  |                 |      
|Total allowance for loan losses |  | $               | 1,545
|                                |  |                 |      

20



Real Estate Owned and Real Estate In Judgment.At December 31, 1999, the Bank had
$168,000 of REO and RIJ in its portfolio. When the Bank acquires property through foreclosure or deed in lieu of foreclosure, it is initially recorded at the lower of the recorded investment in the
corresponding loan or the fair value of the related assets at the date of foreclosure, less costs to sell. Thereafter, if there is a further deterioration in value, the Bank provides for a specific
valuation allowance and charges operations for the diminution in value.

Investment Activities

The Board of Directors sets the investment policy and procedures of the Bank. This policy generally provides that investment decisions will be
made based on the safety of the investment, liquidity requirements of the Bank and, to a lesser extent, potential return on the investments. In pursuing these objectives, the Bank considers the
ability of an investment to provide earnings consistent with factors of quality, maturity, marketability and risk diversification. While the Board of Directors has final authority and responsibility
for the securities investment portfolio, the Bank has established an Investment Committee comprised of six Directors to supervise the Bank's investment activities. The Bank's Investment Committee
meets monthly and evaluates all investment activities for safety and soundness, adherence to the Bank's investment policy, and assurance that authority levels are maintained.

The Bank currently does not participate in hedging programs, interest rate swaps, or other activities involving the use of off-balance
sheet derivative financial instruments. Similarly, the Bank does not invest in mortgage-related securities which are deemed to be "high risk," or purchase bonds which are not rated investment grade.

Mortgage-Backed Securities.The Bank currently purchases mortgage-backed
securities in order to: (i) generate positive interest rate spreads with minimal administrative expense; and (ii) lower its credit risk as a result of the guarantees provided by FHLMC,
FNMA, and the Government National Mortgage Association ("GNMA"). The Bank invests in mortgage-backed securities insured or guaranteed by FNMA, FHLMC and GNMA. At December 31, 1999,
mortgage-backed securities totalled $11.9 million, or 2.3%, of total assets and 2.4% of total interest earning assets, all of which was classified as available-for-sale.
At December 31, 1999, 67.4% of the mortgage-backed securities were backed by adjustable-rate loans and 32.6% were backed by fixed-rate loans. The mortgage-backed
securities portfolio had coupon rates ranging from 6.00% to 10.00% and had a weighted average yield of 6.29% at December 31, 1999. The estimated fair value of the Bank's mortgage-backed
securities at December 31, 1999, was $11.9 million, which is $197,000 less than the amortized cost of $12.1 million.

Mortgage-backed securities are created by the pooling of mortgages and issuance of a security with an interest rate which is less than the interest rate on the
underlying mortgages. Mortgage-backed securities typically represent a participation interest in a pool of single-family or multi-family mortgages, although the Bank focuses its investments on
mortgage-backed securities backed by single-family mortgages. The issuers of such securities (generally U.S. Government agencies and government sponsored enterprises, including FNMA, FHLMC and GNMA)
pool and resell the participation interests in the form of securities to investors such as the Bank and guarantee the payment of principal and interest to investors. Mortgage-backed securities
generally yield less than the loans that underlie such securities because of the cost of payment guarantees and credit enhancements. In addition, mortgage-backed securities are usually more liquid
than individual mortgage loans and may be used to collateralize certain liabilities and obligations of the Bank. Investments in mortgage-backed securities involve a risk that actual prepayments will
be greater than estimated prepayments over the life of the security, which may require adjustments to the amortization of any premium or accretion of any discount relating to such instruments thereby
reducing the net yield on such securities. There is also reinvestment risk associated with the cash flows from such securities or in the event such securities are redeemed by the issuer. In addition,
the market value of such securities may be adversely affected by changes in interest rates. The Bank estimates prepayments for its mortgage-backed securities at purchase to ensure that prepayment
assumptions are reasonable considering the underlying collateral for the mortgage-backed
securities at issue and current mortgage interest rates and to determine the yield and estimated maturity of its mortgage-backed security portfolio. Of the Bank's $11.9 million mortgage-backed
securities portfolio at December 31, 1999, $2.6 million with a weighted average yield of 6.33% had contractual maturities within five years and $9.3 million with a weighted
average yield of 6.27% had contractual maturities over five years. However, the actual maturity of a mortgage-backed security may be less than

21



its
stated maturity due to prepayments of the underlying mortgages. Prepayments that are faster than anticipated may shorten the life of the security and may result in a loss of any premiums paid and
thereby reduce the net yield on such securities. Although prepayments of underlying mortgages depend on many factors, the difference between the interest rates on the underlying mortgages and the
prevailing mortgage interest rates generally is the most significant determinant of the rate of prepayments. During periods of declining mortgage interest rates, refinancing generally increases and
accelerates the prepayment of the underlying mortgages and the related security. Under such circumstances, the Bank may be subject to reinvestment risk because, to the extent that the Bank's
mortgage-backed securities prepay faster than anticipated, the Bank may not be able to reinvest the proceeds of such repayments and prepayments at a comparable rate.

U.S. Government Obligations.At December 31, 1999, the Bank's U.S.
Government securities portfolio totalled $60.8 million, all of which were classified as available-for-sale. Such portfolio primarily consists of medium-term
(maturities of three to fifteen years) securities.

Equity Investments.At December 31, 1999, the Bank's equity investment portfolio totaled
$300,000, all of which were classified available-for-sale. The portfolio consists of $100,000 of common stock and $200,000 of preferred stock in a small privately held company
specializing in interest rate risk and web site design consulting.

The
following table sets forth the composition of the Bank's investment and mortgage-backed and mortgage-related securities portfolios in dollar amounts and in percentages at the
dates indicated:

|                                 |  | At December 31, |       
|-------------------------------- |  | --------------- | ------
|
|
|
|Investment securities:           |  |                 |       
|U.S. Government obligations      |  | $               | 60,780
|Equity investments               |  |                 | 300   
|                                 |  |                 |       
|Total investment securities      |  |                 | 61,080
|                                 |  |                 |       
|Mortgage-backed securities:      |  |                 |       
|FHLMC                            |  |                 | 2,245 
|GNMA                             |  |                 | 6,072 
|FNMA                             |  |                 | 3,565 
|                                 |  |                 |       
|Total mortgage-backed securities |  |                 | 11,882
|                                 |  |                 |       
|Total securities                 |  | $               | 72,962
|                                 |  |                 |       

22



The
following table sets forth the Bank's securities activities for the periods indicated. All investment securities in the Bank's portfolio are classified as
available-for-sale.

|                                                                         |  | For the Year
Ended December 31, |       
|------------------------------------------------------------------------ |  | ------------------------------- | ------
|
|
|Beginning balance                                                        |  | $                               | 75,517
|                                                                         |  |                                 |       
|Investment securities purchased                                          |  |                                 | 29,137
|Mortgage-backed securities purchased                                     |  |                                 |      
|Less:                                                                    |  |                                 |       
|Sale of investment securities                                            |  |                                 | 11,713
|Principal repayments on mortgage-backed securities                       |  |                                 | 5,796 
|Maturities of investment securities                                      |  |                                 | 11,084
|Gain on sale of investment securities                                    |  |                                 | (103  
|Net amortization of premium                                              |  |                                 | 84    
|Change in net unrealized gains (losses) on available-for-sale securities |  |                                 | 3,118 
|                                                                         |  |                                 |       
|Ending balance                                                           |  | $                               | 72,962
|                                                                         |  |                                 |       

The
following table sets forth at the dates indicated certain information regarding the amortized cost and market values of the Bank's investment and mortgage-backed and
mortgage-related securities, all of which was classified as available-for-sale.

|                                 |  | At December 31,
|-------------------------------- |  | ---------------
|
|
|
|Investment securities:           |  |                
|U.S. Government obligations      |  | $              
|Equity investment                |  |                
|                                 |  |                
|Total investment securities      |  |                
|                                 |  |                
|Mortgage-backed securities:      |  |                
|GNMA                             |  |                
|FNMA                             |  |                
|FHLMC                            |  |                
|                                 |  |                
|Total mortgage-backed securities |  |                
|                                 |  |                
|Total securities                 |  | $              
|                                 |  |                

23



The
table below sets forth certain information regarding the carrying value, weighted average yields and contractual maturities of the Bank's securities portfolio, all of which was
classified as available-for-sale, as of December 31, 1999.

|                                 |  | At December 31,1999 |  
|-------------------------------- |  | ------------------- | -
|
|
|
|Mortgage-backed securities:      |  |                     |  
|FHLMC                            |  | $                   | 
|GNMA                             |  |                     | 2
|FNMA                             |  |                     | 
|                                 |  |                     |  
|Total mortgage-backed securities |  |                     | 
|U.S. Government obligations      |  |                     | 
|                                 |  |                     |  
|Total securities                 |  | $                   | 2
|                                 |  |                     |  

Sources of Funds

General.Deposits, repayments and prepayments of loans, cash flows generated from operations
and FHLB advances are the primary sources of the Bank's funds for use in lending, investing and for other general purposes.

Deposits.The Bank offers a variety of deposit accounts with a range of interest rates and
terms. The Bank's deposit accounts consist of savings, retail checking/NOW accounts, commercial checking accounts, money market accounts, club accounts and certificate of deposit accounts. The Bank
offers certificate of deposit accounts with balances in excess of $100,000 at preferential rates (jumbo certificates) and also offers Individual Retirement Accounts ("IRAs") and other qualified plan
accounts.

At December 31, 1999, the Bank's deposits totaled $323.9 million, or 76.5%, of interest-bearing liabilities. For the year ended December 31, 1999,
the average balance of core deposits (savings, NOW, money market and non-interest-bearing checking accounts) totaled $142.0 million, or 48.5% of total average deposits. At
December 31, 1999, the Bank had a total of $175.3 million in certificates of deposit, of which $130.4 million had maturities of one year or less reflecting the shift in deposit
accounts from savings accounts to shorter-term certificate accounts that has occurred in recent years. For the year ended December 31, 1999, the average balance of core deposits
represented approximately 43.9% of total deposits and certificate accounts represented 54.1%, as compared to core deposits representing 45.6% of total deposits and certificate accounts representing
52.5% of deposits for the year ended December 31, 1998. Although the Bank has a significant portion of its deposits in core deposits, management monitors activity on the Bank's core deposits
and, based on historical experience and the Bank's current pricing strategy, believes it will continue to retain a large portion of such accounts. The Bank is not limited with respect to the rates it
may offer on deposit products.

The flow of deposits is influenced significantly by general economic conditions, changes in money market rates, prevailing interest rates and
competition. The Bank's deposits are obtained predominantly from the areas in which its branch offices are located. The Bank relies primarily on customer service
and long-standing relationships with customers to attract and retain these deposits; however, market interest rates and rates offered by competing financial institutions affect the Bank's
ability to attract and retain deposits. The Bank uses traditional means of advertising its deposit products, including radio and print media and generally does not solicit deposits from outside its
market area. While certificate accounts in excess of $100,000 are accepted by the Bank, and may be subject to preferential rates, the Bank does not actively solicit such deposits as such deposits are
more difficult to retain than core deposits. The Bank's policies do not permit the use of brokered deposits.

24



At December 31, 1999, the Bank had outstanding $32.7 million in certificate of deposit accounts in amounts of $100,000 or more, maturing as follows:

|Maturity Period               |  | Amount |        | Weighted
Average
Rate |     
|----------------------------- |  | ------ | ------ | --------------------- | ----
|
|Three months or less          |  | $      | 6,985  |                       | 5.36
|Over three through six months |  |        | 5,070  |                       | 5.22
|Over six through 12 months    |  |        | 13,230 |                       | 5.71
|Over 12 months                |  |        | 7,435  |                       | 5.39
|                              |  |        |        |                       |     
|Total                         |  | $      | 32,720 |                       | 5.49
|                              |  |        |        |                       |     

The
following table sets forth the distribution of the Bank's deposit accounts for the periods indicated and the weighted average interest rates on each category of deposits
presented.

|                              |  | For the Year Ended
December 31, 1999 |         | For the Year Ended
December 31, 1998 |        | For the Year Ended
December 31, 1997 |     
|----------------------------- |  | ------------------------------------ | ------- | ------------------------------------ | ------ | ------------------------------------ | ----
|
|
|Money market accounts         |  | $                                    | 31,340  |                                      | 9.68   | %                                    | 3.53
|Passbook savings accounts     |  |                                      | 73,675  |                                      | 22.75  |                                      | 3.35
|NOW accounts                  |  |                                      | 28,044  |                                      | 8.66   |                                      | 1.80
|Non-interest-bearing accounts |  |                                      | 15,539  |                                      | 4.80   |                                      |    
|                              |  |                                      |         |                                      |        |                                      |     
|Total                         |  |                                      | 148,598 |                                      | 45.88  |                                      | 2.75
|Certificates of deposit       |  |                                      | 175,281 |                                      | 54.12  |                                      | 5.34
|                              |  |                                      |         |                                      |        |                                      |     
|Total deposits                |  | $                                    | 323,879 |                                      | 100.00 | %                                    | 4.15
|                              |  |                                      |         |                                      |        |                                      |     

25



The following table presents, by various rate categories, the amount of certificate of deposit accounts outstanding at the dates indicated.

|                           |  | Period to Maturity
from December 31, 1999 |         |  |   |       
|-------------------------- |  | ----------------------------------------- | ------- |  | - | ------
|
|
|
|
|Certificate accounts:      |  |                                           |         |  |   |       
|4.00% or less              |  | $                                         | 614     |  | $ |      
|4.01 to 5.00%              |  |                                           | 39,809  |  |   | 5,989 
|5.01 to 6.00%              |  |                                           | 76,514  |  |   | 9,726 
|6.01 to 7.00%              |  |                                           | 13,333  |  |   | 5,136 
|7.01 to 8.00%              |  |                                           | 100     |  |   |      
|                           |  |                                           |         |  |   |       
|Total at December 31, 1999 |  | $                                         | 130,730 |  | $ | 20,851
|                           |  |                                           |         |  |   |       

Borrowed Funds.The following table sets forth certain information regarding the Bank's
borrowed funds at or for the years ended on the dates indicated:

|                                                            |  | At or For the Year Ended
December 31, |        
|----------------------------------------------------------- |  | ------------------------------------- | -------
|
|
|FHLB advances:                                              |  |                                       |        
|Average balance outstanding                                 |  | $                                     | 85,983 
|                                                            |  |                                       |        
|Maximum amount outstanding at any month-end during the year |  | $                                     | 115,200
|                                                            |  |                                       |        
|Balance outstanding at end of year                          |  | $                                     | 115,200
|                                                            |  |                                       |        
|Weighted average interest rate during the year              |  |                                       | 5.20   
|                                                            |  |                                       |        
|Weighted average interest rate at end of year               |  |                                       | 5.38   
|                                                            |  |                                       |        

Subsidiary Activities

Fox Valley Service Corporation of Elgin.Fox Valley Service Corporation of Elgin ("Fox Valley")
is the Bank's wholly-owned subsidiary which was incorporated in March 1974 for the purpose of entering into joint venture real estate development projects. Fox Valley currently owns a single
parcel of real estate valued at $101,000.

Fox Valley Financial Services, Inc.Elgin Agency, Inc. was renamed Fox Valley
Financial Services, Inc. ("FVFS") in April, 1999 and is the wholly-owned subsidiary of Fox Valley. FVFS is a service corporation that offers a wide variety of financial products and services
for individuals and businesses, which includes various investment and insurance products. FVFSI has two salespeople who are employed on a commission basis.

Personnel

As of December 31, 1999, the Bank had 96 full-time employees and 44 part-time employees. The employees are not represented by a
collective bargaining unit and the Bank considers its relationship with its employees to be good.

26



## 

REGULATION AND SUPERVISION

General

The Bank is an Illinois State chartered mutual savings bank and its deposit accounts are insured up to applicable limits by the FDIC under the Savings
Association Insurance Fund ("SAIF"). The Bank is subject to extensive regulation by the Commissioner, as its chartering authority, and by the FDIC, as the deposit insurer. The Bank must file reports
with the Commissioner and the FDIC concerning its activities and financial condition, in addition to obtaining regulatory approvals prior to entering into certain transactions such as establishing
branches and mergers with, or acquisitions of, other depository institutions. There are periodic examinations by the Commissioner and the FDIC to assess the Bank's compliance with various regulatory
requirements and financial condition. This regulation and supervision establishes a framework of activities in which a savings bank can engage and is intended primarily for the protection of the
insurance fund and depositors. The regulatory structure also gives the regulatory authorities extensive discretion in connection with their supervisory and enforcement activities and examination
policies, including policies with respect to the classification of assets and the establishment of adequate loan loss reserves for regulatory purposes. Any change in such regulation, whether by the
Commissioner, the FDIC or through legislation, could have a material adverse impact on the Company and the Bank and their operations and stockholders. The Holding Company will also be required to file
certain reports with, and otherwise comply with the rules and regulations, of the OTS, the Commissioner and of the Securities and Exchange Commission ("SEC") under the federal securities laws. Certain
of the regulatory requirements applicable to the Bank and to the Holding Company are referred to below or elsewhere herein.

The
Commissioner has established a schedule for the assessment of "supervisory fees" upon all Illinois savings banks to fund the operations of the Commissioner. These supervisory fees
are computed on the basis of each savings bank's total assets (including consolidated subsidiaries) and are payable at the end of each calendar quarter. A schedule of fees has also been established
for certain filings made by Illinois savings banks with the Commissioner. The Commissioner also assesses fees for examinations conducted by the Commissioner's staff, based upon the number of hours
spent by the Commissioner's staff performing the examination. During the year ended December 31, 1999, the Bank paid approximately $41,000 in supervisory fees and expenses.

Regulations

Capital Requirements.Under the Illinois law and the regulations of the Commissioner, an
Illinois savings bank must maintain a minimum level of capital equal to the higher of 3% of total assets or the amount required to maintain insurance of deposits by the FDIC. The Commissioner has the
authority to require an Illinois savings bank to maintain a higher level of capital if deemed necessary based on the savings bank's financial condition, history, management or earnings prospects.

The
FDIC has also adopted risk-based capital guidelines to which the Bank is subject. The Bank is required to maintain certain levels of regulatory capital in relation to
regulatory risk-weighted assets. Risk-based capital ratios are determined by allocating assets and specified off-balance sheet items to four
risk-weighted categories ranging from 0% to 100%, with higher levels of capital being required for the categories perceived as representing greater risk. The guidelines divide a savings
bank's capital into two
tiers. The first tier ("Tier I") includes common equity, retained earnings, certain non-cumulative perpetual preferred stock (excluding auction rate issues) and minority interests in
equity accounts of consolidated subsidiaries, less goodwill and other intangible assets (except mortgage servicing rights and purchased credit card relationships subject to certain limitations).
Supplementary ("Tier II") capital includes, among other items, cumulative perpetual and long-term limited-life preferred stock, mandatory convertible securities, certain hybrid
capital instruments, term subordinated debt and the allowance for loan and lease losses, subject to certain limitations, less required deductions. Savings banks are required to maintain a total
risk-based capital ratio of 8%, of which at least 4% must be Tier I capital.

27



In
addition, the FDIC has established regulations prescribing a minimum Tier I leverage ratio. These regulations provide for a minimum Tier I leverage ratio of 3% for banks that meet
certain specified criteria, including that they have the highest examination rating and are not experiencing or anticipating significant growth. All other banks are required to maintain a Tier I
leverage ratio of 3% plus an additional cushion of at least 4%. The FDIC may, however, set higher leverage and risk-based capital requirements on individual institutions when particular
circumstances warrant.

The
following is a summary of the Bank's regulatory capital at December 31, 1999:

|Total Capital to Total Assets         |  | 11.55 | %
|------------------------------------- |  | ----- | -
|Total Capital to Risk-Weighted Assets |  | 18.58 | %
|Tier I Leverage Ratio                 |  | 12.77 | %
|Tier I to Risk-Weighted Assets        |  | 18.11 | %

The
FDIC and the other federal banking agencies, have adopted a regulation providing that the agencies will take account of the exposure of a bank's capital and economic value to
changes in interest rate risk in assessing a bank's capital adequacy.

Standards for Safety and Soundness.The federal banking agencies have adopted final regulations
and Interagency Guidelines Establishing Standards for Safety and Soundness to implement safety and soundness standards. The Guidelines set forth the safety and soundness standards that the federal
banking agencies use to identify and address problems at insured depository institutions before capital becomes impaired. If the appropriate federal banking agency determines that an institution fails
to meet any standard prescribed by the Guidelines, the agency may require the institution to submit to the agency an acceptable plan to achieve compliance with the standard.

Lending Restrictions.The Bank is prohibited by Illinois from making secured or unsecured loans
for business, corporate, commercial or agricultural purposes representing in the aggregate an amount in excess of 15% of its total assets, unless the Commissioner authorizes in writing a higher
percentage limit for such loans upon the request of an institution.

The
Bank is also subject to a loans-to-one borrower limitation. Under the Illinois law, the total loans and extensions of credit by the Bank to any person
outstanding at one time must not exceed the greater of $500,000 or 20% of the Bank's total capital plus general loan loss reserves. In addition, the Bank may
make loans in an amount equal to an additional 10% of the Bank's capital plus general loan loss reserves if secured by readily marketable collateral.

Dividend Limitations.Under the ISBA, dividends may only be declared when the total capital of
the Bank is greater than that required by Illinois law. Dividends may be paid by the Bank out of its net profits. The written approval of the Commissioner must be obtained, however, before a savings
bank having total capital of less than 6% of total assets may declare dividends in any year in an amount in excess of 50% of its net profits for that year. A savings bank may not declare dividends in
excess of its net profits in any year without the approval of the Commissioner. Finally, the Bank will be unable to pay dividends in an amount which would reduce its capital below the greater of
(i) the amount required by the FDIC capital regulations or otherwise specified by the FDIC, (ii) the amount required by the Commissioner or (iii) the amount required for the
liquidation account to be established by the Bank in connection with the Bank's conversion. The Commissioner and the FDIC also have the authority to prohibit the payment of any dividends by the Bank
if the Commissioner or the FDIC determines that the distribution would constitute an unsafe or unsound practice.

Prompt Corrective Regulatory Action

Federal law requires, among other things, that federal bank regulatory authorities take "prompt corrective action" with respect to banks that do not meet
minimum capital requirements. For these purposes, the law establishes various capital categories. The FDIC has adopted regulations to implement the prompt corrective action legislation.

28



Under
the regulations, an institution is deemed to be "undercapitalized" if it has a total risk-based capital ratio of less than 8%, a Tier I risk-based capital ratio of less
than 4%, or generally a leverage ratio of less than 4%. An institution is deemed to be "significantly undercapitalized" if it has a total risk-based capital ratio of less than 6%, a Tier I
risk-based capital ratio of less than 3%, or a leverage ratio of less than 3%. An institution is deemed to be "critically undercapitalized" if it has a ratio of tangible equity (as defined
in the regulations) to total assets that is equal to or less than 2%.

"Undercapitalized"
banks are subject to growth, capital distribution (including dividend) and other limitations and are required to submit a capital restoration plan. A bank's
compliance with such plan must be guaranteed by any company that controls the undercapitalized institution in an amount equal to the lesser of 5.0% of the Bank's total assets when deemed
undercapitalized or the amount necessary to achieve the status of adequately capitalized. If an "undercapitalized" bank fails to submit an acceptable plan, it is treated as if it is "significantly
undercapitalized." "Significantly undercapitalized" banks are subject to one or more of a number of additional restrictions, including but not limited to an order by the FDIC to sell sufficient voting
stock to become adequately capitalized, requirements to reduce total assets and cease receipt of deposits from correspondent banks or dismiss directors or officers. "Critically undercapitalized"
institutions also may not make any payment of principal or interest on certain subordinated debt or extend credit for a highly leveraged transaction or enter into any material transaction outside the
ordinary course of business. In addition, subject to a narrow exception, the appointment of a receiver or conservator is required for a "critically undercapitalized" institution within 270 days
after it obtains such status.

Transactions with Affiliates

Transactions between depository institutions and their affiliates are governed by federal law. An affiliate of a savings bank is any company or entity that
controls, is controlled by, or is under common control
with the savings bank, other than a subsidiary. In a holding company context, at a minimum, the parent holding company of a savings bank and any companies which are controlled by such parent holding
company are affiliates of the savings bank. Generally, the extent to which the savings bank or its subsidiaries may engage in "covered transactions," including loans, with any one affiliate is limited
to 10% of such savings bank's capital stock and surplus, and there is an aggregate limit on all such transactions with all affiliates of 20% of such capital stock and surplus. Federal law also
establishes specific collateral requirements for loans or extensions of credit to, or guarantees, acceptances on letters of credit issued on behalf of an affiliate. Covered transactions and a broad
list of other specified transactions also must be on terms substantially the same, or no less favorable, to the savings bank or its subsidiary as similar transactions with nonaffiliates.

Federal
law also restricts a savings bank with respect to loans to directors, executive officers, and principal stockholders. Loans to directors, executive officers and stockholders
who control, directly or indirectly, 10% or more of voting securities of a savings bank, and certain related interests of any of the foregoing, may not exceed the savings bank's total capital and
surplus. Loans to directors, executive officers and principal shareholders must be made on terms substantially the same as offered in comparable transactions to other persons, except that such
insiders may receive preferential loans made pursuant to a benefit or compensation program that is widely available to the Bank's employees and does not give preference to the insider over the
employees. Federal law also establishes board of director approval requirements for loans exceeding a certain amount. There are additional limitations on loans to executive officers.

Enforcement

The Commissioner and FDIC have extensive enforcement authority over Illinois-chartered savings banks, including the Bank. This enforcement authority includes,
among other things, the ability to assess civil money penalties, to issue cease and desist orders and to remove directors and officers. In general, these enforcement actions may be initiated in
response to violations of laws and regulations and to unsafe or unsound practices.

The
Commissioner is given authority by Illinois law to appoint a conservator or receiver for an Illinois savings bank under certain circumstances including, but not limited to,
insolvency, a substantial dissipation of assets due to

29



violation
of law, regulation, order of the Commissioner or an unsafe or unsound practice. The FDIC also has authority under federal law to appoint a conservator or receiver for an insured savings bank
under certain circumstances.

Insurance of Deposit Accounts

Deposits of the Bank are presently insured by the SAIF. The FDIC maintains a risk-based assessment system by which institutions are assigned to one
of three categories based on their capitalization and one of three subcategories based on examination ratings and other supervisory information. An institution's assessment rate depends upon the
categories to which it is assigned. Assessment rates for SAIF member institutions are determined semiannually by the FDIC and currently range from zero basis points for the healthiest institutions to
27 basis points for the riskiest.

In
addition to the assessment for deposit insurance, institutions are required to make payments on bonds issued in the late 1980s by the Financing Corporation ("FICO") to recapitalize
the predecessor
to the SAIF. During 1999, FICO payments for SAIF members approximated 6.5 basis points, while Bank Insurance Fund ("BIF") members paid 1.3 basis points. By law, equal sharing of FICO payments between
SAIF and BIF members began on January 1, 2000.

The
Bank's assessment rate for 1999 was zero. Payments toward the FICO bonds amounted to $162,000. The FDIC has authority to increase insurance assessments. A significant increase in
SAIF insurance premiums would likely have an adverse effect on the operating expenses and results of operations of the Bank. Management cannot predict what insurance assessment rates will be in the
future.

Insurance
of deposits may be terminated by the FDIC upon a finding that the institution has engaged in unsafe or unsound practices, is in an unsafe or unsound condition to continue
operations or has violated any applicable law, regulation, rule, order or condition imposed by the FDIC or the OTS. The management of the Bank does not know of any practice, condition or violation
that might lead to termination of deposit insurance.

Federal Reserve System

The Federal Reserve Board regulations require depository institutions to maintain non-interest-earning reserves against their transaction accounts
(primarily NOW and regular checking accounts). The Federal Reserve Board regulations generally require that reserves be maintained against aggregate transaction accounts as follows: for that portion
of transaction accounts aggregating $44.3 million or less (subject to adjustment by the Federal Reserve Board) the reserve requirement is 3%; and for accounts greater than $44.3 million,
the reserve requirement is $1.329 million plus 10% (subject to adjustment by the Federal Reserve Board between 8% and 14%) against that portion of total transaction accounts in excess of
$44.3 million. The first $5.0 million of otherwise reservable balances (subject to adjustments by the Federal Reserve Board) are exempted from the reserve requirements. The Bank is in
compliance with the foregoing requirements.

Federal Home Loan Bank System

The Bank is a member of the FHLB System, which consists of 12 regional FHLBs. The FHLB provides a central credit facility primarily for member institutions.
The Bank, as a member of the FHLB, is required to acquire and hold shares of capital stock in the FHLB in an amount at least equal to 1% of the aggregate principal amount of its unpaid residential
mortgage loans and similar obligations at the beginning of each year, or 1/20 of its advances (borrowings) from the FHLB, whichever is greater. The Bank was in compliance with this
requirement with an investment in FHLB stock at December 31, 1999 of $5.8 million.

The
FHLBs are required to provide funds for the resolution of insolvent thrifts and to contribute funds for affordable housing programs. These requirements could reduce the amount of
dividends that the FHLBs pay to their members and could also result in the FHLBs imposing a higher rate of interest on advances to their members. For the years ended December 31, 1999, 1998 and
1997, cash dividends from the FHLB to the Bank amounted to approximately $285,000, $160,000, and $140,000, respectively.

30



Holding Company Regulation

Federal law allows a state savings bank that qualifies as a "qualified thrift lender" to elect to be treated as a savings association for
purposes of the savings and loan holding company provisions of federal law.
Such election results in its holding company being regulated as a savings and loan holding company by the OTS rather than as a bank holding company by the Federal Reserve Board. The Bank has made such
election and has received approval from the OTS to become a savings and loan holding company. The Company has registered with the OTS and is subject to OTS regulations, examinations, supervision and
reporting requirements. In addition, the OTS has enforcement authority over the Company and its non-savings institution subsidiaries. Among other things, this authority permits the OTS to
restrict or prohibit activities that are determined to be a serious risk to the subsidiary savings institution. Additionally, the Bank is required to notify the OTS at least 30 days before
declaring any dividend to the Company. Because the Bank is chartered under Illinois law, the Company is also subject to registration with and regulation by the Commissioner.

As a unitary savings and loan holding company, the Company is generally not restricted under existing laws as to the types of business activities in
which it may engage. The Gramm-Leach-Bliley Act of 1999 provides that no company may acquire control of a savings association after May 4, 1999 unless it engages only in the financial
activities permitted for financial holding companies under the law or for multiple savings and loan holding companies as described below. Further, the Gramm-Leach-Bliley Act specifies that existing
savings and loan holding companies may only engage in such activities. The Gramm-Leach-Bliley Act, however, grandfathered the unrestricted authority for activities with respect to unitary savings and
loan holding companies existing prior to May 4, 1999, such as the Company, so long as the Bank continues to comply with the qualified thrift lender test. Upon any non-supervisory
acquisition by the Company of another savings association as a separate subsidiary, the Company would become a multiple savings and loan holding company and would be subject to extensive limitations
on the types of business activities in which it could engage. Federal law limits the activities of a multiple savings and loan holding company and its non-insured institution subsidiaries
primarily to activities permissible for bank holding companies under Section 4(c)(8) of the Bank Holding Company Act, subject to the prior approval of the OTS, and to other activities
authorized by OTS regulation. Multiple savings and loan holding companies are prohibited from acquiring or retaining, with certain exceptions, more than 5% of a non-subsidiary company
engaged in activities other than those permitted by federal law.

Federal law prohibits a savings and loan holding company, directly or indirectly, or through one or more subsidiaries, from merging with or acquiring
more than 5% of the voting stock of another savings institution or holding company thereof without prior written approval of the OTS. In evaluating applications by holding companies to acquire savings
institutions, the OTS must consider the financial and managerial resources and future prospects of the company and institution involved, the effect of the acquisition on the risk to the insurance
funds, the convenience and needs of the community and competitive factors.

The OTS is prohibited from approving any acquisition that would result in a multiple savings and loan holding company controlling savings institutions
in more than one state, except: (i) interstate supervisory acquisitions by savings and loan holding companies; and (ii) the acquisition of a savings institution in another state if the
laws of the state of the target savings institution specifically permit such acquisitions. The states vary in the extent to which they permit interstate savings and loan holding company acquisitions.

In order to elect and continue to be regulated as a savings and loan holding company by the OTS, the Bank must continue to qualify as a qualified
thrift lender. This requires the Bank to maintain compliance with the test for a "domestic building and loan association," as defined in the Internal Revenue Code, or with a Qualified Thrift Lender
Test. Under the Test, a savings institution is required to maintain at least 65% of its "portfolio assets" (total assets less: (i) specified liquid assets up to 20% of total assets;
(ii) intangibles, including goodwill; and (iii) the value of property used to conduct business) in certain "qualified thrift investments" (primarily residential mortgages and related
investments, including certain mortgage-backed and related securities) in at least 9 months out of each 12 month period. A holding company of a savings institution that fails to qualify
as a qualified thrift lender must either convert to a bank holding company and thereby become subject to the regulation and supervision of the Federal Reserve Board or operate under certain
restrictions. As of December 31, 1999, the Bank maintained in excess of 65% of its portfolio assets in qualified thrift investments. The Bank also met the test in each of the prior
12 months and, therefore, is a qualified thrift

31



lender.
Recent legislative amendments have broadened the scope of "qualified thrift investments" that go toward meeting the test to fully include credit card loans, student loans and small business
loans.

Federal Securities Laws

The Company has filed with the SEC a registration statement under the Securities Act for the registration of the Common Stock to be issued pursuant to the
Conversion. Upon completion of the Conversion, the Company's Common Stock will be registered with the SEC under the Exchange Act. The Company will then be subject to the information, proxy
solicitation, insider trading restrictions and other requirements under the Exchange Act.

The
registration under the Securities Act of shares of the Common Stock to be issued in the Conversion does not cover the resale of such shares. Shares of the Common Stock purchased
by persons who are not affiliates of the Company may be resold without registration. Shares purchased by an affiliate of the Company will be subject to the resale restrictions of Rule 144 under
the Securities Act. If the Company meets the current public information requirements of Rule 144 under the Securities Act, each affiliate of the Company who complies with the other conditions
of Rule 144 (including those that require the affiliate's sale to be aggregated with those of certain other persons) would be able to sell in the public market, without registration, a number
of shares not to exceed, in any three-month period, the greater of (i) 1% of the outstanding shares of the Company or (ii) the average weekly volume of trading in such shares during the
preceding four calendar weeks. Provision may be made in the future by the Company to permit affiliates to have their shares registered for sale under the Securities Act under certain circumstances.

FEDERAL AND STATE INCOME TAXATION

Federal Taxation

General.The Company files a consolidated federal income tax return. To the extent a member
incurs a loss which is utilized to reduce the consolidated federal tax liability, that member will be reimbursed for the tax benefit utilized from the member(s) incurring federal tax liabilities.

Amounts
provided for income tax expense are based upon income reported for financial statement purposes and do not necessarily represent amounts currently payable to federal and state
tax authorities. Deferred income taxes, which principally arise from the temporary difference related to the recognition of certain income and expense items for financial reporting purposes and the
period in which they affect federal and state taxable income, are included in the amounts provided for income taxes.

Bad Debt Reserves.The Small Business Job Protection Act of 1996 (the "1996 Act"), which was
enacted on August 20, 1996, made significant changes to provisions of the Code relating to a savings institution's use of bad debt reserves for federal income tax purposes and requires such
institutions to recapture (i.e. take into income) certain portions of their accumulated bad debt reserves. Prior to the enactment of the 1996 Act, the Bank was permitted to establish tax reserves for
bad debts and to make annual additions thereto, which additions, within specified formula limits, were deducted in arriving at the Bank's taxable income. The Bank's deduction with respect to
"qualifying loans," which are generally loans secured by certain interests in real property, could be computed using an amount based on a six-year moving average of the Bank's actual loss
experience (the "Experience Method"), or a percentage equal to 8% of the Bank's taxable income (the "PTI Method"), computed without regard to this deduction and with additional modifications and
reduced by the amount of any permitted addition to
the non-qualifying reserve.  The Bank's deduction with respect to non-qualifying loans was required to be computed under the Experience Method.

The 1996 Act.Under the 1996 Act, for its current and future taxable years, as a "Small Bank,"
the Bank is permitted to make additions to its tax bad debt reserves under an Experience Method based on total loans. However, the Bank is required to recapture (i.e. take into income) over a six year
period the excess of the balance of its tax bad debt reserves as of December 31, 1996 over the balance of such reserves as of December 31, 1987. As of December 31, 1995, the
Bank's tax bad debt reserve exceeded the balance of such reserve as of December 31, 1987 by $2.2 million. However, the Bank will not incur an additional tax liability related to its tax
bad debt reserves since the Bank has previously provided deferred taxes on the recapture amount.

32



Distributions.Under the 1996 Act, if the Bank makes "non-dividend distributions"
to the Company, such distributions will be considered to have been made from the Bank's unrecaptured tax bad debt reserves (including the balance of its reserves as of December 31, 1987) to the
extent thereof, and an amount based on the amount distributed (but not in excess of the amount of such reserves) will be included in the Bank's income. The term "non-dividend
distributions" is defined as distributions in excess of the Bank's current and accumulated earnings and profits, as calculated for federal income tax purposes, distributions in redemption of stock,
and distributions in partial or complete liquidation. Dividends paid out of the Bank's current or accumulated earnings and profits will not cause this pre-1988 reserve to be included in
the Bank's income.

The
amount of additional taxable income created from a non-dividend distribution is an amount that, when reduced by the tax attributable to the income, is equal to the
amount of the distribution. Thus, if the Bank makes a non-dividend distribution to the Company, approximately one and one-half times the amount of such distribution (but not in
excess of the amount of such reserves) would be includable in income for federal income tax purposes, assuming a 35% federal corporate income tax rate. The Bank does not intend to pay dividends that
would result in a recapture of any portion of its tax bad debt reserves.

Dividends Received Deduction and Other Matters.The Company may exclude from its income 100% of
dividends received from the Bank as a member of the same affiliated group of corporations. The corporate dividends received deduction is generally 70% in the case of dividends received from
unaffiliated corporations with which the Company and the Bank will not file a consolidated tax return, except that if the Company and the Bank own more than 20% of the stock of a corporation
distributing a dividend, then 80% of any dividends received may be excluded.

State Taxation

Illinois State Taxation.The Bank and its subsidiaries are required to file Illinois income tax
returns and pay tax at an effective tax rate of 7.18% of Illinois taxable income. For these purposes, Illinois taxable income generally means federal taxable income subject to certain modifications
the primary one of which is the exclusion of interest income on United States obligations.

The
Bank and its subsidiaries file one combined corporation return for State of Illinois income tax purposes.

Delaware State Taxation.As a Delaware holding company not earning income in Delaware, the
Company is exempted from Delaware Corporate income tax but is required to file an annual report with and pay an annual franchise tax to the State of Delaware.

Additional Item. Executive Officers of the Registrant.

The following table sets forth certain information regarding the executive officers of the Company and the Bank who are not also directors or Named Executive
Officers.

|Name                |  | Age at 12/31/99 |  | Position                             
|------------------- |  | --------------- |  | -------------------------------------
|Jerry L. Gosse      |  | 64              |  | Vice President and Compliance Officer
|Sandra L. Sommers   |  | 57              |  | Senior Vice PresidentSavings        
|Joseph E. Stanczak  |  | 47              |  | Senior Vice President                
|R. Scott Reining    |  | 44              |  | Senior Vice President/Lending        
|Nancy L. Topalovich |  | 45              |  | Senior Vice President                

33



Item 2. Properties.

The Bank conducts its business through an executive and full-service branch office located in Elgin and five other full-service branch
offices. The Bank completed construction on the fifth full-service branch, which is located in neighboring Huntley, Illinois, in October, 1999. The Company believes that the Bank's
facilities are adequate to meet the present and immediately foreseeable needs of the Bank and the Company.

|Location                                                                            |  | Leased
or
Owned |  | Original
Year
Leased
or
Acquired |  | Date of
Lease
Expiration |  | Net Book Value
of Property or
Leasehold
Improvements at
December 31,
1999
|----------------------------------------------------------------------------------- |  | --------------- |  | -------------------------------- |  | ------------------------ |  | -------------------------------------------------------------------------
|
|Executive/Main/Branch Office:                                                       |  |                 |  |                                  |  |                          |  |                                                                          
|1695 Larkin Avenue
Elgin, Illinois 60123                                            |  | Owned           |  | 1973                             |  |                         |  | $                                                                        
|Branch Offices:                                                                     |  |                 |  |                                  |  |                          |  |                                                                          
|850 Summit Street
Elgin, Illinois 60120                                             |  | Owned           |  | 1983                             |  |                         |  |                                                                          
|176 East Chicago Avenue
Elgin, Illinois 60120                                       |  | Owned           |  | 1953                             |  |                         |  |                                                                          
|1000 S. McLean Boulevard
Elgin, Illinois 60123                                      |  | Leased          |  | 1996                             |  | 2011                     |  |                                                                          
|390 South Eighth Street
Route 31 & Village Quarter Road
West Dundee, Illinois 60118 |  | Owned           |  | 1980                             |  |                         |  |                                                                          
|13300 Route 47
Huntley, Illinois 60142                                              |  | Owned           |  | 1998                             |  |                         |  |                                                                          
|Other Properties:                                                                   |  |                 |  |                                  |  |                          |  |                                                                          
|44 South Lyle Street
Elgin, Illinois 60123 (1)                                      |  | Owned           |  | 1986                             |  |                         |  |                                                                          
|1665 Larkin Avenue
Elgin, Illinois 60123 (2)                                        |  | Owned           |  | 1996                             |  |                         |  |                                                                          

---

Item 3. Legal Proceedings.

The Company is not involved in any pending legal proceedings other than routine legal proceedings occurring in the ordinary course of business. Such routine
legal proceedings, in the aggregate, are believed by management to be immaterial to the financial condition and results of operations of the Company.

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

None.

34



## 

PART II

Item 5. Market for the Company's Common Equity and Related Stockholder Matters.

The Common Stock of the Company is traded on the American Stock Exchange under the symbol "EFC." The stock began trading on April 3, 1998. To date, the
Company has not paid a dividend to its shareholders. In the future, the Board of Directors may consider a policy of paying cash dividends on the Common Stock. As of March 10, 2,000, there were
2,855 recordholders of the Common Stock of the Company, which includes shares held in street name. The following table sets forth for the quarters indicated the range of high and low sale price
information for the Common Stock of the Company as reported on the American Stock Exchange.

|     |  | Year Ended December 31, 1999
|---- |  | ----------------------------
|
|High |  | 107/8                       
|Low  |  | 93/4                        

Item 6. Selected Financial Data.

See "Selected Consolidated Financial and Other Data of the Company" on the fourth page hereof. In the electronic version of the Form 10-K
the above-captioned information appears in Exhibit 13.

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.

Forward-Looking Statements

This report contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. The Company intends such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements
contained in the Private Securities Reform Act of 1995, and is including this statement for purposes of these safe harbor provisions. Forward-looking statements, which are based on certain assumptions
and describe future plans, strategies and expectations of the Company, are generally identifiable by use of the words "believe," "expect," "intend," "anticipate," "estimate," "project," or similar
expressions. The Company's ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse effect on the operations
and future prospects of the Company and the subsidiaries include, but are not limited to, changes in:
interest rates, general economic conditions, legislative/regulatory changes, monetary and fiscal policies of the U.S. Government, including policies of the U.S. Treasury and the Federal Reserve Board,
the quality or composition of the loan or investment portfolios, demand for loan products, deposit flows, competition, demand for financial services in the Company's market area and accounting
principles, policies and guidelines. These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. Further
information concerning the Company and its business, including additional factors that could materially affect the Company's financial results, is included in the Company's filings with the SEC.

The
Company does not undertakeand specifically disclaims any obligationto publicly release the result of any revisions which may be made to any
forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.

35



Management of Interest Rate Risk and Market Risk Analysis

The principal objective of the Company's interest rate risk management is to evaluate the interest rate risk inherent in certain balance sheet
accounts, determine the level of risk appropriate given the Bank's business strategy, operating environment, capital and liquidity requirements and performance objectives, and manage the risk
consistent with the Board of Directors' approved guidelines. Through such management, the Company seeks to reduce the vulnerability of its operations to changes in interest rates. The Bank's Board of
Directors reviews the Bank's interest rate risk position on a quarterly basis. The Bank's Asset/Liability Committee is comprised of the Bank's entire Board of Directors and members of senior
management. The Committee is responsible for reviewing the Bank's activities and strategies, the effect of those strategies on the Bank's net interest margin, the market value of the portfolio and the
effect that changes in the interest rates will have on the Bank's portfolio and the Bank's exposure limits.

In recent years, the Bank has utilized the following strategies to manage interest rate risk: (1) emphasizing the origination and retention of
adjustable-rate mortgage loans and shorter-term fixed-rate mortgage loans, consumer loans consisting primarily of home equity lines of credit and
short-term commercial business loans and (2) investing in short-term and adjustable-rate securities which may generally bear lower yields as compared to
longer-term investments, but which better position the Bank for increases in market interest rates. The Bank currently does not participate in hedging programs, interest rate swaps or
other activities involving the use of off-balance sheet derivative financial instruments.

In the event of sharply rising interests rates, the Bank has, with retention in mind, competitively price deposits, particularly time deposits. As
necessary, the Bank has offered competitive special products to increase retention. Historically, the Bank has retained significant levels of maturing time deposits based on the above practice, as
well as effective customer service and long-standing relationships with customers. From January 1, 1999 to December 31, 1999, the Bank experienced an 84.4% retention rate of
funds maturing from time deposits.

Gap Analysis.The matching of assets and
liabilities may be analyzed by examining the extent to which such assets and liabilities are "interest rate sensitive" and by monitoring a bank's interest rate sensitivity "gap." An asset or liability
is said to be interest rate sensitive within a specific time period if it will mature or reprice within that time period. The interest rate sensitivity gap is defined as the difference between the
amount of interest-earning assets maturing or repricing within a specific time period and the amount of interest-bearing liabilities maturing or repricing within that same time period. At
December 31, 1999, the Bank's one-year gap position, the difference between the amount of interest-earning assets maturing or repricing within one year and interest-bearing
liabilities maturing or repricing within one year, was (23.45)%. A gap is considered positive when the amount of interest rate sensitive assets exceeds the amount of interest rate sensitive
liabilities. A gap is considered negative
when the amount of interest rate sensitive liabilities exceeds the amount of interest rate sensitive assets. Accordingly, during a period of rising interest rates, an institution with a negative gap
position would be in a worse position to invest in higher yielding assets which, consequently, may result in the cost of its interest-bearing liabilities increasing at a rate faster than its yield on
interest-earning assets than if it had a positive gap. Conversely, during a period of falling interest rates, an institution with a negative gap would tend to have its interest-bearing liabilities
repricing downward at a faster rate than its interest-earning assets as compared to an institution with a positive gap which, consequently, may tend to positively affect the growth of its net interest
income.

The following table sets forth the amounts of interest-earning assets and interest-bearing liabilities outstanding at December 31, 1999, which are anticipated
by the Bank, based upon certain assumptions, to reprice or mature in each of the future time periods shown (the "Gap Table"). Except as stated below, the amount of assets and liabilities shown which
reprice or mature during a particular period were determined in accordance with the earlier of term to repricing or the contractual maturity of the asset or liability. The table sets forth an
approximation of the projected repricing of assets and liabilities at December 31, 1999, on the basis of contractual maturities, anticipated prepayments, and scheduled rate adjustments within a
three month period and subsequent selected time intervals. For loans on residential properties, adjustable-rate loans, and fixed-rate loans, actual repricing and maturity dates
were used. Mortgage-backed securities were assumed to prepay at rates between 16.5% and 22.8% annually. Savings accounts were assumed to decay at 14.12%, 14.12%, 28.24%, 12.08%, 8.73%, 12.64%, and
10.08%, money market savings accounts were assumed to decay at 13.15%, 13.15%, 26.29%, 28.93%, 11.28%, 6.52% and 0.68%, and NOW accounts were assumed to decay at 8.68%, 8.68%, 17.36%, 37.46%, 15.96%,
10.45% and 1.40% for the periods of three months or less, three to six months, six to 12 months, one to three years, three to five years, five to ten years and more than ten years,
respectively.

36



These assumptions are generally based on the OTS's deposit decay guidelines at December 31, 1999. Prepayment and deposit decay rates can have a significant impact on the Bank's
estimated gap. While the Bank believes such assumptions to be reasonable, there can be no assurance that assumed prepayment rates and decay rates will approximate actual future loan prepayment and
deposit withdrawal activity.

37



|                                                                                                   |  | At December 31, 1999
|-------------------------------------------------------------------------------------------------- |  | --------------------
|
|
|Interest-earning assets (1):                                                                       |  |                     
|Short-term deposits                                                                                |  | $                   
|Investment securities (2)                                                                          |  |                     
|Mortgage-backed and mortgage-related securities (2)                                                |  |                     
|Mortgage loans, net (3)                                                                            |  |                     
|Other loans (3)                                                                                    |  |                     
|FHLB stock                                                                                         |  |                     
|                                                                                                   |  |                     
|Total interest-earning assets                                                                      |  |                     
|                                                                                                   |  |                     
|Interest-bearing liabilities:                                                                      |  |                     
|Money market savings accounts                                                                      |  |                     
|Passbook savings accounts                                                                          |  |                     
|NOW accounts                                                                                       |  |                     
|Certificates of deposit                                                                            |  |                     
|FHLB advances                                                                                      |  |                     
|                                                                                                   |  |                     
|Total interest-bearing liabilities                                                                 |  |                     
|                                                                                                   |  |                     
|Interest sensitivity gap (4)                                                                       |  | $                   
|                                                                                                   |  |                     
|Cumulative interest sensitivity gap                                                                |  | $                   
|                                                                                                   |  |                     
|Cumulative interest sensitivity gap as a percentage of total assets                                |  |                     
|Cumulative interest sensitivity gap as a percentage of total interest-earning assets               |  |                     
|Cumulative net interest-earning assets as a percentage of cumulative interest- bearing liabilities |  |                     

---

38





Certain shortcomings are inherent in the method of analysis presented in the Gap Table. For example, although certain assets and liabilities
may have similar maturities or periods to repricing, they may react in different degrees to changes in market interest rates. Also, the interest rates on certain types of assets and liabilities may
fluctuate in advance of changes in market interest rates, while interest rates on other types may lag behind changes in market rates. Additionally, certain assets, such as adjustable-rate
loans, have features which restrict changes in interest rates both on a short-term basis and over the life of the asset. Further, in the event of changes in interest rates, prepayment and
early withdrawal levels would likely deviate significantly from those assumed in calculating the table. Finally, the ability of many borrowers to service their adjustable-rate loans may
decrease in the event of an interest rate increase.

Analysis of Net Interest Income

Net interest income represents the difference between income on interest-earning assets and expense on interest-bearing liabilities. Net interest income
depends on the relative amounts of interest-earning assets and interest-bearing liabilities and the interest rate earned or paid on them.

39



Average Balance Sheet.The following table sets forth certain
information relating to the Bank for the years ended December 31, 1999, 1998 and 1997. The average yields and costs are derived by dividing income or expense by the average balance of
interest-earning assets or interest-bearing liabilities, respectively, for the periods shown and reflect annualized yields and costs. Average balances are derived from average monthly balances. The
yields and costs include fees which are considered adjustments to yields.

|                                                                  |  | For the Year Ended December 31, |        
|----------------------------------------------------------------- |  | ------------------------------- | -------
|
|
|
|Assets:                                                           |  |                                 |        
|Interest-earning assets:                                          |  |                                 |        
|Short-term deposits                                               |  | $                               | 19,339 
|Investment securities                                             |  |                                 | 57,909 
|Mortgage-backed and mortgage-related securities                   |  |                                 | 13,734 
|Mortgage loans, net                                               |  |                                 | 332,331
|Other loans                                                       |  |                                 | 17,964 
|FHLB stock                                                        |  |                                 | 4,320  
|                                                                  |  |                                 |        
|Total interest-earning assets                                     |  |                                 | 445,597
|                                                                  |  |                                 |        
|Noninterest-earning assets                                        |  |                                 | 19,197 
|                                                                  |  |                                 |        
|Total assets                                                      |  | $                               | 464,794
|                                                                  |  |                                 |        
|Liabilities and Equity:                                           |  |                                 |        
|Interest-bearing liabilities:                                     |  |                                 |        
|Deposits:                                                         |  |                                 |        
|Money market accounts                                             |  | $                               | 29,379 
|Passbook savings accounts                                         |  |                                 | 70,260 
|NOW accounts                                                      |  |                                 | 27,414 
|Certificates of deposit                                           |  |                                 | 150,680
|                                                                  |  |                                 |        
|Total deposits                                                    |  |                                 | 277,733
|FHLB advances                                                     |  |                                 | 85,983 
|                                                                  |  |                                 |        
|Total interest-bearing liabilities                                |  |                                 | 363,716
|                                                                  |  |                                 |        
|Noninterest-bearing liabilities                                   |  |                                 | 24,051 
|                                                                  |  |                                 |        
|Total liabilities                                                 |  |                                 | 387,767
|Total equity                                                      |  |                                 | 77,027 
|                                                                  |  |                                 |        
|Total liabilities and equity                                      |  | $                               | 464,794
|                                                                  |  |                                 |        
|Net interest income                                               |  |                                 |        
|                                                                  |  |                                 |        
|Interest rate spread                                              |  |                                 |        
|                                                                  |  |                                 |        
|Net interest margin as a percent of interest-earning assets       |  |                                 |        
|                                                                  |  |                                 |        
|Ratio of interest-earning asse ts to interest-bearing liabilities |  |                                 |        
|                                                                  |  |                                 |        

40



Rate/Volume Analysis.The following table presents the extent
to which changes in interest rates and changes in the volume of interest-earning assets and interest-bearing liabilities have affected the Bank's interest income and interest expense during the
periods indicated. Information is provided in each category with respect to: (i) changes attributable to changes in volume (changes in volume multiplied by prior rate); (ii) changes
attributable to changes in rate (changes in rate multiplied by prior volume); and (iii) the net change. The changes attributable to the combined impact of volume and rate have been allocated
proportionately to the changes due to volume and the changes due to rate.

|                                                     |  | Year Ended
December 31, 1999
Compared to
Year Ended
December 31, 1998 |       | Year Ended
December 31, 1998
Compared to
Year Ended
December 31, 1997 |  
|---------------------------------------------------- |  | --------------------------------------------------------------------- | ----- | --------------------------------------------------------------------- | -
|
|
|
|Interest-earning assets:                             |  |                                                                       |       |                                                                       |  
|Short-term deposits                                  |  | $                                                                     | (308  | )                                                                     | $
|Investment securities                                |  |                                                                       | (80   | )                                                                     |  
|Mortgage-backed and mortgage-related securities, net |  |                                                                       | (418  | )                                                                     |  
|Mortgage loans, net                                  |  |                                                                       | 4,741 |                                                                       |  
|Other loans                                          |  |                                                                       | 310   |                                                                       |  
|FHLB stock                                           |  |                                                                       | 124   |                                                                       |  
|                                                     |  |                                                                       |       |                                                                       |  
|Total interest-earning assets                        |  |                                                                       | 4,369 |                                                                       |  
|                                                     |  |                                                                       |       |                                                                       |  
|Interest-bearing liabilities:                        |  |                                                                       |       |                                                                       |  
|Money market accounts                                |  |                                                                       | 56    |                                                                       |  
|Passbook savings accounts                            |  |                                                                       | 467   |                                                                       |  
|NOW accounts                                         |  |                                                                       | 5     |                                                                       |  
|Certificates of deposit                              |  |                                                                       | 320   |                                                                       |  
|FHLB advances                                        |  |                                                                       | 2,246 |                                                                       |  
|                                                     |  |                                                                       |       |                                                                       |  
|Total interest-bearing liabilities                   |  |                                                                       | 3,094 |                                                                       |  
|                                                     |  |                                                                       |       |                                                                       |  
|Net change in net interest income                    |  | $                                                                     | 1,275 |                                                                       | $
|                                                     |  |                                                                       |       |                                                                       |  

Comparison of Financial Condition For the Years Ended December 31, 1999 and December 31, 1998

Total assets at December 31, 1999 were $510.2 million, which represented an increase of $89.3 million, or 21.2%, compared
to $420.9 million at December 31, 1998. The change in total assets was primarily due to an increase in loans receivable of $87.0 million, or 28.2%, to $396.0 million at
December 31, 1999 from $309.0 million at December 31, 1998. The 28.2% increase in loans was due to the Company's strategy to utilize its excess capital to grow the Bank's total
assets. The increase in loans receivable was attributed to a $49.6 million increase in the Bank's one-to-four-family mortgage portfolio; a
$17.7 million increase in the multi-family mortgage loan portfolio; and a $10.5 million increase in the commercial real estate mortgage loan portfolio during the year ended
December 31, 1999. Loans originated and purchased totaled $121.8 and $39.0 million, respectively for the year ended December 31, 1999. The growth in total assets was funded by
increases in borrowed money and savings deposits. Borrowed money, representing FHLB advances, increased $58.2 million to $115.2 million at December 31, 1999 from
$57.0 million at December 31, 1998. Savings deposits increased $54.3 million to $323.9 million at December 31, 1999 from $269.6 million at December 31,

41



1998.
Stockholders' equity decreased $22.4 million to $66.4 million at December 31, 1999 from $88.8 million at December 31, 1998. The decrease in stockholders'
equity was primarily the result of the Company's successful completion of a Modified Dutch Auction Tender, that expired on June 1, 1999, wherein 1,709,544 shares, or 24.0%, of the Company's
outstanding shares of common stock were purchased at $12.00 per share. In addition, a substantial portion of a 5.0% stock repurchase, announced October 1, 1999, was completed by
December 31, 1999, contributing to the reduction in stockholders' equity. This repurchase, the Company's third, was completed on January 13, 2000. As of December 31, 1999, there
were 5,160,250 shares of common stock outstanding.

Comparison of Financial Condition For the Years Ended December 31, 1998 and December 31, 1997

Total assets at December 31, 1998 were $420.9 million, which represented an increase of $89.0 million, or 26.8%, compared
to $331.9 million at December 31, 1997. The change in total assets was primarily due to an increase in loans receivable, cash and cash equivalents and investment securities. Loans
receivable, net, increased by $62.3 million, or 25.3%, to $309.0 million at December 31, 1998 as compared to $246.7 million at December 31, 1997. The increase in
loans receivable was attributable to a $42.1 million increase in the Bank's one- to four-family mortgage loan portfolio; a $7.3 million increase in the multi-
family mortgage loan portfolio; and a $9.2 million increase in the commercial real estate mortgage loan
portfolio during the year ended December 31, 1998. Cash and cash equivalents increased by $13.2 million to $23.3 million at December 31, 1998 as compared to
$10.1 million at December 31, 1997. Investment securities increased by $12.1 million, or 26.7%, to $57.6 million at December 31, 1998 as compared to
$45.5 million at December 31, 1997. This increase was primarily due to an increase of $11.6 million in U.S. Treasuries and government securities to $47.1 million at
December 31, 1998 compared to $35.5 million at December 31, 1997. The growth in total assets was funded by increases in borrowed money and the initial public offering. Borrowed
money, representing FHLB advances, increased by $33.0 million to $57.0 million at December 31, 1998 as compared to $24.0 million at December 31, 1997. Stockholders'
equity increased by $56.6 million to $88.8 million at December 31, 1998 as compared to $32.2 million at December 31, 1997. This increase is primarily due to the
proceeds generated in the stock conversion, amounting to $72.8 million, net of $4.4 million of treasury stock purchased; a contribution of $9.0 million to enable the ESOP Trustee
to purchase stock to fund the ESOP stock purchased; and $3.7 million used to purchase stock to fund the incentive plan.

Comparison of Operating Results for the Years Ended December 31, 1999 and December 31, 1998

General.The Company's net income increased
$3.8 million, to $4.0 million for the year ended December 31, 1999, from $264,000 for the year ended December 31, 1998. Net income for the year ended December 31,
1998 was impacted by the recognition of a one-time $5.5 million pre-tax ($3.5 million after tax) expense related to the establishment of the Elgin Financial
Foundation (the "Foundation") as part of the Bank's conversion in 1998 from mutual to stock form (the "Conversion"). Net income of the Company, excluding the one-time,
non-recurring contribution to the Foundation, amounted to $3.8 million for the year ended December 31, 1998.

Interest Income.Interest income increased $3.7 million,
or 13.0%, to $32.0 million for the year ended December 31, 1999, compared with the same period in 1998. This increase resulted from an increase in average interest-earning assets offset
by a decrease in average yield. The largest component was an increase of $4.1 million in mortgage loan interest income for the year ended December 31, 1999. This resulted from an
increase in average balance of $63.6 million, partly the result of loans purchased during the year totaling $39.0 million, offset by a decrease in average yield of 25 basis points. This
was further offset by a decrease of $628,000 in investment and mortgage-backed securities available-for-sale, short-term deposits and FHLB stock interest income.
This resulted from a decrease in average balance of $13.5 million offset by an increase in average yield of 16 basis points. Overall, the average yield on the Bank's interest-earning assets
decreased by 6 basis points to 7.18% for the year ended December 31, 1999 from 7.24% for the year ended December 31, 1998. The decrease in average yield is due to a general decline in
interest rates. The average balance of interest-earning assets increased $54.2 million, or 13.9%, to $445.6 million for the year ended December 31, 1999 from $391.4 million
for the comparable period in 1998.

42



Interest Expense.Interest expense increased by
$2.2 million, or 15.6%, to $16.3 million for the year ended December 31, 1999, from$14.1 million for the year ended December 31, 1998. This increase resulted from
the increase in the average balance of interest-bearing liabilities, offset by an overall decrease in the average rate paid on those interest-bearing liabilities. The average rate paid on total
deposits decreased 23 basis points to 4.48% for the year ended December 31, 1999 from 4.71% for the year ended December 31, 1998. The average balance of deposits increased
$21.0 million, or 8.2%, to $277.7 million for the year ended December 31, 1999 from $256.7 million for the year ended December 31, 1998. This resulted in a level of
interest expense on deposits of $11.8 million for 1999 and 1998.

The
larger increase came in the area of FHLB advances. Interest expense resulting from borrowed money increased by $2.2 million. The average rate paid on borrowed money
decreased 12 basis points to 5.20% for the year ended December 31, 1999 from 5.32% for the year ended December 31, 1998. This decrease in average rate was offset by an increase of
$43.2 million in the average balance of borrowed
money to $86.0 million for the year ended December 31, 1999 from $42.8 million for the year ended December 31, 1998.

Net Interest Income Before Provision for Loan Losses.Net
interest income before provision for loan losses increased $1.5 million, or 10.30%, to $15.7 million for the year ended December 31, 1999 from $14.2 million for the year
ended December 31, 1998. This increase was primarily attributed to a $54.2 million increase in average interest-earning assets, at an average yield of 7.18%, offset by an increase in the
average balance of interest-bearing liabilities of $64.2 million, at an average cost of 4.48%. This combination resulted in an increase on interest rate spread of 17 basis points to 2.70% for
the year ended December 31, 1999 from 2.53% for the year ended December 31, 1998. This increase in interest rate spread is due to a lower cost of deposits in the Bank's local market
area. The net interest margin as a percent of interest-earning assets decreased 11 basis points to 3.52% for the year ended December 31, 1999 as compared to 3.63% for the comparable period in
1998.

Provision for Loan Losses.The Bank's provision for loan losses
decreased $82,000 to $211,000 for the year ended December 31, 1999 from $293,000 in 1998. At December 31, 1999 and 1998, non-performing loans totaled $1.3 million and
$1.0 million, respectively. At December 31, 1999 and 1998 the balance of the allowance for loan losses totaled $1.5 million and $1.4 million, respectively. At
December 31, 1999, the ratio of the allowance for loan losses to non-performing loans was 121.7% compared to 136.5% at December 31, 1998. The ratio of the allowance to total
loans was 0.39% and 0.44% at December 31, 1999 and 1998, respectively. Net charge-offs totaled $39,000 and $46,000 in 1999 and 1998, respectively. Management periodically calculates
an allowance sufficiency analysis based upon the portfolio composition, asset classifications, loan-to-value ratios, potential impairments in the current loan portfolio, and
other factors. This analysis is designed to reflect estimated credit losses for specifically identified loans, as well as estimated credit losses inherent in the remainder of the loan portfolio. The
reserve methodology employed by management reflects the difference in degree of risk between the various categories of loans in the Bank's portfolio. The reserve methodology also critically assesses
those loans adversely classified in the portfolio by management as doubtful, substandard or special mention. These allowance components are set at a higher factor than the non-classified
one- to four-family loans in the portfolio to reflect the greater level of risk to which management believes the Bank is exposed. Management believes that the provision for
loan losses and the allowance for loan losses are currently adequate to cover probable losses in the existing loan portfolio. While management estimates loan losses using the best available
information, no assurance can be given that future additions to the allowance will not be necessary based on changes in economic and real estate market conditions, further information obtained
regarding problem loans, identification of additional problem loans and other factors, both within and outside of management's control.

Noninterest Income.Noninterest income totaled
$1.2 million and $906,000 for the years ended December 31, 1999 and 1998, respectively. Service fees increased $263,000 to $956,000 for the year ended December 31, 1999 from
$693,000 for the comparable period in 1998. In addition, insurance commissions increased $35,000 to $127,000 for the year ended December 31, 1999 from $92,000 for the year ended
December 31, 1998. Finally, gains on the sales of securities increased $91,000 to $103,000 for the year ended December 31, 1999 from $12,000 for the comparable period in 1998. These
increases were offset by a $68,000 decrease to $53,000 in other income for the year ended December 31, 1999 from $121,000 for the year ended December 31, 1998.

43



Noninterest Expense.Noninterest expense decreased by
$4.1 million, to $10.5 million for the year ended December 31, 1999 from $14.6 million for the comparable period in 1998. The noninterest expense in 1998 was impacted by
the Company establishing the Foundation with a one-time $5.5 million non-recurring pre-tax donation, as part of the Conversion. This donation was funded with
authorized but unissued common stock immediately following the conversion. This contribution amounted to 8.0% of the common stock sold. Compensation and benefits increased by $1.0 million, or
21.5%, to $5.6 million for the year ended December 31, 1999 compared to $4.6 million for the year ended December 31, 1998.
This increase was primarily due to a combination of annual salary increases, the adoption of a Stock Award Plan, which was approved in October 1998 and the adoption of and Employee Stock
Ownership Plan, which was established in 1998 in connection with the Conversion. In addition, the full service facility, which opened in Huntley was completely staffed, as well as other employee
additions throughout the Bank. All other operating expenses, including advertising, depreciation and repairs, marketing, postage, communications, data processing and other office expense increased by
a combined $461,000, or 10.4% to $4.9 million for the year ended December 31, 1999 compared to $4.4 million for the comparable period in 1998. Of this increase, $181,000 is
related to advertising, which was due to the grand opening of the Huntley facility as well as additional promotion of the Bank's subsidiary Fox Valley Financial Services, Inc.; $86,000 of
depreciation; $79,000 of office building expenses; and $56,000 of data processing expense. Management continues to emphasize the importance of expense management and control in order to continue to
provide expanded banking services to a growing market base.

Income Tax Expense.Income tax totaled $2.2 million for
the year ended December 31, 1999 compared to $10,000 for the comparable period in 1998. The increase in the provision for income taxes was the result of an increase in pretax income of
$6.0 million to $6.3 million for the year ended December 31, 1999 from $274,000 for the same period in 1998. This increase is primarily attributable to the 1998
one-time non-recurring $5.5 million donation made to establish the Foundation.

Comparison of Operating Results for the Years Ended December 31, 1998 and December 31, 1997

General.The Company's net income decreased
$2.4 million, to $264,000 for the year ended December 31, 1998, from $2.7 million of income for the year ended December 31, 1997. The decrease is directly attributable to
the establishment and funding of the Elgin Financial Foundation. On April 3, 1998, the Company completed its conversion to the stock form of ownership. As part of the conversion, the Company
established the Foundation with a one-time $5.5 million non-recurring pre-tax donation ($3.5 million after tax). This donation was funded with
authorized but unissued common stock immediately following the conversion. This contribution amounted to 8.0% of the common stock sold. In addition, net interest income increased by
$3.1 million, offset by a $1.5 million increase in noninterest expense, excluding the contribution to the foundation. Net income of the Company, excluding the one-time,
non-recurring contribution to the Foundation, amounted to $3.8 million for the year ended December 31, 1998.

Interest Income.Interest income increased $3.8 million,
or 15.7%, to $28.3 million for the year ended December 31, 1998, compared with the same period in 1997. This increase resulted from an increase in average interest-earning assets offset
by a decrease in average yield. The largest component was an increase of $1.9 million in mortgage loan interest income for the year ended December 31, 1998. This resulted from an
increase in average balance of $34.7 million, offset by a decrease in average yield of 33 basis points. Another large component was an increase of $1.1 million in investment securities
interest income for the year ended December 31, 1998. This resulted from an increase in average balance of $19.0 million, offset by a decrease in average yield of 48 basis points.
Overall, the average yield on the Bank's interest-earning assets decreased by 44 basis points to 7.24% for the year ended December 31, 1998 from 7.68% for the year ended December 31,
1997. The decrease in average yield is due to a general decline in loan rates in the Bank's local market area. The average balance of interest-earning assets increased by $72.9 million, or
22.9%, to $391.4 million for the year ended December 31, 1998 from $318.5 million for the comparable period in 1997. This increase is directly related to the stock subscription
proceeds received in March 1998.

Interest Expense.Interest expense increased by $849,000, or
6.4%, to $14.1 million for the year ended December 31, 1998, from $13.2 million for the year ended December 31, 1997. This increase resulted from the increase

44



in
the average balance of interest-bearing liabilities, offset by an overall decrease in the average rate paid on those interest-bearing liabilities. The average rate paid on total deposits decreased
6 basis points to 4.61% for the year ended December 31, 1998 from 4.67% for the year ended December 31, 1997. The related average balance of deposits increased $3.8 million, or
1.5%, to $256.7 million for the year ended December 31, 1998 from $252.9 million for the comparable period in 1997. The resulting increase in interest paid on deposits amounted to
$17,000 for the year ended December 31, 1998. The larger increase came in the area of FHLB advances. Interest expense resulting from borrowed money increased by $832,000. The average rate paid
on borrowed money decreased by 46 basis points to 5.32% for the year ended December 31, 1998 from 5.78% for the year ended December 31, 1997. This increase in average rate paid was
offset by an increase of $17.8 million in the average balance of borrowed money to $42.8 million for the year ended December 31, 1998 from $25.0 million for the year ended
December 31, 1997.

Net Interest Income Before Provision for Loan Losses.Net
interest income before provision for loan losses increased $3.0 million, or 26.6%, to $14.2 million for the year ended December 31, 1998 from $11.2 million for the
comparable period in 1997. This increase was primarily attributable to a $72.9 million increase in average interest-earning assets, at an average yield of 7.24%, offset by an increase in the
average balance of interest-bearing liabilities of $21.6 million, at an average cost of 4.71%. This combination resulted in a decline on interest rate spread of 38 basis points to 2.53% for the
year ended December 31, 1998, as compared to 2.91% for the year ended December 31, 1997. The decrease in interest rate spread is due to a general decline in loan rates in the Bank's
local market area. The net interest margin as a percent of interest-earning assets increased by 11 basis points to 3.63% for the year ended December 31, 1998 as compared to 3.52% for the
comparable period in 1997. This increase is due to increases in both interest-earning assets and noninterest-bearing liabilities offset by the decrease in interest rate spread.

Provision for Loan Losses.The Bank's provision for loan losses
decreased by $61,000 to $293,000 for the year ended December 31, 1998 from $354,000 in 1997. At December 31, 1998 and 1997, non-performing loans totalled $1.0 million
and $2.0 million, respectively, At December 31, 1998 and 1997 the balance of the allowance for loan losses totalled $1.4 and $1.1 million, respectively. At December 31,
1998, the ratio of the allowance for loan losses to non-performing loans was 136.5% compared to 57.7% at December 31, 1997. The decrease in nonperforming loans is primarily due to
the transfer of a loan to foreclosed real estate in 1998 and the subsequent sale during the fourth quarter of 1998. At December 31, 1997, this property was classified as a substandard and
non-performing loan. The Bank recognized a $12,000 loss on the sale of this property. The ratio of the allowance to total loans was 0.44% and 0.46% at December 31, 1998 and 1997,
respectively. Charge-offs totalled $46,000 and $36,000 in 1998 and 1997, respectively.

Noninterest Income.Noninterest income totalled $906,000 and
$801,000 for the years ended December 31, 1998 and 1997, respectively. Service fees increased $92,000 to $693,000 for the year ended December 31, 1998 from $601,000 for the comparable
period in 1997. Other income increased by $87,000 to $121,000 for the year ended December 31, 1998 from $34,000 for the year ended December 31, 1997. This increase was primarily the
result of a $54,000 increase in loan processing fees. The fee structure generating this increase was put into effect at the end of the third quarter of 1998. These increases were offset by a $66,000
decrease in insurance commissions to $92,000 for the year ended December 31, 1998 from $158,000 for the year ended December 31, 1997 and a loss on the sale of foreclosed real estate of
$12,000 in 1998 compared to a gain of $8,000 in 1997. Gains on sale of investment securities totalled $12,000 for the year ended December 31, 1998; there were no gains in 1997.

Noninterest Expense.Noninterest expense increased by
$7.0 million, to $14.6 million for the year ended December 31, 1998 from $7.6 million for the comparable period in 1997. On April 3, 1998, the Company completed its
conversion to the stock form of ownership. As part of the conversion, the Company established the Foundation with a one-time $5.5 million non-recurring
pre-tax donation. This donation was
funded with authorized but unissued common stock immediately following the conversion. This contribution amounted to 8.0% of the common stock sold. Compensation and benefits increased by $666,000, or
17.0%, to $4.6 million for the year ended December 31, 1998 compared to $3.9 million for the year ended December 31, 1997. This increase was primarily due to a combination
of annual salary increases, the addition of staff, the adoption of an Employee Stock Ownership Plan which was established

45



in
connection with the conversion, and the adoption of a stock-based employee benefit plan on October 27, 1998. It is likely that salary and benefit expense will increase in future quarters as
a result of the adoption of this plan. All other operating expenses, including advertising, depreciation and repairs, marketing, insurance, postage, communications, data processing and other office
expense increased by a combined $743,000, or 20.2%, to $4.4 million for the year ended December 31, 1998 compared to $3.7 million for the comparable period in 1997. Of this
increase, $83,000 is related to expense incurred on foreclosed real estate; $183,000 of legal expenses as a result of being a public company; $81,000 of data processing expense; $81,000 of
depreciation; and a loss on the disposition of a branch location of $83,000. In December 1998, the branch location in Algonquin, Illinois was closed.

Income Tax Expense.Income tax expense totalled $10,000 for the year ended December 31,
1998 compared to $1.4 million for the comparable period in 1997. The decrease in the provision for income taxes was the result of a decrease in pretax income of $3.8 million, to $274,000
for the year ended December 31, 1998 from $4.1 million for the same period in 1997. This decrease is primarily attributable to the one-time non-recurring
$5.5 million donation made to establish the Foundation.

Liquidity and Capital Resources

The Bank's primary sources of funds are savings deposits, proceeds from the principal and interest payments on loans and proceeds from the maturation of
securities and, to a lesser extent, borrowings from FHLB-Chicago. While maturities and scheduled amortization of loans and securities are predictable sources of funds, deposit outflows and
mortgage prepayments are greatly influenced by general interest rates, economic conditions and competition.

The
primary investing activities of the Bank are the origination of primarily residential one-to four-family loans and, to a lesser extent, multi-family and
commercial real estate, construction and land, commercial and consumer loans and the purchase of mortgage-backed and mortgage-related securities. During the years ended December 31, 1999, 1998,
and 1997, the Bank's loan originations totaled $121.8 million, $142.6 million and $67.3 million, respectively. Purchases of mortgage-backed securities totaled $0 and
$6.3 million for the years ended December 31, 1999 and 1998, respectively. These activities were funded primarily by deposit growth and principal repayments on loans and mortgage-backed
securities. The Bank experienced a net increase (decrease) in total deposits of $54.3 million, ($431,000) and $16.9 million for the years ended December 31, 1999, 1998 and 1997,
respectively. Deposit flows are affected by the level of interest rates, the interest rates and products offered by the local competitors, the Bank and other factors.

The
Bank's most liquid assets are cash and interest-bearing demand accounts. The levels of these assets are dependent on the Bank's operating, financing, lending and investing
activities during any given period. At December 31, 1999, cash and interest-bearing demand accounts totaled $22.2 million, or 4.4% of total assets. The Bank closely monitors its
liquidity position on a daily basis. On a longer-term basis, the Bank maintains a strategy of investing in various lending products as described in greater detail under Item 1 to this
Annual Report. In the event the Bank should require funds beyond its ability to generate them internally, additional sources of funds are available through FHLB advances. At December 31, 1999,
the Bank had $115.2 million of outstanding FHLB borrowings.

Outstanding
commitments to originate first mortgage loans totaled $11.0 million at December 31, 1999. Management of the Bank anticipates that it will have sufficient
funds available to meet its current loan commitments. Certificates of deposit which are scheduled to mature in one year or less from December 31, 1999 totaled $92.3 million. From
December 31, 1998 to December 31, 1999, the Bank experienced an 84.4% retention rate of funds maturing from certificates of deposit. It has been and will
continue to be a priority of management to retain time deposits. The Bank relies primarily on competitive rates, customer service, and long-standing relationships with customers to retain
deposits. From time to time, the Bank will also offer competitive special products to its customers to increase retention. Based upon the Bank's experience with deposit retention and current retention
strategies, management believes that, although

46



it
is not possible to predict future terms and conditions upon renewal, a significant portion of such deposits will remain with the Bank.

At
December 31, 1999, the Bank exceeded all of its regulatory capital requirements with a leverage capital level of $59.3 million, or 12.77% of adjusted assets, which is
above the required level of $18.6 million, or 4.00%, and risk-based capital of $60.9 million, or 18.58% of adjusted assets, which is above the required level of
$26.2 million, or 8.00%.

The
capital injection resulting from the Conversion in 1998 of $72.8 million significantly increased liquidity and capital resources. A portion of the net proceeds were
invested in marketable securities. The initial level of liquidity has been reduced as net proceeds are utilized for general corporate purposes, including the funding of lending activities and
expansion of facilities and to a greater degree the repurchase of the Company's common stock. These repurchases totaled $23.3 million for the year ended December 31, 1999.

Year 2000 Compliance

The Bank completed a company-wide initiative to address the Year 2000 issue. Using the guidelines set forth in the Federal Financial Institutions
Examination Council ("FFIEC") Interagency Statement, Year 2000 Project Management Awareness, the Company developed a comprehensive action plan to prepare, as necessary, computer systems and
facilities.

The
Bank did not experience any material disruptions of the systems or software applications due to the start of the Year 2000 nor has the Bank experienced any problems with third
party vendors, suppliers or service providers. The Bank developed contingency plans, which were validated by a third party and will be updated periodically during 2000. These plans continue to be
maintained and can be implemented, in the unlikely event that, any mission critical systems fail. The Bank will continue to monitor system performance at critical dates throughout 2000.

The
Bank incurred and recorded $58,000 in expense through December 31, 1999 relating to Year 2000 matters. The level of cost is not considered material to the operations of the
Company. Internal staff time spent on Year 2000 activities was extensive, however, such time and expense was not quantified. No material expenses are expected to be incurred in 2000.

Impact of Inflation and Changing Prices

The Consolidated Financial Statements and Notes thereto presented in this Annual Report have been prepared in accordance with GAAP, which generally require the
measurement of financial position and operating results in terms of historical dollar amounts without considering the changes in the relative purchasing power of money over time due to inflation. The
impact of inflation is reflected in the increased cost of the Bank's operations. Unlike industrial companies, nearly all of the assets and liabilities of the Bank are monetary in nature. As a result,
interest rates have a greater impact on the Bank's performance than do the effects of general levels of inflation. Interest rates do not necessarily move in the same direction or to the same extent as
the price of goods and services.

Impact of Accounting Standards

The Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities," in June 1998. SFAS No. 133 standardizes the accounting for derivative instruments, including certain derivative instruments embedded in other
contracts. Under the standard, entities are required to carry all derivative instruments in the statement of financial position at fair value. The accounting for changes in the fair value
(i.e., gains or losses) of a derivative instrument depends on whether it has been designated and qualifies as part of a hedging relationship and, if so,
on the reason for holding it. If certain conditions are met, entities may elect to designate a derivative instrument as a hedge of exposures

47



to
changes in fair values, cash flows, or foreign currencies. If the hedged exposure is a fair value exposure, the gain or loss on the derivative instrument is recognized in earnings in the period of
change together with the offsetting loss or gain on the hedged item attributable to the risk being hedged. If the hedged exposure is a cash flow exposure, the effective portion of the gain or loss on
the derivative instrument is reported initially as a component of other comprehensive income (outside earnings) and subsequently reclassified into earnings when the forecasted transaction affects
earnings. Any amounts excluded from the assessment of hedge effectiveness as well as the ineffective portion of the gain or loss is reported in earnings immediately. SFAS No. 133 is effective
for all quarters of fiscal years beginning after June 15, 1999. Earlier application is encouraged, but is permitted only as of the beginning of any fiscal quarter that begins after the issuance
of the statement. This statement should not be applied retroactively to financial statements of prior periods. During June, 1999, the FASB issued the Statement of Financial Accounting Standards
No. 137, "Accounting for Derivative Instruments and Hedging Activities-Deferral of the Effective Date of FASB Statement No. 133an amendment of FASB Statement
No. 133," ("SFAS 137") that delays SFAS 133 until fiscal years beginning after June 15, 2000. The Company anticipates that the adoption of SFAS No. 133 will not have
a material impact in the Company's results of operations.

Item 7A. Quantitative and Qualitative Disclosure About Market Risk

The Bank's interest rate sensitivity is monitored by management through the use of a Net Portfolio Value Model which generates estimates of the change in the
Bank's net portfolio value ("NPV") over a range of interest rate scenarios. NPV is the present value of expected cash flows from assets, liabilities, and off-balance sheet contracts. The
NPV ratio, under any interest rate scenario, is defined as the NPV in that scenario divided by the market value of assets in the same scenario. The model assumes estimated loan prepayment rates,
reinvestment rates and deposit decay rates similar to the assumptions utilized for the Gap Table. The Sensitivity Measure is the decline in the NPV ratio, in basis points, caused by a 2% increase or
decrease in rates, whichever produces a larger decline. The higher the institution's Sensitivity Ratio, the greater its exposure to interest rate risk is considered to be. The following NPV Table sets
forth the Bank's NPV as of December 31, 1999.

|       |  |   |        |  |   |         |   | NPV as % of Portfolio
Value of Assets |   
|------ |  | - | ------ |  | - | ------- | - | ------------------------------------- | --
|
|
|
|
|300    |  | $ | 39,013 |  | $ | (24,158 | ) | (38.24                                | )%
|200    |  |   | 46,017 |  |   | (17,154 | ) | (27.15                                | ) 
|100    |  |   | 53,762 |  |   | (9,409  | ) | (14.89                                | ) 
|Static |  |   | 63,171 |  |   |        |   |                                      |   
|(100)  |  |   | 68,493 |  |   | 5,322   |   | 8.42                                  |   
|(200)  |  |   | 74,398 |  |   | 11,227  |   | 17.77                                 |   
|(300)  |  |   | 73,691 |  |   | 10,520  |   | 16.65                                 |   

Certain
shortcomings are inherent in the methodology used in the above interest rate risk measurements. Modeling changes in NPV require the making of certain assumptions which may or
may not reflect the manner in which actual yields and costs respond to changes in market interest rates. In this regard, the NPV Table presented assumes that the composition of the Bank's interest
sensitive assets and liabilities existing at the beginning of a period remains constant over the period being measured and also assumes that a particular change in interest rates is reflected
uniformly across the yield curve regardless of the duration to maturity or repricing of specific assets and liabilities. Accordingly, although the NPV Table provides an indication of the Bank's
interest rate risk exposure at a particular point in time, such

48



measurements
are not intended to and do not provide a precise forecast of the effect of changes in market interest rates on the Bank's net interest income and will differ from actual results.

For
a further discussion regarding Quantitative and Qualitative Disclosure about Market Risk, see Item 7 of this Form 10-K, "Management's Discussion and Analysis of
Financial Condition and Results of OperationsManagement of Interest Rate Risk and Market Risk Analysis."

Item 8. Financial Statements and Supplementary Data.

49



## 

EFC BANCORP, INC. AND SUBSIDIARIES

Consolidated
Financial Statements

December 31,
1999 and 1998

(With
Independent Auditors' Report Thereon)



## 

Independent Auditors' Report

The
Board of Directors
EFC Bancorp, Inc.:

We
have audited the accompanying consolidated balance sheets of EFC Bancorp, Inc. and subsidiaries (the Company) as of December 1999 and 1998, and the related
consolidated statements of income, changes in stockholders' equity, and cash flows for each of the years in the three-year period ended December 31, 1999. These consolidated
financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We
conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.

In
our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of EFC Bancorp, Inc. and subsidiaries
as of December 31, 1999 and 1998, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 1999 in
conformity with generally accepted accounting principles.



Chicago,
Illinois
March 3, 2000



EFC BANCORP, INC.
AND SUBSIDIARIES

Consolidated Balance Sheets

December 31, 1999 and 1998

|                                                                                                                            |  | 1999 |             | 1998 |            
|--------------------------------------------------------------------------------------------------------------------------- |  | ---- | ----------- | ---- | -----------
|Assets                                                                                                                      |  |      |             |      |            
|Cash and cash equivalents:                                                                                                  |  |      |             |      |            
|On hand and in banks                                                                                                        |  | $    | 6,839,710   |      | 2,217,242  
|Interest bearing deposits with financial institutions                                                                       |  |      | 15,333,885  |      | 21,062,664 
|                                                                                                                            |  |      |             |      |            
|Total cash and cash equivalents                                                                                             |  |      | 22,173,595  |      | 23,279,906 
|Loans receivable, net                                                                                                       |  |      | 396,006,771 |      | 308,990,195
|Mortgage-backed securities available-for-sale, at fair value                                                                |  |      | 11,882,080  |      | 17,880,124 
|Investment securities available-for-sale, at fair value                                                                     |  |      | 61,079,696  |      | 57,636,600 
|Foreclosed real estate                                                                                                      |  |      | 168,145     |      | 192,564    
|Stock in Federal Home Loan Bank of Chicago, at cost                                                                         |  |      | 5,760,000   |      | 2,849,840  
|Accrued interest receivable                                                                                                 |  |      | 2,807,426   |      | 1,971,598  
|Office properties and equipment, net                                                                                        |  |      | 8,640,410   |      | 6,529,734  
|Other assets                                                                                                                |  |      | 2,453,629   |      | 1,545,345  
|                                                                                                                            |  |      |             |      |            
|Total assets                                                                                                                |  | $    | 510,971,752 |      | 420,875,906
|                                                                                                                            |  |      |             |      |            
|Liabilities and Stockholders' Equity                                                                                        |  |      |             |      |            
|Liabilities:                                                                                                                |  |      |             |      |            
|Deposits                                                                                                                    |  | $    | 323,879,293 |      | 269,581,995
|Borrowed money                                                                                                              |  |      | 115,200,000 |      | 57,000,000 
|Advance payments by borrowers for taxes and insurance                                                                       |  |      | 897,038     |      | 643,051    
|Income taxes payable                                                                                                        |  |      | 528,421     |      | 1,263,619  
|Accrued expenses and other liabilities                                                                                      |  |      | 4,044,911   |      | 3,631,972  
|                                                                                                                            |  |      |             |      |            
|Total liabilities                                                                                                           |  |      | 444,549,663 |      | 332,120,637
|                                                                                                                            |  |      |             |      |            
|Stockholders' equity:                                                                                                       |  |      |             |      |            
|Preferred stock, par value $.01 per share, authorized 2,000,000
Shares; no shares issued                                    |  |      |            |      |           
|Common stock, par value $.01 per share, authorized 25,000,000
Shares; issued 7,491,434 shares at December 31, 1999 and 1998 |  |      | 74,914      |      | 74,914     
|Additional paid-in capital                                                                                                  |  |      | 72,039,597  |      | 72,213,277 
|Treasury stock, at cost, 2,331,184 and 374,500 shares
at December 31, 1999 and 1998, respectively                           |  |      | (27,671,724 | )    | (4,355,125 
|Unearned employee stock ownership plan (ESOP), 519,406 and 559,360
Shares at December 31, 1999 and 1998, respectively       |  |      | (7,766,459  | )    | (8,363,878 
|Unearned stock award plan, 222,224 and 289,668 shares
at December 31, 1999 and 1998, respectively                           |  |      | (2,472,242  | )    | (3,222,561 
|Retained earnings, substantially restricted                                                                                 |  |      | 33,469,424  |      | 31,757,826 
|Accumulated other comprehensive income (loss)                                                                               |  |      | (1,251,421  | )    | 650,816    
|                                                                                                                            |  |      |             |      |            
|Total stockholders' equity                                                                                                  |  |      | 66,422,089  |      | 88,755,269 
|Commitments and contingencies                                                                                               |  |      |             |      |            
|                                                                                                                            |  |      |             |      |            
|Total liabilities and stockholders' equity                                                                                  |  | $    | 510,971,752 |      | 420,875,906
|                                                                                                                            |  |      |             |      |            

See
accompanying notes to consolidated financial statements.

F-2



EFC BANCORP, INC.
AND SUBSIDIARIES

Consolidated Statements of Income

Years ended December 31, 1999, 1998 and 1997

|                                                                                                   |  | 1999 |            | 1998 |            | 1997
|-------------------------------------------------------------------------------------------------- |  | ---- | ---------- | ---- | ---------- | ----
|Interest income:                                                                                   |  |      |            |      |            |     
|Loans secured by real estate                                                                       |  | $    | 24,900,473 |      | 20,806,230 |     
|Other loans                                                                                        |  |      | 1,457,010  |      | 1,256,049  |     
|Mortgage-backed securities available-for-sale                                                      |  |      | 971,192    |      | 1,146,033  |     
|Investment securities available-for-sale and interest
Bearing deposits with financial institutions |  |      | 4,655,066  |      | 5,107,268  |     
|                                                                                                   |  |      |            |      |            |     
|Total interest income                                                                              |  |      | 31,983,741 |      | 28,315,580 |     
|Interest expense:                                                                                  |  |      |            |      |            |     
|Deposits                                                                                           |  |      | 11,832,427 |      | 11,825,046 |     
|Borrowed money                                                                                     |  |      | 4,468,830  |      | 2,272,968  |     
|                                                                                                   |  |      |            |      |            |     
|Total interest expense                                                                             |  |      | 16,301,257 |      | 14,098,014 |     
|                                                                                                   |  |      |            |      |            |     
|Net interest income before provision for loan losses                                               |  |      | 15,682,484 |      | 14,217,566 |     
|Provision for loan losses                                                                          |  |      | 211,000    |      | 293,000    |     
|                                                                                                   |  |      |            |      |            |     
|Net interest income after provision for loan losses                                                |  |      | 15,471,484 |      | 13,924,566 |     
|                                                                                                   |  |      |            |      |            |     
|Noninterest income:                                                                                |  |      |            |      |            |     
|Service fees                                                                                       |  |      | 955,937    |      | 692,962    |     
|Real estate and insurance commissions                                                              |  |      | 126,656    |      | 92,048     |     
|Gain (loss) on sale of foreclosed real estate                                                      |  |      |           |      | (12,199    | )   
|Gain on sale of securities                                                                         |  |      | 102,940    |      | 11,814     |     
|Other                                                                                              |  |      | 53,357     |      | 121,342    |     
|                                                                                                   |  |      |            |      |            |     
|Total noninterest income                                                                           |  |      | 1,238,890  |      | 905,967    |     
|                                                                                                   |  |      |            |      |            |     
|Noninterest expense:                                                                               |  |      |            |      |            |     
|Compensation and benefits                                                                          |  |      | 5,564,294  |      | 4,581,486  |     
|Office building, net                                                                               |  |      | 392,158    |      | 312,906    |     
|Depreciation and repairs                                                                           |  |      | 790,122    |      | 703,950    |     
|Data processing                                                                                    |  |      | 449,453    |      | 393,135    |     
|Federal insurance premiums                                                                         |  |      | 161,663    |      | 176,833    |     
|NOW account operating expenses                                                                     |  |      | 285,298    |      | 259,785    |     
|Foundation contribution                                                                            |  |      |           |      | 5,548,651  |     
|Other                                                                                              |  |      | 2,809,297  |      | 2,579,957  |     
|                                                                                                   |  |      |            |      |            |     
|Total noninterest expense                                                                          |  |      | 10,452,285 |      | 14,556,703 |     
|                                                                                                   |  |      |            |      |            |     
|Income before income taxes                                                                         |  |      | 6,258,089  |      | 273,830    |     
|Income tax expense                                                                                 |  |      | 2,237,295  |      | 10,000     |     
|                                                                                                   |  |      |            |      |            |     
|Net income                                                                                         |  | $    | 4,020,794  |      | 263,830    |     
|                                                                                                   |  |      |            |      |            |     
|Earnings (loss) per share:                                                                         |  |      |            |      |            |     
|Basic                                                                                              |  | $    | 0.72       |      | (0.08      | )   
|Diluted                                                                                            |  |      | 0.72       |      | (0.08      | )   
|                                                                                                   |  |      |            |      |            |     

See accompanying notes to consolidated financial statements.

F-3



## 

EFC BANCORP, INC. AND SUBSIDIARIES   Consolidated Statements of Changes in Stockholders' Equity   Years ended December 31, 1999, 1998, and 1997

|                                                                                                                                                              |  | Number of
Common
Stock
Shares |   | Common
stock |        | Additional
paid-in
capital |            | Treasury
stock |             | Unearned
ESOP
plan
shares |            | Unearned
stock
award
plan
shares |            | Retained
earnings |            | Accumulated
other
comprehensive
income (loss) |            | Total |            
|------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------------- | - | ------------ | ------ | -------------------------- | ---------- | -------------- | ----------- | ------------------------- | ---------- | -------------------------------- | ---------- | ----------------- | ---------- | --------------------------------------------- | ---------- | ----- | -----------
|Balance at December 31, 1996                                                                                                                                  |  |                               |   | $            |       |                            |           |                |            |                           |           |                                  |           |                   | 28,806,333 |                                               | 706,431    |       | 29,512,764 
|Comprehensive income:                                                                                                                                         |  |                               |   |              |        |                            |            |                |             |                           |            |                                  |            |                   |            |                                               |            |       |            
|Net income                                                                                                                                                    |  |                               |   |              |       |                            |           |                |            |                           |           |                                  |           |                   | 2,687,663  |                                               |           |       | 2,687,663  
|Change in net unrealized gain (loss) on
Securities available-for-sale                                                                                         |  |                               |   |              |       |                            |           |                |            |                           |           |                                  |           |                   |           |                                               | 44,550     |       | 44,550     
|Income tax effect                                                                                                                                             |  |                               |   |              |       |                            |           |                |            |                           |           |                                  |           |                   |           |                                               | (15,236    | )     | (15,236    
|                                                                                                                                                              |  |                               |   |              |        |                            |            |                |             |                           |            |                                  |            |                   |            |                                               |            |       |            
|Total comprehensive income                                                                                                                                    |  |                               |   |              |        |                            |            |                |             |                           |            |                                  |            |                   |            |                                               |            |       | 2,716,977  
|                                                                                                                                                              |  |                               |   |              |        |                            |            |                |             |                           |            |                                  |            |                   |            |                                               |            |       |            
|Balance at December 31, 1997                                                                                                                                  |  |                               |   |              |       |                            |           |                |            |                           |           |                                  |           |                   | 31,493,996 |                                               | 735,745    |       | 32,229,741 
|Issuance of common stock                                                                                                                                      |  | 7,491,434                     |   |              | 74,914 |                            | 72,694,412 |                |            |                           |           |                                  |           |                   |           |                                               |           |       | 72,769,326 
|Unearned employee stock ownership plan Shares issued                                                                                                          |  | (599,314                      | ) |              |       |                            |           |                |            |                           | (8,961,298 | )                                |           |                   |           |                                               |           |       | (8,961,298 
|Treasury stock purchased                                                                                                                                      |  | (374,500                      | ) |              |       |                            |           |                | (4,355,125  | )                         |           |                                  |           |                   |           |                                               |           |       | (4,355,125 
|Unearned stock award plan shares purchased                                                                                                                    |  | (299,657                      | ) |              |       |                            | (373,790   | )              |            |                           |           |                                  | (3,333,684 | )                 |           |                                               |           |       | (3,707,474 
|ESOP shares committed to be released                                                                                                                          |  | 39,954                        |   |              |       |                            | (107,345   | )              |            |                           | 597,420    |                                  |           |                   |           |                                               |           |       | 490,075    
|Stock award planshares allocated                                                                                                                             |  | 9,989                         |   |              |       |                            |           |                |            |                           |           |                                  | 111,123    |                   |           |                                               |           |       | 111,123    
|Comprehensive income:                                                                                                                                         |  |                               |   |              |        |                            |            |                |             |                           |            |                                  |            |                   |            |                                               |            |       |            
|Net income                                                                                                                                                    |  |                               |   |              |       |                            |           |                |            |                           |           |                                  |           |                   | 263,830    |                                               |           |       | 263,830    
|Change in net unrealized gain (loss) on Securities available-for-sale, less Reclassification adjustment for realized Gains included in net income of $11,814  |  |                               |   |              |       |                            |           |                |            |                           |           |                                  |           |                   |           |                                               | (51,242    | )     | (51,242    
|Income tax effect                                                                                                                                             |  |                               |   |              |       |                            |           |                |            |                           |           |                                  |           |                   |           |                                               | (33,687    | )     | (33,687    
|                                                                                                                                                              |  |                               |   |              |        |                            |            |                |             |                           |            |                                  |            |                   |            |                                               |            |       |            
|Total comprehensive income                                                                                                                                    |  |                               |   |              |        |                            |            |                |             |                           |            |                                  |            |                   |            |                                               |            |       | 178,901    
|                                                                                                                                                              |  |                               |   |              |        |                            |            |                |             |                           |            |                                  |            |                   |            |                                               |            |       |            
|Balance at December 31, 1998                                                                                                                                  |  |                               |   |              | 74,914 |                            | 72,213,277 |                | (4,355,125  | )                         | (8,363,878 | )                                | (3,222,561 | )                 | 31,757,826 |                                               | 650,816    |       | 88,755,269 
|Treasury stock purchased                                                                                                                                      |  | (1,956,684                    | ) |              |       |                            |           |                | (23,316,599 | )                         |           |                                  |           |                   |           |                                               |           |       | (23,316,599
|ESOP shares committed to be released                                                                                                                          |  | 39,954                        |   |              |       |                            | (173,680   | )              |            |                           | 597,419    |                                  |           |                   |           |                                               |           |       | 423,739    
|Stock award planshares allocated                                                                                                                             |  | 67,444                        |   |              |       |                            |           |                |            |                           |           |                                  | 750,319    |                   |           |                                               |           |       | 750,319    
|Dividends declared ($.40 per share)                                                                                                                           |  |                               |   |              |       |                            |           |                |            |                           |           |                                  |           |                   | (2,309,196 | )                                             |           |       | (2,309,196 
|Comprehensive income:                                                                                                                                         |  |                               |   |              |        |                            |            |                |             |                           |            |                                  |            |                   |            |                                               |            |       |            
|Net income                                                                                                                                                    |  |                               |   |              |       |                            |           |                |            |                           |           |                                  |           |                   | 4,020,794  |                                               |           |       | 4,020,794  
|Change in net unrealized gain (loss) on Securities available-for-sale, less Reclassification adjustment for realized Gains included in net income of $102,940 |  |                               |   |              |       |                            |           |                |            |                           |           |                                  |           |                   |           |                                               | (3,118,422 | )     | (3,118,422 
|Income tax effect                                                                                                                                             |  |                               |   |              |       |                            |           |                |            |                           |           |                                  |           |                   |           |                                               | 1,216,185  |       | 1,216,185  
|                                                                                                                                                              |  |                               |   |              |        |                            |            |                |             |                           |            |                                  |            |                   |            |                                               |            |       |            
|Total comprehensive income                                                                                                                                    |  |                               |   |              |        |                            |            |                |             |                           |            |                                  |            |                   |            |                                               |            |       | 2,118,557  
|                                                                                                                                                              |  |                               |   |              |        |                            |            |                |             |                           |            |                                  |            |                   |            |                                               |            |       |            
|Balance at December 31, 1999                                                                                                                                  |  |                               |   | $            | 74,914 |                            | 72,039,597 |                | (27,671,724 | )                         | (7,766,459 | )                                | (2,472,242 | )                 | 33,469,424 |                                               | (1,251,421 | )     | 66,422,089 
|                                                                                                                                                              |  |                               |   |              |        |                            |            |                |             |                           |            |                                  |            |                   |            |                                               |            |       |            

See accompanying notes to consolidated financial statements.

F-4



EFC BANCORP, INC.
AND SUBSIDIARIES

Consolidated Statements of Cash Flows

Years ended December 31, 1999, 1998, and 1997

|                                                                                            |  | 1999 |             | 1998 |             | 1997 |            
|------------------------------------------------------------------------------------------- |  | ---- | ----------- | ---- | ----------- | ---- | -----------
|Cash flows from operating activities:                                                       |  |      |             |      |             |      |            
|Net income                                                                                  |  | $    | 4,020,794   |      | 263,830     |      | 2,687,663  
|Adjustments to reconcile net income to net cash provided by (used in) operating activities: |  |      |             |      |             |      |            
|Amortization of premiums and discounts, net                                                 |  |      | 83,619      |      | 149,880     |      | (5,424     
|Provision for loan losses                                                                   |  |      | 211,000     |      | 293,000     |      | 353,649    
|Deferred income tax expense (benefit)                                                       |  |      | (278,308    | )    | (2,231,079  | )    | 82,927     
|Stock award plan shares allocated                                                           |  |      | 750,319     |      | 111,123     |      |           
|ESOP shares committed to be released                                                        |  |      | 597,419     |      | 597,420     |      |           
|Change in fair value of ESOP shares                                                         |  |      | (173,680    | )    | (107,345    | )    |           
|Depreciation and amortization of office properties and equipment                            |  |      | 565,274     |      | 506,884     |      | 428,623    
|Loss (gain) on sale of foreclosed real estate                                               |  |      |            |      | 12,199      |      | (7,915     
|Gain on sale of investment securities                                                       |  |      | (102,940    | )    | (11,814     | )    |           
|Loss on disposition of branch                                                               |  |      |            |      | 82,752      |      |           
|Decrease (increase) in accrued interest receivable and
other assets, net                    |  |      | (1,744,112  | )    | 596,467     |      | (794,087   
|Increase (decrease) in income taxes payable, accrued
expenses and other liabilities, net    |  |      | 910,196     |      | (114,561    | )    | 1,238,288  
|                                                                                            |  |      |             |      |             |      |            
|Net cash provided by operating activities                                                   |  |      | 4,839,581   |      | 148,756     |      | 3,983,724  
|                                                                                            |  |      |             |      |             |      |            
|Cash flows from investing activities:                                                       |  |      |             |      |             |      |            
|Net increase in loans receivable                                                            |  |      | (48,291,349 | )    | (54,137,235 | )    | (9,131,659 
|Purchases of loans receivable                                                               |  |      | (38,995,788 | )    | (9,712,698  | )    | (239,000   
|Purchases of mortgage-backed securities available-for-sale                                  |  |      |            |      | (6,282,062  | )    | (4,114,358 
|Principal payments on mortgage-backed securities available-for-sale                         |  |      | 5,796,437   |      | 8,231,538   |      | 5,966,402  
|Maturities of investment securities available-for-sale                                      |  |      | 11,084,307  |      | 31,696,914  |      | 13,143,950 
|Proceeds from sale of investment securities available-for-sale                              |  |      | 11,712,628  |      | 2,011,814   |      |           
|Purchases of investment securities available-for-sale                                       |  |      | (29,137,525 | )    | (45,717,111 | )    | (21,074,337
|Purchases of office properties and equipment                                                |  |      | (2,675,950  | )    | (1,729,824  | )    | (1,475,700 
|Purchases of stock in the Federal Home Loan Bank of Chicago                                 |  |      | (2,910,160  | )    | (798,840    | )    |           
|Proceeds from sale of foreclosed real estate                                                |  |      | 83,980      |      | 1,156,106   |      | 187,037    
|                                                                                            |  |      |             |      |             |      |            
|Net cash used in investing activities                                                       |  |      | (93,333,420 | )    | (75,281,398 | )    | (16,737,665
|                                                                                            |  |      |             |      |             |      |            
|Cash flows from financing activities:                                                       |  |      |             |      |             |      |            
|Proceeds from the issuance of common stock                                                  |  |      |            |      | 72,769,326  |      |           
|Purchase of common stock by ESOP                                                            |  |      |            |      | (8,961,298  | )    |           
|Purchase of treasury stock                                                                  |  |      | (23,316,599 | )    | (4,355,125  | )    |           
|Purchase of stock award plan stock                                                          |  |      |            |      | (3,707,474  | )    |           
|Net increase (decrease) in deposits                                                         |  |      | 54,297,298  |      | (431,435    | )    | 16,899,485 
|Cash dividends paid                                                                         |  |      | (1,793,171  | )    |            |      |           
|Proceeds from borrowed money                                                                |  |      | 100,200,000 |      | 39,000,000  |      | 49,000,000 
|Repayments on borrowed money                                                                |  |      | (42,000,000 | )    | (6,000,000  | )    | (54,000,000
|                                                                                            |  |      |             |      |             |      |            
|Net cash provided by financing activities                                                   |  |      | 87,387,528  |      | 88,313,994  |      | 11,899,485 
|                                                                                            |  |      |             |      |             |      |            
|Net increase (decrease) in cash and cash equivalents                                        |  |      | (1,106,311  | )    | 13,181,352  |      | (854,456   
|Cash and cash equivalents at beginning of year                                              |  |      | 23,279,906  |      | 10,098,554  |      | 10,953,010 
|                                                                                            |  |      |             |      |             |      |            
|Cash and cash equivalents at end of year                                                    |  | $    | 22,173,595  |      | 23,279,906  |      | 10,098,554 
|                                                                                            |  |      |             |      |             |      |            
|Supplemental disclosures of cash flow information:                                          |  |      |             |      |             |      |            
|Cash paid during the year for:                                                              |  |      |             |      |             |      |            
|Interest                                                                                    |  | $    | 15,976,039  |      | 14,120,663  |      | 13,252,714 
|Income taxes                                                                                |  |      | 2,560,000   |      | 1,702,500   |      | 1,264,890  
|Noncash investing activitiestransfer of loans to foreclosed real estate                    |  |      | 168,145     |      | 1,262,217   |      | 218,888    
|                                                                                            |  |      |             |      |             |      |            

See accompanying notes to consolidated financial statements.

F-5



EFC BANCORP, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 1999, 1998 and 1997

(1) Summary of Significant Accounting Policies

The following describes the more significant policies which the EFC Bancorp, Inc. (the Company) follows in preparing and presenting its consolidated
financial statements.

Principles of Consolidation

The consolidated financial statements include the accounts of EFC Bancorp, Inc. and its wholly owned subsidiaries. All significant intercompany accounts
and transactions have been eliminated in consolidation.

The
accounting and reporting policies of the Company conform to generally accepted accounting principles and to general practice within the banking industry. In preparing the
consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the consolidated balance sheet
and revenues and expenses for the period. Actual results could differ from these estimates.

Financial Reporting of Segments

Statement of Financial Accounting Standards No. 131 (SFAS 131), "Disclosures about Segments of an Enterprise and Related Information."
SFAS 131 established standards for the way public business enterprises report information about operating segments in annual financial statements. Operating segments are components of an
enterprise for which separate financial information is available, and is evaluated regularly by management in deciding how to allocate resources and in assessing performance. SFAS 131
establishes standards for related disclosures about products, services, geographic areas, and major customers. The Company operates as a single segment.

The
Savings Bank is principally engaged in the business of attracting deposits and investing these funds, together with borrowings, to originate primarily
one-to-four family residential mortgages and construction loans and to purchase securities.

Loans Receivable

Loans receivable are stated at unpaid principal balances less deferred loan fees, and the allowance for loan losses. Premiums and discounts on purchased loans
are amortized and accreted to interest income using the level yield method over the remaining period to contractual maturity.

Loan
origination fees and certain direct costs associated with loan originations are deferred. Net deferred fees are amortized as yield adjustments over the contractual life of the
related loans using the level-yield method.

The
allowance for loan losses is provided by charges to operations. The balance of the allowance is based on management's review of the inherent credit risk in the loan portfolio and
current economic conditions. Regulatory examiners may require the Company to recognize additions to the allowance based upon their judgments about information available to them at the time of their
examination.

F-6



Allowance
for losses on specific loans and real estate owned is charged to operations when any permanent decline reduces the market value to less than the loan principal balance or
carrying value less estimated costs to sell foreclosed real estate.

Management,
considering current information and events regarding the borrower's ability to repay their obligations, considers a loan to be impaired when it is probable that the
Company will be unable to collect all amounts due according to the contractual terms of the note agreement, including principal and interest.

A
loan is generally classified as non-accrual when collectibility is in doubt and the loan is contractually past due three months or more. When a loan is placed on
non-accrual status, previously accrued, but unpaid interest is reversed against interest income. Income on such loans is subsequently recorded to the extent that cash is received and where
future collection of principal is probable. Loans past due three months or more are considered impaired. The amount of impairment for individual loans is measured based on the fair value of the
collateral, if the loan is collateral dependent, or alternatively, at the present value of expected future cash flows discounted at the loan's effective interest rate. Certain groups of small balance
homogenous loans represented by installment and consumer credit and residential real estate loans are excluded from the impairment provisions. As of and for the years ended December 31, 1999
and 1998, the Company did not have any impaired loans, as defined.

Investment Securities and Mortgage-backed Securities

The Company classifies its investment and mortgage-backed securities in one of three categories: trading, available-for-sale, or held
to maturity. Securities which the Company has the positive intent and ability to hold to maturity are classified as held to maturity and measured at amortized cost. Securities purchased for the
purpose of being sold in the near term are classified as trading securities and measured at fair value with any change in fair value included in earnings. All other securities that are not classified
as held to maturity or trading are classified as available-for-sale. Securities classified as available-for-sale are measured at fair value with any
changes in fair value reflected as a separate component of retained earnings, net of related tax effects. Gains and losses on the sale of such securities are determined using the specific
identification method. The Company has classified all investment securities as available-for-sale at December 31, 1999 and 1998.

Discounts
and premiums on mortgage-backed securities purchased are accreted and amortized to maturity, using a method which approximates the effective interest method. For investment
securities, the straight-line method based upon the contractual life of the security is principally used, which approximates the effective interest method.

Office Properties and Equipment

Office properties and equipment are stated at cost less accumulated depreciation and amortization. Depreciation and amortization is computed for financial
reporting purposes principally on the straight-line basis over the estimated useful lives (5 to 20 years) of the respective assets.

F-7



Income Taxes

Deferred income taxes arise from the recognition of certain items of income and expense for tax purposes in years different from those in which they are
recognized in the consolidated financial statements. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax bases (temporary differences).

Deferred
tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which the temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized as income in the period that includes the enactment date.

Foreclosed Real Estate

Foreclosed real estate represents real estate acquired through foreclosure which is recorded at the lower of cost (principal balance of the former first
mortgage loan plus costs of obtaining title and possession) or net realizable value, at the date of foreclosure. After foreclosure, additional reserves are recorded as necessary to reflect further
impairment of the estimated net realizable value.

Employee Stock Ownership Plan (ESOP)

Compensation expense under the ESOP is equal to the fair value of common shares released or committed to be released annually to participants in the ESOP. The
difference between the fair value of the shares committed to be released and the cost of those shares to the ESOP will be charged or credited to additional paid-in capital. Common stock
purchased by the ESOP and not committed to be released to participants is included in the consolidated balance sheet at cost as a reduction of stockholders' equity. Dividends on allocated ESOP shares
are recorded as a reduction of stockholders' equity; dividends on unallocated ESOP shares are used to pay debt service, and recorded as a reduction of debt and accrued interest.

Earnings per Share

Basic earnings per share is calculated by dividing income available to common stockholders by the weighted average number of common shares outstanding. Diluted
earnings per share is calculated by dividing net income by the weighted average number of shares adjusted for the dilutive effect of outstanding stock options. ESOP shares are only considered
outstanding for earnings per share calculations when they are committed to be released.

Cash and Cash Equivalents

For purposes of the consolidated statements of cash flows, cash and cash equivalents are considered to include cash on hand and in banks and interest bearing
deposits with financial institutions.

F-8



Comprehensive Income

Comprehensive income consists of net income and net unrealized gains (losses) on securities and is presented in the consolidated statements of changes in
stockholders' equity.

Basis of Presentation

Certain amounts for prior years have been reclassified to conform to the current year presentation.

(2) Reorganization to a Stock Corporation

On August 12, 1997, the Board of Directors adopted a Plan of Conversion, as amended pursuant to which the Bank converted (the Plan) from a state
chartered savings bank to a state chartered stock savings bank (the Conversion). The Plan was approved by the regulatory authorities and the members at a special meeting. EFC Bancorp, Inc was formed
by the Bank in October 1997 and acquired 100% of the Bank's outstanding common stock in connection with the Conversion.

During
1997, the Bank changed its name to Elgin Financial Savings Bank.

On
April 3, 1998, the Savings Bank completed the Conversion and the Company completed the issuance and sale of 6,936,513 shares of its own common stock (the Transaction), at a
price of $10.00 per share, through an initial public offering (IPO). The Company also contributed 554,921 shares of its common stock, from authorized, but unissued shares, to a charitable foundation
(the Foundation) immediately following the Conversion. The Company received net proceeds from the Transaction of $72,769,326, after the reduction from gross proceeds of $2,145,000 for IPO related
expenses, which were initially deferred. On the date of the Transaction, $12,490,054 of deposits and $56,875,076 million of nondepository stock subscriptions funds were transferred to
stockholder's equity and $37,258,531 of nondepository stock subscription funds were subsequently returned to subscribers; also subsequent to the Transaction, the ESOP purchased, through a $8,961,298
loan from the Company, 599,314 shares of common stock on the open market.

The
Savings Bank established a liquidation account, as of the date of Conversion, in the amount of $31,024,068, equal to its retained earnings as of the date of the latest
consolidated balance sheet appearing in the final prospectus. The Liquidation Account is established to provide a limited priority claim on the assets of the Savings Bank to qualifying
pre-conversion depositors (Eligible and Supplemental Eligible Account Holders) who continue to maintain deposits in the Savings Bank after Conversion. In the unlikely event of a complete
liquidation of the Savings Bank, and only in such an event, each Eligible Account Holder would then receive from the Liquidation Account a liquidation distribution based on his proportionate share of
the then total remaining qualifying deposits.

The
Foundation created in connection with the Conversion is a tax-exempt private foundation as determined by the Internal Revenue Service. The contribution of common stock
to the Foundation by the Company will be tax deductible, subject to an annual limitation based on 10% of the Company's annual taxable income. The Company, however, would be able to carryforward any
unused portion of the deduction for five years following the contribution. The Company recognized a $5,549,000 expense for the full amount of the contribution, offset in part by the $2,053,000
corresponding tax benefit during 1998.

F-9



In
addition to the 25,000,000 authorized shares of common stock, the Company authorized 2,000,000 shares of preferred stock with a par value of $.01 per share. The Board of Directors
is authorized, subject to any limitations by law, to provide for the issuance of the shares of preferred stock in series, to establish from time to time the number of shares to be included in each
such series, and to fix the designation, powers, preferences, and rights of the shares of each such series and any qualifications, limitations or restriction thereof. As of December 31, 1999,
there were no shares of preferred stock issued.

(3) Earnings Per Share

The Company adopted SFAS No. 128,Earnings per Share,during 1998. Earnings per share information for
prior periods cannot be computed because the Company did not issue common stock until April 3, 1998. Net loss for purposes of per share calculations for the year ended December 31, 1998
consists of a net loss from April 3, 1998 through December 31, 1998. ESOP shares are only considered outstanding for earnings per share calculations when they are committed to be
released.

The
following table sets forth the computation of basic and diluted earnings (loss) per share for the periods indicated:

|                                                   |  | Year ended
December 31,
1999 |           | April 3, 1998
(date of initial
offering)
through
December 31,
1998 |          
|-------------------------------------------------- |  | ---------------------------- | --------- | ------------------------------------------------------------------ | ---------
|Basic:                                             |  |                              |           |                                                                    |          
|Net income (loss)                                  |  | $                            | 4,020,794 |                                                                    | (557,081 
|Weighted average common shares outstanding         |  |                              | 5,571,247 |                                                                    | 6,914,871
|                                                   |  |                              |           |                                                                    |          
|Basic earnings (loss) per share                    |  | $                            | 0.72      |                                                                    | (0.08    
|                                                   |  |                              |           |                                                                    |          
|Diluted:                                           |  |                              |           |                                                                    |          
|Net income (loss)                                  |  | $                            | 4,020,794 |                                                                    | (557,081 
|Weighted average common shares outstanding         |  |                              | 5,571,247 |                                                                    | 6,914,871
|Effect of dilutive stock options outstanding       |  |                              |          |                                                                    | 17,832   
|                                                   |  |                              |           |                                                                    |          
|Diluted weighted average common shares outstanding |  |                              | 5,571,247 |                                                                    | 6,932,703
|                                                   |  |                              |           |                                                                    |          
|Diluted earnings (loss) per share                  |  | $                            | 0.72      |                                                                    | (0.08    
|                                                   |  |                              |           |                                                                    |          

F-10



(4) Loans Receivable, Net

Loans receivable, net are summarized as follows:

|                               |  | December 31,
|------------------------------ |  | ------------
|
|Mortgage loans:                |  |             
|One-to-four family residential |  | $           
|Multifamily                    |  |             
|Commercial                     |  |             
|Construction and land          |  |             
|                               |  |             
|Total mortgage loans           |  |             
|                               |  |             
|Other loans:                   |  |             
|Home equity loans              |  |             
|Commercial                     |  |             
|Auto loans                     |  |             
|Loans on savings accounts      |  |             
|Other                          |  |             
|                               |  |             
|Total other loans              |  |             
|                               |  |             
|Total loans receivable         |  |             
|                               |  |             
|Less:                          |  |             
|Deferred loan fees             |  |             
|Allowance for loan losses      |  |             
|                               |  |             
|Loans receivable, net          |  | $           
|                               |  |             

Activity
in the allowance for loan losses is summarized as follows:

|                             |  | Years ended December 31, |          
|---------------------------- |  | ------------------------ | ---------
|
|Balance at beginning of year |  | $                        | 1,372,837
|Provision for loan losses    |  |                          | 211,000  
|Charge-offs                  |  |                          | (40,984  
|Recoveries                   |  |                          | 1,724    
|                             |  |                          |          
|Balance at end of year       |  | $                        | 1,544,577
|                             |  |                          |          

F-11



Loans
receivable in arrears three months or more and on non accrual status or in the process of foreclosure are as follows:

|                  |  | Number of
loans |  | Amount |           | Percent of
gross loans
receivable |    
|----------------- |  | --------------- |  | ------ | --------- | --------------------------------- | ---
|December 31, 1999 |  | 11              |  | $      | 1,269,999 |                                   | .32
|December 31, 1998 |  | 9               |  |        | 1,005,979 |                                   | .32
|December 31, 1997 |  | 13              |  |        | 2,048,857 |                                   | .83
|                  |  |                 |  |        |           |                                   |    

The
Savings Bank makes loans to their officers, and directors and to associates of such persons. These loans were made in the ordinary course of business on the same terms and
conditions, including interest rates and collateral, as those prevailing at the time for comparable transactions with other customers and do not involve more than a normal risk. As of
December 31, 1999 and 1998, the outstanding balance on such loans was approximately $3,586,000, and $2,292,000, respectively. Loan origination and repayments for the year ended
December 31, 1999 were $1,500,000 and $105,000, respectively.

(5) Mortgage-backed Securities and Investment Securities Available-for-Sale

The
amortized cost and estimated fair value of mortgage-backed securities and investment securities available-for-sale are summarized as follows:

|                                         |  | December 31, 1999
|---------------------------------------- |  | -----------------
|
|Mortgage-backed securities:              |  |                  
|Federal Home Loan Mortgage Corporation   |  | $                
|Federal National Mortgage Association    |  |                  
|Government National Mortgage Association |  |                  
|                                         |  |                  
|                                         |  |                  
|Investment securities:                   |  |                  
|United States Government obligations     |  |                  
|Equity securities                        |  |                  
|                                         |  |                  
|                                         |  |                  
|                                         |  |                  
|                                         |  | $                
|                                         |  |                  

F-12



|                                                            |  | December 31, 1998
|----------------------------------------------------------- |  | -----------------
|
|Mortgage-backed securities:                                 |  |                  
|Federal Home Loan Mortgage Corporation                      |  | $                
|Federal National Mortgage Association                       |  |                  
|Government National Mortgage Association                    |  |                  
|                                                            |  |                  
|                                                            |  |                  
|Investment securities: United States Government obligations |  |                  
|                                                            |  |                  
|                                                            |  | $                
|                                                            |  |                  

There
were no sales of mortgage-backed securities available-for-sale for the years ended December 31, 1999, 1998, and 1997. During the years ended
December 31, 1999 and 1998 sales of investment securities available-for-sale totaled $11,712,628 and $2,011,814, respectively. These sales resulted in gross gains
of $102,940 and $11,814 for the respective time periods. There were no sales of investment securities available-for-sale for the year ended December 31, 1997.

The
amortized cost and estimated fair value of investment securities available-for-sale at December 31, 1999 by contractual maturity are shown below.
Expected maturities may differ from contractual maturities because borrowers may have the right to prepay obligations.

|                                       |  | Amortized
cost |            | Estimated
fair value
|-------------------------------------- |  | -------------- | ---------- | --------------------
|Due in one year or less                |  | $              |           |                     
|Due after one year through five years  |  |                | 20,561,936 |                     
|Due after five years through ten years |  |                | 31,168,010 |                     
|Due after ten years                    |  |                | 10,904,235 |                     
|Equity securities                      |  |                | 300,000    |                     
|                                       |  |                |            |                     
|                                       |  | $              | 62,934,181 |                     
|                                       |  |                |            |                     

F-13



EFC BANCORP, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 1999, 1998 and 1997

(6) Accrued Interest Receivable

Accrued interest receivable is summarized as follows:

|                           |  | December 31,
|-------------------------- |  | ------------
|
|Loans receivable           |  | $           
|Mortgage-backed securities |  |             
|Investment securities      |  |             
|                           |  |             
|                           |  | $           
|                           |  |             

(7) Office Properties and Equipment

A summary of office properties and equipment at cost is summarized as follows:

|                                               |  | December 31, |           
|---------------------------------------------- |  | ------------ | ----------
|
|Land                                           |  | $            | 1,443,385 
|Land improvements                              |  |              | 299,061   
|Office buildings                               |  |              | 6,763,591 
|Leasehold improvements                         |  |              | 185,043   
|Furniture, fixtures, and equipment             |  |              | 3,144,504 
|                                               |  |              |           
|                                               |  |              | 11,835,584
|Less accumulated depreciation and amortization |  |              | (3,195,174
|                                               |  |              |           
|                                               |  | $            | 8,640,410 
|                                               |  |              |           

Depreciation
and amortization expense totaled $565,274, $506,884, and $428,623, for the years ended December 31, 1999, 1998, and 1997, respectively.

F-14



(8) Deposits

Deposit balances are summarized as follows:

|                                                                    |  | December 31, 1999 |             | Stated or
weighted
average
rate |       | December 31, 1998 |      | Stated or
weighted
average
rate |  
|------------------------------------------------------------------- |  | ----------------- | ----------- | ------------------------------- | ----- | ----------------- | ---- | ------------------------------- | -
|
|Balance by interest rate:                                           |  |                   |             |                                 |       |                   |      |                                 |  
|Commercial checking accounts                                        |  | $                 | 9,445,906   |                                 | 2.9   | %                 |     | %                               | $
|NOW accounts
noninterest bearing                                   |  |                   | 6,093,206   |                                 | 1.9   |                   |     |                                 |  
|NOW accounts
interest bearing                                      |  |                   | 28,044,410  |                                 | 8.7   |                   | 1.80 |                                 |  
|Passbook                                                            |  |                   | 73,675,405  |                                 | 22.7  |                   | 3.35 |                                 |  
|Money market accounts                                               |  |                   | 31,339,492  |                                 | 9.7   |                   | 3.53 |                                 |  
|Certificate accounts:                                               |  |                   |             |                                 |       |                   |      |                                 |  
|Fixed rates                                                         |  |                   | 116,833,293 |                                 | 36.1  |                   | 5.29 |                                 |  
|Individual retirement accounts
18-48 month fixed and variable rate |  |                   | 43,517,420  |                                 | 13.4  |                   | 5.40 |                                 |  
|Jumbo certificates
(with a minimum
denomination of $100,000)        |  |                   | 14,930,161  |                                 | 4.6   |                   | 5.53 |                                 |  
|                                                                    |  |                   |             |                                 |       |                   |      |                                 |  
|                                                                    |  | $                 | 323,879,293 |                                 | 100.0 | %                 | 4.15 | %                               | $
|                                                                    |  |                   |             |                                 |       |                   |      |                                 |  
|Contractual maturity of certificate accounts ($100,000 or greater): |  |                   |             |                                 |       |                   |      |                                 |  
|Under 3 months                                                      |  | $                 | 6,984,816   |                                 | 21.4  | %                 |      |                                 | $
|Over 3 months through 6 months                                      |  |                   | 5,070,291   |                                 | 15.5  |                   |      |                                 |  
|Over 6 months through 12 months                                     |  |                   | 13,229,776  |                                 | 40.4  |                   |      |                                 |  
|Over 12 months                                                      |  |                   | 7,435,357   |                                 | 22.7  |                   |      |                                 |  
|                                                                    |  |                   |             |                                 |       |                   |      |                                 |  
|                                                                    |  | $                 | 32,720,258  |                                 | 100.0 | %                 |      |                                 | $
|                                                                    |  |                   |             |                                 |       |                   |      |                                 |  

F-15



Interest
expense on deposits is summarized as follows for the years ended December 31:

|                      |  | 1999 |            | 1998 |            | 1997
|--------------------- |  | ---- | ---------- | ---- | ---------- | ----
|Passbook accounts     |  | $    | 2,355,677  |      | 1,830,765  |     
|NOW accounts          |  |      | 493,374    |      | 535,261    |     
|Money market accounts |  |      | 1,036,713  |      | 938,579    |     
|Certificate accounts  |  |      | 7,946,663  |      | 8,520,441  |     
|                      |  |      |            |      |            |     
|                      |  | $    | 11,832,427 |      | 11,825,046 |     
|                      |  |      |            |      |            |     

(9) Borrowed Money

Borrowed money is summarized as follows:

|                                                     |  |      |  | December 31, 1999 |   | December 31, 1998
|---------------------------------------------------- |  | ---- |  | ----------------- | - | -----------------
|
|Advances from the
Federal Home
Loan Bank of
Chicago: |  | 2000 |  | 6.32              | % | $                
|                                                     |  | 2001 |  | 5.56              |   |                  
|                                                     |  | 2002 |  | 5.66              |   |                  
|                                                     |  | 2003 |  |                  |   |                  
|                                                     |  | 2004 |  | 5.45              |   |                  
|                                                     |  | 2008 |  | 5.11              |   |                  
|                                                     |  | 2009 |  | 5.08              |   |                  
|                                                     |  |      |  |                   |   |                  
|                                                     |  |      |  | 5.38              | % | $                
|                                                     |  |      |  |                   |   |                  

$5,000,000
of the advances due in 2008 have an adjustable interest rate. All other advances have fixed interest rates. Certain advances are callable by the FHLB on a quarterly basis
as follows: $68,000,000 in advances are callable beginning in 2000, and $14,000,000 in advances are callable beginning in 2001.

The
Savings Bank adopted a collateral pledge agreement whereby it has agreed to at all times keep on hand, free of all other pledges, liens, and encumbrances, performing first
mortgage loans with unpaid principal balances aggregating no less than 167% of the outstanding secured advances from the Federal Home Loan Bank of Chicago. The carrying value of the collateral was
approximately $275,186,000 at December 31, 1999. All stock in the Federal Home Loan Bank of Chicago is also pledged as additional collateral for these advances.

F-16



(10) Income Taxes

Income tax expense for the years ended December 31, 1999, 1998 and 1997 is as follows:

|                         |  | Years ended December 31,
|------------------------ |  | ------------------------
|
|Current:                 |  |                         
|Federal                  |  | $                       
|State                    |  |                         
|                         |  |                         
|                         |  |                         
|                         |  |                         
|Deferred:                |  |                         
|Federal                  |  |                         
|State                    |  |                         
|                         |  |                         
|                         |  |                         
|                         |  |                         
|Total income tax expense |  | $                       
|                         |  |                         

The
actual Federal income tax expense for 1999, 1998, and 1997 differs from the "expected" income tax expense for those periods (computed by applying the statutory U.S. federal
corporate tax rate of 34% to earnings before income taxes) as follows:

|                                                                   |  | 1999 |           | 1998 |          | 1997 |          
|------------------------------------------------------------------ |  | ---- | --------- | ---- | -------- | ---- | ---------
|Tax expense based on the statutory U.S. federal corporate tax rate |  | $    | 2,127,750 |      | 93,102   |      | 1,385,748
|State income taxes, net of federal benefit                         |  |      | 130,177   |      | (132,706 | )    | 63,488   
|Other, net                                                         |  |      | (20,632   | )    | 49,604   |      | (61,169  
|                                                                   |  |      |           |      |          |      |          
|                                                                   |  | $    | 2,237,295 |      | 10,000   |      | 1,388,067
|                                                                   |  |      |           |      |          |      |          

F-17



The
tax effects of existing temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 1999 and 1998
are as follows:

|                                                   |  | 1999 |            | 1998 |           
|-------------------------------------------------- |  | ---- | ---------- | ---- | ----------
|Deferred tax assets:                               |  |      |            |      |           
|Allowance for loan losses                          |  | $    | 582,141    |      | 532,226   
|Stock award plan                                   |  |      | 3,984      |      | 81,175    
|Capital loss carryforward                          |  |      |           |      | 39,489    
|Charitable contribution carryforward               |  |      | 1,699,048  |      | 2,035,801 
|Unrealized loss on securities available-for-sale   |  |      | 794,731    |      |          
|Other                                              |  |      |           |      | 2,787     
|                                                   |  |      |            |      |           
|Gross deferred tax assets                          |  |      | 3,079,904  |      | 2,691,478 
|Valuation allowance                                |  |      |           |      | (39,489   
|                                                   |  |      |            |      |           
|Net deferred tax assets                            |  |      | 3,079,904  |      | 2,651,989 
|                                                   |  |      |            |      |           
|Deferred tax liabilities:                          |  |      |            |      |           
|FHLB stock dividends                               |  |      | (126,790   | )    | (134,780  
|Unrealized gain on securities available-for-sale   |  |      |           |      | (416,095  
|Loan fees                                          |  |      | (180,280   | )    | (273,184  
|Depreciation                                       |  |      | (459,608   | )    | (187,863  
|Tax bad debt reserve in excess of base year amount |  |      | (555,426   | )    | (738,034  
|Other                                              |  |      | (4,011     | )    |          
|Future federal liability for state tax benefit     |  |      |           |      | (77,975   
|                                                   |  |      |            |      |           
|Gross deferred tax liabilities                     |  |      | (1,326,115 | )    | (1,827,931
|                                                   |  |      |            |      |           
|Net deferred tax asset                             |  | $    | 1,753,789  |      | 824,058   
|                                                   |  |      |            |      |           

The
valuation allowance for deferred tax assets at December 31, 1998 was $39,489, and represented the tax effect of a capital loss carryforward of $95,895. Capital losses can
only be utilized to offset capital gains and are limited to a five-year carryforward. The capital loss carryforward expired in 1999.

Retained
earnings at December 31, 1999 includes approximately $2,328,000 of tax bad debt reserves for which no provision for Federal or state income tax has been made. If, in
the future this amount, or a portion thereof, is used for certain purposes, then a Federal and state tax liability, at the then current corporate income tax rates, will be imposed on the amounts so
used.

F-18



(11) Employee Benefit Plans



The Savings Bank adopted the Elgin Federal Financial Center 401(k) Employee Benefit Plan and Trust (Plan), effective November 1, 1986, for the exclusive
benefit of eligible employees and their beneficiaries. The Plan is a qualified plan covering all employees of the Savings Bank who have completed at least six months of service for the Savings Bank
and are age 20 or older. The Plan also provides benefits in the event of death, disability, or other termination of employment. Participants may make contributions to the Plan from 2% to 10% of their
earnings, subject to Internal Revenue Service limitations. Matching contributions can be made at the Savings Bank's discretion each Plan year. There were no contributions by the Savings Bank during
1999 and 1998. Contributions in 1997 were approximately $166,000.



In conjunction with the Savings Bank's conversion, the Company formed an ESOP. The ESOP covers substantially all employees that are age 21 or over and with at
least 1,000 hours of service. The ESOP borrowed $8,961,298 from the Company and purchased 599,314 common shares issued in the conversion. The loan has a 15 year term, with an interest
rate of 8.50%. The Savings Bank intends to make discretionary contributions to the ESOP sufficient to service the requirements of the loan over a period of 15 years. During the years ended
December 31, 1999 and 1998, 39,954 shares were allocated, respectively. ESOP expense for the years ended December 31, 1999 and 1998 totaled $423,739 and $490,075, respectively. The fair
value of unallocated shares totaled $5,194,000 and $6,083,000 at December 31, 1999 and 1998, respectively.



On October 27, 1998, the Company adopted a SAP which may grant up to 4%,or 299,657 shares of the common
stock issued in the Company's initial public offering to eligible directors, officers and certain key employees of the Company. All shares available under the SAP were granted on October 27,
1998. Shares vest as follows: 20% per year for five (5) years of continuous service. Deferred compensation relating to the shares granted under the SAP totaled $3,333,684, the fair value of the
shares on the date of grant, and is being recognized as compensation expense as the participants vest in those shares. For the year ended December 31, 1999 an 1998 the Company recorded
compensation expense of $750,319 and $111,123, respectively.

During
1998, 299,657 shares of the Company's common stock were purchased by the SAP in the open market at a weighted average price of $12.37 per share. The aggregate purchase price of
all nonvested shares acquired by the SAP is reflected as a reduction of stockholders' equity as deferred compensation.

F-19





The Savings Bank had a defined benefit pension plan covering all salaried employees meeting certain eligibility requirements. On September 9, 1997 the
Board of Directors of the Savings Bank terminated its noncontributory pension plan effective November 4, 1997. Plan benefits ceased to accrue on September 30, 1997. Upon termination, all
benefits became 100% vested, and all persons entitled to benefits were eligible to request an immediate lump-sum settlement of the benefit entitlement. The Savings Bank recorded pension
expense of approximately $293,000 in 1997 including a curtailment expense of approximately $104,000 in conjunction with the termination of the pension plan. The pension plan was liquidated in
January 1998. There was no pension expense in 1999 or 1998.

(12) Stock Option Plan

On October 27, 1998, the Company adopted a stock option plan (the Plan) pursuant to which the Company's Board of Directors may grant stock options to
directors, officers, and employees of the Company and the Savings Bank. The number of common shares authorized under the Plan is 749,143, equal to 10% of the total number of shares issued in the
initial stock offering. Stock options granted under the plan will vest at a rate of 20% per year beginning on the first anniversary date of the grant. The exercise price is equal to the fair value of
the common stock at the date of grant. The option term cannot exceed ten years from the commencement date of the Plan of October 27, 1998.

The
Company adopted the disclosure provisions of FASB Statement No. 123,Accounting for Stock-Based Compensation. The fair value
of each option granted is estimated on the grant date using the Black-Scholes option-pricing model. The following assumptions were used in estimating the fair value of options granted in 1999 and
1998.

|                               |  | 1999   |  | 1998   
|------------------------------ |  | ------ |  | -------
|Dividend yield                 |  | 4%     |  |       
|Risk-free interest rate        |  | 6.19%  |  | 4.63%  
|Weighted average expected life |  | 9 yrs. |  | 10 yrs.
|Expected volatility            |  | 5.43%  |  | 22.98% 
|                               |  |        |  |        

The
weighted average per share fair values of options granted in 1999 and 1998 were $.78 and $4.85, respectively.

F-20



Under
Statement 123, the Company is required to disclose pro forma net income and earnings per share as if compensation expense relative to the fair value of options granted had been
included in earnings. Had the Company determined compensation cost based on the fair value at the grant date of its stock options under Statement 123, the Company's net income would have been reduced
to the pro forma amounts indicated below:

|                           |  | Year ended
December 31, 1999 |           | Period from Apri1 13, 1998 through
December 31, 1999 |  
|-------------------------- |  | ---------------------------- | --------- | ---------------------------------------------------- | -
|Net income (loss):         |  |                              |           |                                                      |  
|As reported                |  | $                            | 4,020,794 |                                                      | $
|Pro forma                  |  |                              | 3,951,389 |                                                      |  
|                           |  |                              |           |                                                      |  
|Earnings (loss) per share: |  |                              |           |                                                      |  
|Basic:                     |  |                              |           |                                                      |  
|As reported                |  | $                            | 0.72      |                                                      |  
|Pro forma                  |  |                              | 0.71      |                                                      |  
|Diluted:                   |  |                              |           |                                                      |  
|As reported                |  |                              | 0.72      |                                                      |  
|Pro forma                  |  |                              | 0.71      |                                                      |  
|                           |  |                              |           |                                                      |  

A
summary of the status of the Company's stock option transactions under the Plan for the year ended December 31, 1999 and 1998 is presented below:

|                                 |  | 1999    |   | 1998
|-------------------------------- |  | ------- | - | ----
|
|Outstanding at beginning of year |  | 749,000 |   | $   
|Forfeitures                      |  | (33,000 | ) |     
|Granted                          |  | 33,000  |   |     
|Exercised                        |  |        |   |     
|                                 |  |         |   |     
|Outstanding at end of year       |  | 749,000 |   |     
|                                 |  |         |   |     
|Exercisable at year end          |  | 143,200 |   |     
|                                 |  |         |   |     

F-21



EFC BANCORP, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 1999, 1998 and 1997

(13) Regulatory Capital Requirements

The Savings Bank is subject to regulatory capital requirements administered by State and Federal regulatory agencies. Failure to meet minimum capital
requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Savings Bank's financial
statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Savings Bank must meet specific capital guidelines that involve quantitative measures of
the Savings Bank's assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting practices. The Savings Bank's capital amounts and classification are
also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

Quantitative
measures established by regulation to ensure adequacy require the Savings Bank to maintain minimum amounts and ratios as set forth below. Management believes, as of
December 31, 1999 that the Savings Bank meets all capital adequacy requirement to which it is subject.

As
of December 31, 1999 and 1998, the most recent notification from the Federal Deposit Insurance Corporation categorized the Savings Bank as well capitalized under the
regulatory framework for prompt corrective action. There are no conditions or events since that notification that management believes have changed the institution's category.

F-22



The
Savings Bank's actual capital amounts and ratios are as follows:

|                                         |  | Actual |            | For capital adequacy purposes |      | To be well capitalized under prompt corrective action |  
|---------------------------------------- |  | ------ | ---------- | ----------------------------- | ---- | ----------------------------------------------------- | -
|
|December 31, 1999:                       |  |        |            |                               |      |                                                       |  
|Total capital (to risk weighted assets)  |  | $      | 60,882,000 |                               | 18.6 | %                                                     | $
|Tier I capital (to risk weighted assets) |  |        | 59,337,000 |                               | 18.1 |                                                       |  
|Tier I capital (to average assets)       |  |        | 59,337,000 |                               | 12.8 |                                                       |  
|December 31, 1998:                       |  |        |            |                               |      |                                                       |  
|Total capital (to risk weighted assets)  |  |        | 69,602,000 |                               | 28.4 |                                                       |  
|Tier I capital (to risk weighted assets) |  |        | 68,229,000 |                               | 27.9 |                                                       |  
|Tier I capital (to average assets)       |  |        | 68,229,000 |                               | 16.8 |                                                       |  

(14) Concentrations of Credit Risk and Financial Instruments with Off-Balance Sheet Risk

Substantially all of the Savings Bank's mortgage loans are secured by single-family homes in Kane County. For loans originated, the Savings Bank evaluates each
customer's creditworthiness on a case-by-case basis. Management believes the Savings Bank has a diversified loan portfolio and concentration of lending activities that does not
result in an acute dependency upon the economic conditions of the lending area. Purchased participation loans are secured by properties primarily in the southern Wisconsin area and to a lesser extent
by properties in the Chicagoland area.

The
Savings Bank is party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. Those
financial instruments primarily include commitments to extend credit. Commitments to extend credit are agreements to lend to a customer so long as there is no violation of any condition established in
the contract. The Savings Bank evaluates each customer's creditworthiness on a case-by-case basis. The amount of collateral obtained is based

F-23



on
management's credit evaluation of the customer. The Savings Bank's exposure to credit loss in the event of nonperformance by the customer is represented by the contractual amount of those financial
instruments. At December 31, 1999 and 1998, the Savings Bank had the following commitments:

|                       |  | 1999 |            | 1998
|---------------------- |  | ---- | ---------- | ----
|First mortgage loans   |  | $    | 7,334,000  |     
|Construction loans     |  |      | 3,643,000  |     
|Unused lines of credit |  |      | 14,176,000 |     
|Letters of credit      |  |      | 917,000    |     

There
are various matters of litigation pending against the Company that have arisen during the normal course of business. Based upon discussions with legal counsel, management
believes that the liability, if any, resulting from these matters will not be material to the financial statements of the Company.

(15) Fair Value of Financial Instruments

Statement of Financial Accounting Standards No. 107, "Disclosures about Fair Value of Financial Instruments" (Statement No. 107), requires the
disclosure of estimated fair values of all asset, liability, and off-balance sheet financial instruments. The estimated fair value amounts under Statement No. 107 have been
determined as of a specific point in time utilizing various available market information, assumptions, and appropriate valuation methodologies. Accordingly, the estimated fair values presented herein
are not necessarily representative of the underlying value of the Company. Rather, the disclosures are limited to reasonable estimates of the fair value of only the Company's financial instruments.
The use of assumptions and various valuation techniques, as well as the absence of secondary markets for certain financial instruments, will likely reduce the comparability of fair value disclosures
between financial institutions. The Company does not plan to sell most of its assets or settle most of its liabilities at these fair values.

F-24



The
estimated fair values of the Company's financial instruments are set forth in the following table.

|                                |  | December 31,
|------------------------------- |  | ------------
|
|
|
|Financial assets:               |  |             
|Cash and cash equivalents       |  | $           
|Investment securities           |  |             
|Mortgage-backed securities      |  |             
|Loans receivable                |  |             
|Accrued interest receivable     |  |             
|Stock in FHLB of Chicago        |  |             
|                                |  |             
|Financial liabilities:          |  |             
|Nonmaturing deposits            |  | $           
|Deposits with stated maturities |  |             
|Borrowed money                  |  |             
|Accrued interest payable        |  |             
|                                |  |             

The
following methods and assumptions are used by the Company in estimating the fair value amounts for its financial instruments.



The carrying value of cash and cash equivalents approximates fair value due to the short period of time between origination of the instrument and its expected
realization.



The fair value of investment securities and mortgage-backed securities are estimated using quoted market prices. The fair value of FHLB stock is based on its
redemption value.



The fair value of loans receivable is based on contractual cash flows adjusted for prepayment assumptions, discounted using the current rate at which similar
loans would be made to borrowers with similar credit ratings and remaining terms to maturity.



The carrying value of accrued interest receivable and payable approximates fair value due to the relatively short period of time between accrual and expected
realization.

F-25





The fair value of deposits with no stated maturity, such as commercial checking, passbook savings, NOW, and money market accounts are disclosed as the amount
payable on demand.

The
fair value of fixed-maturity deposits is the present value of the contractual cash flows discounted using interest rates currently being offered for deposits with similar
remaining terms to maturity. If the fair value estimate is less than the amount payable on demand at December 31, the fair value disclosed is the amount payable on demand as per Statement 107.



The fair value of fixed rate FHLB advances is the present value of the contractual cash flows discounted by the current rate offered for similar remaining
maturities.

(16) Condensed Parent Company Only Financial Information

Presented below is the condensed balance sheets as of December 31, 1999 and 1998 and statements of income and cash flows year ended December 31,
1999 and for the period from April 3, 1998 (date of commencement of operations) to December 31, 1998 for EFC Bancorp, Inc. These statements should be read in conjunction with the
consolidated financial statements and the notes thereto.

|                                                             |  | December 31,
|------------------------------------------------------------ |  | ------------
|
|Balance Sheet                                                |  |             
|Assets:                                                      |  |             
|Cash and cash equivalents                                    |  | $           
|Mortgage-backed securities available-for-sale, at fair value |  |             
|Investment securities available-for-sale, at fair value      |  |             
|Equity investment in the Savings Bank                        |  |             
|Accrued interest receivable                                  |  |             
|Other assets                                                 |  |             
|                                                             |  |             
|Total assets                                                 |  | $           
|                                                             |  |             
|Liabilitiesother liabilities                                |  | $           
|Total stockholders' equity                                   |  |             
|                                                             |  |             
|Total liabilities and stockholders' equity                   |  | $           
|                                                             |  |             

F-26



|                                                                      |  | Year ended
December 31, 1999 |             | Period from
April 3, 1998 to
December 31, 1998 |            
|--------------------------------------------------------------------- |  | ---------------------------- | ----------- | ---------------------------------------------- | -----------
|Statement of Income                                                   |  |                              |             |                                                |            
|Dividend income from Savings Bank                                     |  | $                            | 12,493,171  |                                                |           
|Equity in undistributed earnings of the Savings Bank                  |  |                              |            |                                                | 3,038,991  
|Dividend income in excess of earnings of the Savings Bank             |  |                              | (8,492,628  | )                                              |           
|Interest income                                                       |  |                              | 1,341,607   |                                                | 1,532,020  
|Noninterest expense                                                   |  |                              | (1,400,395  | )                                              | (493,883   
|Foundation contribution                                               |  |                              |            |                                                | (5,548,650 
|                                                                      |  |                              |             |                                                |            
|Income (loss) before income taxes                                     |  |                              | 3,941,755   |                                                | (1,471,522 
|Income tax benefit                                                    |  |                              | 79,039      |                                                | 1,735,352  
|                                                                      |  |                              |             |                                                |            
|Net income                                                            |  | $                            | 4,020,794   |                                                | 263,830    
|                                                                      |  |                              |             |                                                |            
|Statements of Cash Flows                                              |  |                              |             |                                                |            
|Operating activities:                                                 |  |                              |             |                                                |            
|Net income                                                            |  | $                            | 4,020,794   |                                                | 263,830    
|Equity in undistributed earnings of the Savings Bank                  |  |                              |            |                                                | (3,038,991 
|Dividend income in excess of earnings of the Savings Bank             |  |                              | 8,492,628   |                                                |           
|Amortization of premiums                                              |  |                              | 37,022      |                                                | 38,116     
|ESOP plan shares allocated                                            |  |                              | 858,165     |                                                |           
|Stock award plan shares allocated                                     |  |                              | 750,319     |                                                | 111,123    
|Change in fair value of ESOP shares                                   |  |                              | (173,680    | )                                              | (107,345   
|Increase in other assets                                              |  |                              | (74,980     | )                                              | (8,303     
|Increase in accrued interest receivable                               |  |                              | (109,981    | )                                              | (638,854   
|Decrease in other liabilities                                         |  |                              | (387,121    | )                                              | (1,510,917 
|                                                                      |  |                              |             |                                                |            
|Net cash provided by (used in) operating activities                   |  |                              | 13,413,166  |                                                | (4,891,341 
|                                                                      |  |                              |             |                                                |            
|Investing activities:                                                 |  |                              |             |                                                |            
|Purchase of capital stock of the Savings Bank                         |  |                              |            |                                                | (33,610,058
|Purchase of mortgage-backed securities available-for-sale             |  |                              |            |                                                | (4,549,273 
|Principal repayments on mortgage-backed securities available-for-sale |  |                              | 1,256,399   |                                                | 1,002,581  
|Purchases of investment securities available-for-sale                 |  |                              | (300,000    | )                                              | (10,023,434
|Maturities of investment securities available-for-sale                |  |                              | 2,000,000   |                                                | 6,000,000  
|                                                                      |  |                              |             |                                                |            
|Net cash provided by (used in) investing activities                   |  |                              | 2,956,399   |                                                | (41,180,184
|                                                                      |  |                              |             |                                                |            
|Financing activities:                                                 |  |                              |             |                                                |            
|Purchase of stock award plan stock                                    |  |                              |            |                                                | (3,707,474 
|Proceeds from the issuance of common stock                            |  |                              |            |                                                | 72,769,326 
|Cash divdends paid                                                    |  |                              | (1,793,171  | )                                              |           
|Purchase of treasury stock                                            |  |                              | (23,316,599 | )                                              | (4,355,125 
|Purchase of common stock by ESOP                                      |  |                              |            |                                                | (8,961,298 
|                                                                      |  |                              |             |                                                |            
|Net cash provided by (used in) financing activities                   |  |                              | (25,109,770 | )                                              | 55,745,429 
|                                                                      |  |                              |             |                                                |            
|Net increase (decrease) in cash and cash equivalents                  |  |                              | (8,740,205  | )                                              | 9,673,904  
|Cash and cash equivalents at beginning of period                      |  |                              | 9,673,904   |                                                |           
|                                                                      |  |                              |             |                                                |            
|Cash and cash equivalents at end of period                            |  | $                            | 933,699     |                                                | 9,673,904  
|                                                                      |  |                              |             |                                                |            

F-27



(17) Selected Quarterly Financial Data (unaudited)

A summary of consolidated operating results on a quarterly basis is as follows:

|                                                     |  | Three months ended
|---------------------------------------------------- |  | ------------------
|
|
|Interest income                                      |  | $                 
|Interest expense                                     |  |                   
|                                                     |  |                   
|Net interest income before provision for loan losses |  |                   
|Provision for loan losses                            |  |                   
|                                                     |  |                   
|Net interest income after provision for loan losses  |  |                   
|Noninterest income                                   |  |                   
|Noninterest expense                                  |  |                   
|                                                     |  |                   
|Income before income tax expense                     |  |                   
|Income tax expense                                   |  |                   
|                                                     |  |                   
|Net income                                           |  | $                 
|                                                     |  |                   
|Earnings per share:                                  |  |                   
|Basic                                                |  | $                 
|Diluted                                              |  |                   
|                                                     |  |                   

F-28



|                                                     |  | Three months ended
|---------------------------------------------------- |  | ------------------
|
|
|Interest income                                      |  | $                 
|Interest expense                                     |  |                   
|                                                     |  |                   
|Net interest income before provision for loan losses |  |                   
|Provision for loan losses                            |  |                   
|                                                     |  |                   
|Net interest income after provision for loan losses  |  |                   
|Noninterest income                                   |  |                   
|Noninterest expense                                  |  |                   
|                                                     |  |                   
|Income (loss) before tax expense                     |  |                   
|Income tax expense (benefit)                         |  |                   
|                                                     |  |                   
|Net income (loss)                                    |  | $                 
|                                                     |  |                   
|Earnings (loss) per share(1):                        |  |                   
|Basic                                                |  | $                 
|Diluted                                              |  |                   
|                                                     |  |                   

---

F-29





## 

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

None.

PART III

Item 10. Directors and Executive Officers of the Registrant.

The information relating to Directors and Executive Officers of the Registrant is incorporated herein by reference to the Registrants' Proxy Statement for the
Annual Meeting of Stockholders to be held on April 25, 2000, at pages 5 and 6.

Item 11. Executive Compensation.

The information relating to directors' compensation and executives' compensation in incorporated herein by reference to the Registrant's Proxy Statement for
the Annual Meeting of Stockholders to be held on April 25, 2000, at pages 7 through 15 (excluding the Executive Compensation Committee Report and Stock Performance Graph).

Item 12. Security Ownership of Certain Beneficial Owners and Management.

The information relating to security ownership of certain beneficial owners and management is incorporated herein by reference to the Registrant's Proxy
Statement for the Annual Meeting of Stockholders to be held on April 25, 2000, at pages 3, 5 and 6.

Item 13. Certain Relationships and Related Transactions.

The information relating to certain relationships and related transactions is incorporated herein by reference to the Registrant's Proxy Statement for the
Annual Meeting of Stockholders to be held on April 25, 2000, at pages 15 and 16.

50



## 

PART IV

Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.

(a) 1. Financial Statements

Consolidated Financial Statements of the Company are listed in the index and appear in this report under "Item 8. Financial Statements and Supplementary Data."

(a) 2. Financial Statement Schedules

Financial Statement Schedules have been omitted because they are not applicable or the required information is shown in the Consolidated Financial Statements
or notes thereto.

(b) Reports on Form 8-K filed during the last quarter of 1999

None.

(c) Exhibits Required by Securities and Exchange Commission Regulation S-K

|Exhibit
Number |  |                                                                                                            
|-------------- |  | -----------------------------------------------------------------------------------------------------------
|3.1            |  | Certificate of Incorporation of EFC Bancorp, Inc. (1)                                                      
|3.2            |  | By-Laws of EFC Bancorp, Inc. (1)                                                                           
|4.0            |  | Stock Certificate of EFC Bancorp, Inc. (1)                                                                 
|10.1           |  | Form of Elgin Financial Savings Bank Employee Stock Ownership Plan and Trust (1)                           
|10.2           |  | Amended and Restated EFC Bancorp, Inc. 1998 Stock Based Incentive Plan (2)                                 
|10.3           |  | Form of Employment Agreement between Elgin Financial Savings Bank and certain executive officers (1)       
|10.4           |  | Form of Employment Agreement between EFC Bancorp, Inc. and certain executive officers (1)                  
|10.5           |  | Form of Change in Control Agreement between Elgin Financial Savings Bank and certain executive officers (1)
|10.6           |  | Form of Change in Control Agreement between EFC Bancorp, Inc. and certain executive officers (1)           
|10.8           |  | Form of Elgin Financial Savings Bank Supplemental Executive Retirement Plan (1)                            
|10.9           |  | Form of Elgin Financial Savings Bank Management Supplemental Executive Retirement Plan (1)                 
|11.0           |  | Statement Re: Computation of Per Share Earnings (filed herewith)                                           
|13.0           |  | Selected Consolidated Financial and Other Data (filed herewith)                                            
|21.0           |  | Subsidiary information incorporated herein by reference to "Part 1Subsidiaries"                           
|23.0           |  | Consent of the Company's Independent Auditors (filed herewith)                                             
|27.0           |  | Financial Data Schedule (filed herewith)                                                                   
|99.1           |  | Proxy Statement, dated April 25, 2000, for the 2000 Annual Meeting of Stockholders                         

---

51





## 

Signatures

Pursuant to the requirements of Section 13 or 15(d) 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.

|               |  | EFC Bancorp, Inc(Registrant)
|-------------- |  | ----------------------------
|March 21, 2000 |  | By:                         

Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and
on the dates indicated:

|Name                                        |  | Title                                                                                                    |  | Date          
|------------------------------------------- |  | -------------------------------------------------------------------------------------------------------- |  | --------------
|                                            |  |                                                                                                          |  |               
|/s/BARRETT J. O'CONNORBarrett J. O'Connor   |  | President, Chief Executive Officer and Director
(principal executive officer)                            |  | March 21, 2000
|/s/JAMES J. KOVACJames J. Kovac             |  | Senior Vice President, Chief Financial Officer and Director
(principal accounting and financial officer) |  | March 21, 2000
|/s/JOHN J. BRITAINJohn J. Britain           |  | Director and Chairman of
the Board                                                                       |  | March 21, 2000
|/s/LEO M. FLANAGAN, JR.Leo M. Flanagan, Jr. |  | Director                                                                                                 |  | March 21, 2000
|/s/VINCENT C. NORTONVincent C. Norton       |  | Director                                                                                                 |  | March 21, 2000
|/s/THOMAS I. ANDERSONThomas I. Anderson     |  | Director                                                                                                 |  | March 21, 2000
|/s/RALPH W. HELM, JR.Ralph W. Helm, Jr.     |  | Director                                                                                                 |  | March 21, 2000
|/s/PETER A. TRAEGERPeter A. Traeger         |  | Director                                                                                                 |  | March 21, 2000
|/s/JAMES A. ALPETERJames A. Alpeter         |  | Director                                                                                                 |  | March 21, 2000



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