EXHIBIT 13

                        ANNUAL REPORT TO SECURITYHOLDERS

                                                        
<PAGE>


                                    CONTENTS

Letter to Shareholders ....................................................    2
Board of Directors and Officers ...........................................    5
Selected Conslidated Financial Information ................................    6
Management's Discussion and Analysis ......................................    8
Report of Independent Auditors ............................................   22
Consolidated Financial Statements .........................................   23
Notes to Consolidated Financial Statements ................................   29
Shareholder Information ...................................................   46


<PAGE>

                              FINANCIAL HIGHLIGHTS


                                                    Years Ended September 30
                                                    ------------------------
                                                 1997        1996         1995
                                                 ----        ----         ----
                                                   (dollars in thousands)
Total Assets ...............................   $231,109    $234,555    $232,358
Total Loans ................................     97,244      91,146      87,555
Mortgage-Backed and Other Securities .......    126,028     136,328     119,541
Deposits ...................................    125,746     118,973     126,632
Borrowings .................................     56,500      59,600      45,500
Net Income .................................      1,745       1,780       1,375
Earnings Per Share .........................        .53         .49         .38
Stockholders' Equity .......................     45,939      52,870      55,710
Stockholders' Equity as a Percent of Assets       19.88%      22.54%      23.98%


                                COMPANY PROFILE

     Damen  Financial  Corporation  was  incorporated in 1995 and is the holding
company for Damen National Bank.

     Damen  National  Bank has deep roots in the Chicago area.  Since 1916,  its
primary purposes have been to provide a safe,  secure place for families to save
and to provide  affordable home  mortgages.  Today, it has evolved into a strong
community bank still  dedicated to its original  purposes but with an increasing
number of financial  products and services designed to meet the growing needs of
a diversified customer base.

     Damen Financial Corporation has assets of $231 million and is headquartered
in Schaumburg,  Illinois. Damen National Bank operates from three offices in the
Chicagoland  area.  The  Company's  common  stock is traded on the NASDAQ  Stock
Market under the symbol: DFIN.

<PAGE>


THIS PAST YEAR USHERED IN A NEW ERA FOR OUR PRINCIPAL  SUBSIDIARY AND OPENED THE
DOOR TO NEW OPPORTUNITIES FOR DAMEN FINANCIAL CORPORATION


                          MESSAGE TO OUR SHAREHOLDERS

     On  February  27,  1997,  Damen  Federal  Bank was granted a new charter to
operate as a national bank, Damen National Bank. This change is a key element in
our  long-term  strategy  to enhance net income and  profitability  with a wider
array of  financial  products.  These new  products can be blended with our more
traditional  home-related  lending programs to give us greater earning power and
greater investment flexibility.

     We saw  progress  in several  important  areas  over the past year.  We are
pleased  to say  that  we  remained  profitable  and  that  per  share  earnings
increased.  However,  profitability and performance are not yet at the levels we
feel are possible.  While net income for the fiscal year  decreased,  net income
showed significant  progress for the last quarter of the fiscal year, a positive
trend. Stock repurchases  included our successful "Modified Dutch Auction" which
was held during March 1997.  By  necessity,  funds had to be set aside for these
repurchases,  resulting  in a lower  level of income  producing  assets.  We are
encouraged  that our net interest  income  declined by only 4.6% in spite of the
$9.8  million for stock repurchases  and the more than $1.0 million in dividends
paid to shareholders.

     Other  encouraging  aspects of our  operations  for fiscal 1997  include an
increased book value per share, high asset quality,  and the fact that loans and
deposits,  which remain the conerstone of our banking franchise,  have continued
to grow.

     At September 30, 1997, book value per share was $14.78, an increase of $.76
from  $14.02  at the  end of the  previous  fiscal  year.  Stockholders'  equity
decreased from $52.9 million to $45.9  million.  The increase in per share value
and the decrease in stockholders'  equity were both affected by the $9.8 million
repurchase of common stock and the payment of $1.0 million in cash dividends. We
have continued to pay a quarterly cash dividend of $.06 per share.

     Our assets were $231 million at fiscal year-end.  As in the past, the board
and  management  place a great deal of emphasis on asset  quality.  That quality
level  remained high as our loan portfolio  continued to increase.  At year-end,
our loan  portfolio  was $97.2  million,  up from $91.1 million at September 30,
1996. Of that


                                       2

<PAGE>

amount, only 12 one-hundredths of 1% were considered to be non-performing assets
(includes  $79,000 real estate owned), a favorable ratio. We remain committed to
the  communities  we serve in providing a continual  flow of home mortgage money
while maintaining conservative lending standards.

     We are  also  proud  of the  niche  we  fill  for  low to  moderate  income
neighborhoods.  That niche  addresses  the need for shorter  term,  lower amount
mortgages where we remain very  competitive.  These secure  investments have low
delinquency histories. We will not abandon our commitment to our low-to-moderate
income communities.

     In spite of heavy  competition  from stocks and mutual  funds,  our deposit
base continued to grow. Our depositors have displayed their financial needs with
deposits  that  helped us reach a level of $125.7  million,  an increase of $6.8
million over last year.

     Our home equity line-of-credit  program has been very successful.  It gives
us a lending  product  with a  variable  rate of return  that  provides  a solid
interest rate spread. At year-end, over $3.3 million in new home equity lines of
credit had been extended with outstanding balances of $2.0 million.

     In keeping  with our  commitment  to  maintaining  long-term  relationships
through quality  service and quality  products,  we have  introduced  securities
investment  services and financial  advice as an option to our customers.  These
services  are made  available  through our  affiliation  with  INVEST  Financial
Corporation.

     Capital  remains one of our  greatest  strengths  ... far above  regulatory
requirements even after our repurchases of stock.

--------------------------------------------------------------------------------

IN SPITE OF HEAVY  COMPETITION FROM STOCKS AND MUTUAL FUNDS,  OUR  DEPOSIT  BASE
CONTINUED TO GROW.

                                   ----------

A commitment to customer service and offering  competitive rates have been prine
factors in the growth of our deposit base.

                                       3
<PAGE>


We will consider further repurchases of stock when we feel it is advantageous to
do so. Our  capital is also at a level that  continues  to enable us to consider
the expansion of our curret markets.

     There were no surprises  over the last year.  Our  long-term  business plan
correctly  anticipated  the growth  levels we achieved as we turned from savings
institution  to a  national  bank  with a more  diverse  product  line.  We also
recognize  our  challenges  for the  future.  As  consolidation  in the  banking
business  increases,  our efforts to find niches in which we can better  compete
must increase.  We must meet the competition from outside sources for our market
base. More specifically, we must put our newly created tools to work in the most
efficient way so as to produce  greater profit levels and maximize the return on
shareholder  investment.  Our goals are clear. We shall continue to seek avenues
of maximizing efficiency so as to improve our bottom line.

     The  officers  and  directors of Damen  Financial  Corporation  look to the
coming year with  enthusiasm.  We are  grateful to the  well-trained,  dedicated
people who function on your behalf and thank you, our shareholders and customers
for your continued support.


Sincerely,


Mary Beth Poronsky Stull
President and Chairman of the Board

--------------------------------------------------------------------------------

AS A LEADER IN  MEETING  THE  CREDIT  NEEDS OF OUR LOCAL  MARKETS,  OUR  LENDING
PORTFOLIO HAS INCREASED.

                                   ----------

Our local  communities  continue to  demonstrate  strong market  potential.  the
diligence  of our  borrowers  has kept the quality of our loans at an  excellent
level.

                                       4
<PAGE>


              DAMEN FINANCIAL CORPORATION AND DAMEN NATIONAL BANK

Directors
---------

MARY BETH PORONSKY STULL
Chairman of the Board of the Company
President and Chief Executive Officer of the Company and
the Bank

EDWARD R. TYBOR
Chairman of the Board of the Bank
Owner, Kubina-Tybor Funeral Home, Chicago,
Illinois

GERALD J. GARTNER(1)
Treasurer and Chief Financial Officer of the Company 
Cashier and Chief Financial Officer of the Bank

JANINE M. PORONSKY(2)
Vice President and Corporate Secretary

CHARLES J. CAPUTO
Retired, Former Owner, Caputo Southwest Cement, Orland Hills,
Illinois

CAROL A. DIVER
Corporate Secretary, Chicago Park District

MARK C. GUINAN(1)
Retired Physician

NICHOLAS J. RAINO(2)
Chairman of the Board, Dale, Smith & Associates, Inc.


Executive Officers
------------------

MARY BETH PORONSKY STULL
President and Chief Executive Officer

GERALD J. GARTNER
Treasurer and Chief Financial Officer of the Company 
Cashier and Chief Financial Officer of the Bank

JANINE M. PORONSKY
Vice President and Corporate Secretary

KENNETH D. VANEK
Senior Vice President

(1)    Director of the Bank only

(2)    Director of the Company only

                                       5
<PAGE>

               SELECTED CONSOLIDATED FINANCIAL INFORMAT10N

<TABLE>
<CAPTION>
                                                                                  AT SEPTEMBER 30                 AT NOVEMBER 30
      (dollars in thousands)                           1997            1996           1995(1)          1994             1993
      ----------------------                           ----            ----           -------          ----             ----
Selected Financial Condition Data:
<S>                                                  <C>             <C>             <C>             <C>             <C>     
Total assets ....................................... $231,109        $234,555        $232,358        $190,643        $183,001
Loans receivable, net ..............................   97,244          91,146          87,555          88,225          84,814
Mortgage-backed securities .........................   84,610          88,098          82,192          67,742          65,262
Tax-exempt securities ..............................   22,493          24,905          20,478          16,711          12,810
Investment securities ..............................   18,925          23,325          16,871          11,483          13,446
Deposits ...........................................  125,746         118,973         126,632         126,210         126,586
Borrowings .........................................   56,500          59,600          45,500          44,000          36,000
Total equity .......................................   45,939          52,870          55,710          17,874          17,406
</TABLE>

<TABLE>
<CAPTION>

                                                                                            TEN MONTHS
                                                              YEARS ENDED SEPTEMBER 30  ENDED SEPTEMBER 30    YEAR ENDED NOVEMBER 30
                                                              ------------------------  ------------------    ----------------------
      (dollars in thousands)                          1997       1996         1995       1995(1)     1994        1994         1993
      ----------------------                          ----       ----         ----       -------     ----        ----         ----
Selected Operations Data:
<S>                                                 <C>         <C>         <C>         <C>        <C>         <C>         <C>     
Total interest income ...........................   $ 16,494    $ 16,661    $ 14,029    $ 11,851   $ 10,555    $ 12,723    $ 13,576
Total interest expense ..........................      9,823       9,672       9,397       7,997      6,234       7,632       7,784
                                                    --------    --------    --------    --------   --------    --------    --------
   Net interest income ..........................      6,671       6,989       4,632       3,854      4,321       5,091       5,792
Provision for loan losses .......................         37          70         163         163       --          --          --
                                                    --------    --------    --------    --------   --------    --------    --------
Net interest income after provision for
   loan losses ..................................      6,634       6,919       4,469       3,691      4,321       5,091       5,792
Fees and service charges ........................         42         109          77          69         54          72         129
Gain (loss) on sales of mortgage-backed
   securities and investment securities .........        140          84          (6)          3         48          40         483
Unrealized gain (loss) on mortgage-backed
   securities and investment securities
   held-for-sale ................................       --          --          (892)       --         (645)     (1,537)       --
Other non-interest income .......................         85          74          82          66         83          97         143
                                                    --------    --------    --------    --------   --------    --------    --------
Total non-interest income .......................        267         267        (739)        138       (460)     (1,328)        755
Total non-interest expense ......................      4,816       5,243       3,610       3,032      2,583       3,167       3,383
                                                    --------    --------    --------    --------   --------    --------    --------
Income before taxes and change in
   accounting principles ........................      2,085       1,943         120         797      1,278         596       3,164
Income tax (provision) benefit ..................       (340)       (163)        348         108       (277)        216        (860)
Cumulative effect of change in accounting for
  securities available-for-sale, net of
  tax effect ....................................       --          --           907         907       --          --          --
Cumulative effect of change in accounting for
  income taxes ..................................       --          --          --          --         (253)       (253)       --
Net income ......................................   $  1,745    $  1,780    $  1,375    $  1,812   $    748    $    559    $  2,304
                                                    ========    ========    ========    ========   ========    ========    ========
</TABLE>

(1)  During 1995,  the Company  changed its fiscal year end from  November 30 to
     September 30.

                                       6
<PAGE>

                    SELECTED FINANCIAL RATIOS AND OTHER DATA

<TABLE>
<CAPTION>
                                                                     AT OR FOR THE YEARS    AT OR FOR TEN MONTHS  AT OR FOR THE YEAR
                                                                      ENDED SEPTEMBER 30     ENDED SEPTEMBER 30    ENDED NOVEMBER 30
                                                                     -------------------    --------------------  ------------------
                                                             1997      1996         1995      1995(1)      1994     1994       1993
                                                             ----      ----         ----      -------      ----     ----       ----
<S>                                                         <C>       <C>          <C>       <C>          <C>      <C>        <C>  
Selected Financial Ratios and Other Data:
Performance Ratios:
 Return on average assets (ratio of net
  income to average total assets)(2)(3) ...............       .75%      .76%(5)       .69%       .54%       .52%      .30%     1.28%
Return on average stockholders' equity
  (ratio of net income to average
  retained earnings)(2)(3) ............................      3.45      3.21(6)       6.75       4.83       5.27      3.12     14.15
Efficiency ratio(7) ...................................     70.84     61.11         75.35      76.02      57.94     60.20     55.79
Interest rate spread information:
  Average during period ...............................      1.84      1.80          1.89       1.82       2.48      2.42      2.92
  End of period .......................................      1.72      1.70          1.65       1.65       2.08      2.26      2.95
Net interest margin(4) ................................      2.98      3.07          2.41       2.37       2.91      2.84      3.32
Ratio of operating expense to average
  total assets(2) .....................................      2.07      2.23          1.82       1.81       1.69      1.71      1.88
Ratio of average interest-earning
  assets to average interest-
  bearing liabilities .................................      1.26      1.30x         1.11x      1.11x      1.10x     1.10x     1.09x

Per Share Information:
  Book value per share outstanding ....................     14.78     14.02         14.04      14.04        N/A       N/A      N/A
  Earnings per share--primary .........................       .53       .49           .38        .50        N/A       N/A      N/A
  Earnings per share--fully diluted ...................       .53       .49           .38        .50        N/A       N/A      N/A
  Dividends declared per share ........................       .24       .12            --         --        N/A       N/A      N/A

Quality Ratios:
  Non-performing assets to total
    assets at end of period ...........................       .12       .15           .03        .03        .06       .06       .09
  Allowance for loan losses to
    non-performing loans ..............................    168.56     98.42        420.71     420.71     108.13    108.13     80.20
  Allowance for loan losses to
    loans receivable, net .............................       .34       .38           .31        .31        .14       .14       .15

Capital Ratios:
  Stockholders' equity to total
    assets at end of period ...........................     19.88     22.54         23.98      23.98       9.38      9.38      9.51
  Average stockholders' equity
    to average assets .................................     21.73     23.63         10.26      11.16       9.77      9.64      9.04

Other Data:
  Number of full-service offices ......................         3         3             3          3          3         3         3
</TABLE>

(1)  During 1995,  the Company  changed its fiscal year end from  November 30 to
     September 30.

(2)  Ratios for the ten month period have been annualized.

(3)  Calculated  prior  to  cumulative   effect  of  change  in  accounting  for
     securities available-for-sale. For ten months ended September 30, 1995, the
     Company's  return on average assets and return on average equity would have
     been .99% and 87.8%, respectively,  if calculated to include the cumulative
     effect of change in accounting.

(4)  Net interest income divided by average interest earning assets.

(5)  Return  would  have  been  .97%  if  calculated   without  regard  to  SAIF
     assessment.

(6)  Return  would  have  been  4.12%  if  calculated  without  regard  to  SAIF
     assessment.

(7)  Non-interest  expense,  excluding SAIF special  assessment,  divided by net
     interest   income  plus  other  income  except  for  gains  and  losses  on
     investments   available-for-sale   and  unrealized   gains  and  losses  on
     securities held-for-sale.

                                       7
<PAGE>

         MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
                              RESULTS OF OPERATIONS

Organization and History

     Damen Financial  Corporation,  a Delaware corporation (the "Company"),  was
formed in 1995 at the  direction of Damen Federal Bank for Savings (the "Savings
Bank") for the purpose of becoming a savings and loan holding company and owning
all of the outstanding stock of the Savings Bank issued on September 29, 1995 in
connection  with the Savings Bank's  conversion from the mutual to stock form of
organization (the  "Conversion").  The Company issued 3,967,500 shares of Common
Stock at $10.00 per share in the  Conversion.  On February 27, 1997, the Savings
Bank converted from a federal savings  association to a national bank (the "Bank
Conversion"),  and in connection  therewith  changed its name to Damen  National
Bank ("Damen" or the "Bank").  Upon  consummation  of the Bank  Conversion,  the
Company  ceased to be a savings  and loan  holding  company,  and  became a bank
holding company.

     The Bank was organized in 1916 to serve a primarily  Slovak  community from
an office established near 51st Street and South Damen Avenue, on the south side
of Chicago.  This office has served the  community  with  uninterrupted  service
since  1916.  In 1972 a branch  office was  opened in  Schaumburg,  Illinois,  a
northwest  suburb of Chicago.  The  Schaumburg  office is now  designated as the
"main  office".  In 1991 a branch  office was  opened in  Burbank,  Illinois,  a
southwest suburb of Chicago.  All offices are "full-service" facilities.

Forward-Looking Statements

     When used in this Annual Report the words or phrases "will likely  result,"
"are expected to," "will continue," "is anticipated,"  "estimate,"  "project" or
similar expressions are intended to identify "forward-looking statements" within
the  meaning of the  Private  Securities  Litigation  Reform  Act of 1995.  Such
statements  are subject to certain  risks and  uncertainties,  including,  among
other  things,  changes in economic  conditions  in the  Company's  market area,
changes in policies by  regulatory  agencies,  fluctuations  in interest  rates,
demand for loans in the Company's market area and competition,  that could cause
actual results to differ materially from historical earnings and those presently
anticipated  or projected.  The Company  wishes to caution  readers not to place
undue reliance on any such  forward-looking  statements,  which speak only as of
the date made.  The Company  wishes to advise  readers  that the factors  listed
above  could  affect the  Company's  financial  performance  and could cause the
Company's  actual  results  for  future  periods to differ  materially  from any
opinions or statements  expressed  with respect to future periods in any current
statements.

     The Company does not undertake-and  specifically declines 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.

General

     The Company conducts no significant  business other than holding investment
securities  and  holding  the  common  stock of its  subsidiary,  the Bank.  All
references  to the Company  include the Bank and the Bank's  subsidiary,  Dasch,
Inc., unless otherwise indicated.

     The business of the Company consists primarily of the business of the Bank.
The Bank is principally  engaged in attracting  deposits from the general public
and using such deposits, together with other funds, to originate primarily fixed
rate one-to  four-family  residential  mortgages  and to a much  lesser  extent,
multi-family,  commercial  real estate and deposit loans primarily in its market
area. The Bank also invests in mortgage-backed  securities,  U.S. Government and
Agency securities, tax exempt securities and other investments.

     The Company's results of operations are dependent primarily on net interest
income,   which  is  the  difference  between  the  interest  earned  on  loans,
mortgage-backed  securities  and  other investments,  and  its  cost  of  funds,
consisting  of interest  paid on  deposits  and  borrowings.  In  addition,  the
Company's  operating results are affected by loan fees,  service charges,  other
income and operating  expenses which primarily consist of employee  compensation
and benefits,  occupancy  expense,  advertising,  federal insurance premiums and
other general and administrative expenses.

                                       8
<PAGE>

     The  operations  of the Company  are  significantly  influenced  by general
economic  conditions  and  by  policies  of  financial  institution   regulatory
agencies,  including the Office of Thrift  Supervision  (the "OTS")  (before the
Bank  Conversion)  and the Office of the  Comptroller of the Company (the "OCC")
(after  the  Bank  Conversion)  and the  FDIC.  The  Company's  cost of funds is
influenced  by  interest  rates on  competing  investments  and  general  market
interest rates.  Lending  activities are affected by the demand for financing of
real estate and other types of loans,  which in turn is affected by the interest
rates at which such financings may be offered.

     The Bank's  basic  mission is to provide  quality  financial  products  and
services in an efficient and caring manner in the communities it serves,  and in
so doing, create growth opportunities and value to its shareholders. In order to
enhance  shareholder  value,  the Company  will strive to maintain  strength and
flexibility through high capital ratios,  maintain high asset quality,  increase
net interest rate spread,  control operating  expenses and increase  efficiency.
The Company will consider  expanding  products and services  where  feasible and
beneficial.

     Management's  discussion and analysis of financial condition and results of
operations is intended to assist in  understanding  the financial  condition and
results of operations of the Company. The information  contained in this section
should be read in conjunction  with the financial  statements  and  accompanying
notes thereto contained elsewhere herein.

Financial Condition

     September 30, 1997 compared to September 30, 1996.  Total assets  decreased
$3.4 million to $231.1  million as of September 30, 1997 from $234.6  million as
of September  30, 1996.  Loans  receivable  increased  while most  categories of
investments decreased primarily due to liquidations to fund stock repurchases of
$9.8  million  during the year.  Loans  receivable  increased by $6.1 million to
$97.2  million at September  30, 1997 from $91.1  million at September  30, 1996
primarily  due to new mortgage loan  originations  of $21.0 million and new home
equity  line  of  credit  loan  originations  of  $2.8  million  exceeding  loan
repayments during the year. Investment securities  available-for-sale  decreased
$7.5 million to $35.9 million from $43.4 million due to maturities  and sales of
$15.5 million  partially  offset by purchases of $7.2 million and a net increase
in  market  value  of $821,000.  Mortgage-backed  securities  held  to  maturity
decreased  $7.6 million to $27.9  million from $35.5  million  primarily  due to
repayments. Mortgage-backed securities available-for-sale increased $4.1 million
to $56.7 million as of September 30, 1997 from $52.6 million as of September 30,
1996,  which was the result of purchases of $12.2  million and a net increase in
market value of $1.2 million  exceeding  repayments of $7.4 million and sales of
$1.8 million.  Purchases  of mortgage-backed securities included $4.1 million of
adjustable rate securities purchased to help reduce interest rate sensitivity.

     Deposits  increased by $6.8 million to $125.7 million at September 30, 1997
from $118.9  million at  September  30, 1996 due to net deposits of $2.3 million
and interest  credited of $4.5  million.  Borrowings  from the Federal Home Loan
Bank of Chicago decreased by $3.1 million to $56.5 million at September 30, 1997
from $59.6 million at September 30, 1996. Longer term borrowed money (terms over
two years) increased by $2 million while shorter term borrowings  decreased $5.1
million.  Advance  maturities  were  extended  somewhat  during the year to take
advantage  of a  relatively  flat yield curve and to help reduce  interest  rate
risk.

     Stockholders'  equity  decreased  by  $6.9  million  to  $45.9  million  at
September 30, 1997 from $52.8  million at September  30, 1996,  due primarily to
the  purchase  of treasury  stock at a cost of $9.8  million and payment of cash
dividends of $1.0  million,  partially  offset by net income of $1.7 million and
an increase of $1.2 million in net  unrealized  market gains,  net of taxes,  on
investments available for sale. The Company declared cash dividends of six cents
per share each quarter for the year ended  September  30, 1997. At September 30,
1997 book value per share was $14.78 compared to $14.02 at September 30, 1996.

     September 30, 1996 compared to September 30, 1995.  Total assets  increased
$2.2 million to $234.6  million as of September 30, 1996 from $232.4  million as
of November  30, 1995.  Loans  receivable  and most  categories  of  investments
increased as proceeds  from the  Conversion  were deployed into loans and longer
term investments,  thereby reducing cash and interest-bearing  deposits by $19.2
million.  Investment  securities  held to maturity  increased  $687,000 to $1 .8
million at September  30, 1996 from $1.1  million at  September  30, 1995 due to
additional

                                       9
<PAGE>

investments of   $785,000   exceeding    repayments.    Investment    securities
available-for-sale  increased  $9.6 million to $43.3  million from $33.7 million
due to purchases of $19.6 million, less maturities and sales of $9.7 million and
a net decrease in market value of $298,000.  Mortgage-backed  securities held to
maturity  decreased  $7.0  million  to $35.5  million  from  $42.5  million  due
primarily to repayments. Mortgage-backed securities available-for-sale increased
$12.9 million to $52.6 million as of September 30, 1996 from $39.7 million as of
September 30, 1995, which was the result of purchases of $23.0 million exceeding
repayments  of $8.4  million  and sales of $1.0  million  and a net  decrease in
market value of $748,000.  Purchases of mortgage-backed securities included $8.6
million of adjustable  rate  securities  purchased to help reduce  interest rate
sensitivity.  Loans  receivable  increased  by $3.6 million to $91.1  million at
September 30, 1996 from $87.5 million at September 30, 1995 due primarily to new
loans disbursed of $19.8 million exceeding loan repayments during the year.

     Deposits  decreased by $7.6 million to $119.0 million at September 30, 1996
from  $126.6  million at  September  30,  1995 due to net  withdrawals  of $12.8
million  exceeding  interest  credited,  as depositors  sought higher returns on
other investment  products.  Borrowings from the Federal Home Loan Bank ("FHLB")
of Chicago  increased by $14.1  million to $59.6  million at September  30, 1996
from $45.5 million at September 30, 1995. Longer term borrowed money (terms over
two years)  increased by $2 million while shorter term  borrowings  increased by
$12.1  million.   The  proceeds  were  used  primarily  to  offset  net  savings
withdrawals, and to a lesser extent, to fund loans and investments.

     Stockholders'  equity  decreased  by  $2.8  million  to  $52.9  million  at
September 30, 1996 from $55.7  million at September  30, 1995,  due primarily to
the acquisition of stock for the previously  unfunded  Recognition and Retention
Plan at a cost of $1.9  million,  an increase in net unrealized market losses on
investments available-for-sale, net of taxes, of $619,000 and the acquisition of
treasury  shares at a cost of $2.3 million.  In addition,  the Company  declared
cash  dividends of twelve cents per share  during the year ended  September  30,
1996,  which reduced  stockholders'  equity by $464,000.  At September 30, 1996,
book value per share was $14.02 compared to $14.04 at September 30, 1995.

Asset/Liability Management

     The  Company's  profitability  is  dependent to a large extent upon its net
interest  income,  which  is the  difference  between  its  interest  income  on
interest-earning assets, such as loans and investments, and its interest expense
on  interest-bearing   liabilities,   such  as  deposits  and  borrowings.  When
interest-bearing    liabilities    mature   or   reprice   more   quickly   than
interest-earning  assets in a given  period,  a  significant  increase in market
rates of interest could adversely  affect net interest income.  Similarly,  when
interest-earning  assets  mature or reprice more  quickly than  interest-bearing
liabilities,  falling  interest rates could result in a decrease in net interest
income.  Finally,  a flattening  of the "yield  curve"  (i.e.,  a decline in the
difference between long- and short-term interest rates),  could adversely impact
net  interest  income to the  extent  that the  Company's  assets  have a longer
average term than its liabilities.

     In an  attempt  to manage  its  exposure  to  changes  in  interest  rates,
management  monitors the Company's and the Bank's interest rate risk.  Since the
late 1980s, the Bank's Investment - Asset/Liability Committee has met monthly to
review the Bank's  interest  rate risk  position and  profitability  and to make
recommendations  for  adjustments  to the Bank's Board of Directors.  Management
also reviews the  Company's  and the Bank's  portfolios,  formulates  investment
strategies and oversees the timing and  implementation of transactions to assure
attainment of the Board's objectives in the most effective manner.

     Until 1990,  the Bank's  interest  rate  monitoring  efforts  were  focused
primarily on an analysis of the  difference  or "gap" between the amounts of its
assets  and  liabilities  repricing  during  specific  time  periods.   However,
beginning  in 1991,  the Bank  also  began to focus on a "Net  Portfolio  Value"
analysis  (described  below) in order to avoid  distortions in gap analysis that
could be caused by changes in mortgage loan prepayment speeds and changes in the
relationship between long- and short-term interest rates.

     In managing  its  asset/liability  mix, and  depending on the  relationship
between long- and  short-term  interest  rates,  market  conditions and consumer
preference,  and in view of its substantial capital position, the Bank may place
more  emphasis on managing  net  interest  margin  than on better  matching  the
interest rate  sensitivity of its assets and liabilities in an effort to enhance
net interest income.

                                       10
<PAGE>

Management  believes  that the increased net interest  income  resulting  from a
mismatch  in the  maturity of its asset and  liability  portfolios  can,  during
periods of declining or stable  interest  rates and  "positively  sloped"  yield
curves,  provide high enough returns to justify the increased exposure to sudden
and unexpected  increases in interest rates.  However, in view of the above, the
Bank's  results of  operations  and net portfolio  values  remain  vulnerable to
increases in interest rates and to declines in the difference  between long- and
short-term interest rates.

     To the extent  consistent  with its  interest  rate spread  objectives  and
market  conditions,  the Bank  attempts to manage its interest rate risk and has
taken several steps in this regard.  First, a significant  portion of the Bank's
recent  mortgage-backed  and  related  securities   acquisitions  have  been  of
securities having adjustable interest rates or anticipated average lives of five
years or  less.  As of  September  30,  1997,  the Bank  had  $57.7  million  of
adjustable  rate and/or short or  intermediate  anticipated  term  (average life
projected  to be five years or less)  mortgage-backed  and  related  securities.
Second,  the  Bank  has  devoted  a  portion  of its  investment  securities  to
instruments  having  short or  intermediate  (five years or less)  terms.  As of
September 30, 1997, the Bank had $14.0 million in investment securities maturing
or  likely to be called in five  years or less.  Third,  the Bank has  devoted a
portion of its borrowing activity to indebtedness having terms of three years or
more.  At September 30, 1997,  the Bank had $18.0 million of borrowed  money due
after September 30, 2000.  Fourth, a portion of the Bank's deposits  consists of
passbook  accounts,  which are  considered  by  management  to be somewhat  more
resistant  to  interest  rate  changes  than most other types of  accounts,  and
certificates  of  deposit,  having  maturities  of three  years  or more.  As of
September  30, 1997,  the Bank had $19.9  million of passbook  accounts and $4.9
million of certificates of deposit due after September 30, 2000. Also,  although
the Bank does not make  adjustable-rate  loans due to competitive  factors,  the
Bank's fixed-rate  lending program is focused on loans with terms of 15 years or
less.  At September  30, 1997,  $79.6  million or 82.1%  of the Bank's  mortgage
loans had original terms of 15 years or less.

     The Bank voluntarily measures its interest rate risk ("IRR") in calculating
its  risk-based  capital.  The IRR  component of capital is a dollar amount that
measures the sensitivity of the Bank's net portfolio value ("NPV") to changes in
interest rates. In essence,  this approach calculates the difference between the
present  value of  liabilities,  expected  cash flows from assets and cash flows
from off balance sheet contracts.  Presented below, as of September 30, 1997, is
an analysis of the Bank's estimated interest rate risk as measured by changes in
NPV for  instantaneous  and sustained  parallel shifts in interest rates, up and
down 400 basis points in 100 point increments.


                               NET PORTFOLIO VALUE

 ASSUMED CHANGE
IN INTEREST RATES           $ AMOUNT           $ CHANGE           CHANGE  
-----------------           --------           --------           ------  
   (basis points)                   (dollars in thousands)
             +400            $22,391          $(18,018)             (45)%  
             +300             26,799           (13,609)             (34)  
             +200             31,252            (9,156)             (23)  
             +100             35,951            (4,457)             (11)  
                0             40,408                 0                0  
             -100             43,740             3,332                8  
             -200             44,717             4,308               11  
             -300             46,578             6,169               15  
             -400             48,909             8,500               21  


     As  noted  above,  the  market  value of the  Bank's  net  assets  would be
anticipated  to  decline  significantly  in  the  event  of  certain  designated
increases in interest  rates.  For  instance,  in the event of a 200 basis point
increase in interest rates, NPV is anticipated to fall by $9.2 million or 22.7%.
On the other  hand,  a decrease  in interest  rates is  anticipated  to cause an
increase in NPV.

     Certain   assumptions  were  made  in  preparing  the  table  above.  These
assumptions relate to interest rates, loan prepayment rates, deposit decay rates
and the  market  values of  certain  assets  under  the  various  interest  rate
scenarios.  It was also  assumed  that  delinquency  rates  will not change as a
result of changes in interest rates although there can be no assurance that this
will be the case.  In the event that  interest  rates  change to the  designated
levels,  there can be no assurance that the Bank's assets and liabilities  would
perform as set forth above. In

                                       11
<PAGE>


addition,  a change in Treasury rates to the designated levels  accompanied by a
change  in the shape of the  Treasury  yield  curve  would  cause  significantly
different changes to the NPV than indicated above.

     During the last several years, the Board has determined to reduce the level
of  tolerated  interest  rate  risk as  measured  by the  Bank's  interest  rate
sensitivity  gap and,  beginning  in 1991,  by the changes to its NPV based upon
specified  interest  rate shocks.  The actual and  targeted  levels of tolerated
interest  rate risk are reviewed on a quarterly  basis and are subject to change
depending on economic and competitive  factors.  The level of interest rate risk
in the NPV table set forth above as of  September  30, 1997 is within the Bank's
current guidelines for tolerated interest rate risk.

Quantitative and Qualitative Disclosure
About Market Risk

     The Company's  interest  rate risk position is discussed  under the heading
Asset/Liability  Management  on page 10.  Other  types of market  risk,  such as
foreign  currency  exchange risk and  commodity  price risk, do not arise in the
normal course of the Company's business activities.

Liquidity and Capital Resources

     The  Company's  principal  sources of funds are  deposits  and  borrowings,
amortization  and prepayment of loan principal and  mortgage-backed  securities,
maturities and sales of investment  securities and  operations.  While scheduled
loan  repayments and maturing  investments are relatively  predictable,  deposit
flows and early loan repayments are more  influenced by interest  rates,  floors
and caps on  adjustable  rate  loans  and  mortgage-backed  securities,  general
economic  conditions and competition.  The Company generally manages the pricing
of its deposits to be  competitive  and to increase core deposit  relationships.
However,  management has from time to time decided not to pay deposit rates that
are as high as those of its  competitors  and,  when  necessary,  to  supplement
deposits with longer term and/or less expensive alternative sources of funds.

     OCC  regulations  require the Bank to maintain an adequate  level of liquid
assets.  Liquid  assets  generally  include  cash,  certain time  deposits,  and
investments  "available-for-sale."  The Company has  historically  maintained  a
significant  level of liquid assets. At September 30, 1997, the Company's liquid
assets totaled approximately $94.7 million or 41.0% of total assets.

     The  Company's  most  liquid  assets are cash and cash  equivalents,  which
consist of short-term,  highly liquid  investments  with original  maturities of
less than three months that are readily convertible to known amounts of cash and
interest-bearing deposits.  The  level  of  these  assets  is  dependent  on the
Company's operating, financing and investing activities during any given period.
At September 30, 1997 and 1996, cash and cash  equivalents  totaled $2.1 million
and $1.2 million respectively.

     Operating  activities  provided  positive  cash  flows for the years  ended
September 30, 1997 and 1996 and the ten months ended September 30, 1995.

     The primary  investing  activities of the Company are originating loans and
purchasing  mortgage-backed  and investment  securities.  During the years ended
September 30, 1997,  and 1996 and the ten months ended  September 30, 1995,  the
Company's mortgage loan originations and purchases totaled $23.8 million,  $19.8
million  and $12.0  million,  respectively.  Purchases  of  mortgage-backed  and
investment  securities  during the years ended  September 30, 1997 and 1996, and
the ten months ended September 30, 1995 totaled $19.6 million, $43.5 million and
$32.2 million,  respectively.  A substantial  portion of loan  originations  and
purchases of  mortgage-backed  securities and other  investments  were funded by
proceeds from the sale of the Company's stock in September 1995, loan repayments
(including prepayments), the maturity or sale of securities, and borrowed money.

     The  primary   financing   activities  of  the  Company  are  deposits  and
borrowings.  For the year ended  September  30,  1997  deposits  increased  $6.8
million  due to net  deposits  of $2.3  million  and  interest  credited of $4.5
million.  For the year ended September 30, 1996 deposits  decreased $7.6 million
due to net  withdrawals  of $12.8 million  exceeding  interest  credited of $5.2
million.  For the ten  months  ended  September  30,  1995,  deposits  increased
$422,000  due to net  withdrawals  of $3.4  million  and  interest  credited  of
approximately $3.9 million.  During the years ended September 30, 1997 and 1996,
and the ten months ended September 30,

                                       12
<PAGE>


1995, the Company's net (proceeds less repayments)  financing  activity with the
Federal Home Loan Bank ("FHLB")  totaled ($3.1 )million,  $14.1 million and $1.5
million respectively.

     Liquidity  management  is both a daily and a  long-term  responsibility  of
management.  The Company  adjusts its  investments  in liquid  assets based upon
management's  assessment  of (i) expected  loan demand,  (ii)  expected  deposit
flows,  (iii) yields  available  on  interest-earning  deposits  and  investment
securities,  and (iv) the objectives of its asset/liability  management program.
Excess liquidity is invested  generally in  interest-earning  overnight deposits
and short- to  intermediate-term  U.S.  Government  and agency  obligations  and
mortgage-backed  securities of short  duration.  If the Company  requires  funds
beyond its ability to generate  them  internally,  it has  additional  borrowing
capacity  with the FHLB of Chicago.  The Company  anticipates  that it will have
sufficient  funds available to meet current loan  commitments.  At September 30,
1997, the Company had  outstanding  loan  commitments  totaling $5.9 million and
unused home equity lines of credit of $1.2 million.  See Note 10 of the Notes to
Consolidated  Financial  Statements  for  details of  deposits  and  certificate
maturities.

     The Bank is subject to various regulatory capital  requirements  imposed by
the OCC.  At  September  30,  1997,  the Bank  was in full  compliance  with all
applicable  capital  requirements.  See  Note 16 of the  Notes  to  Consolidated
Financial  Statements  for a  reconciliation  of equity  capital  of the Bank to
regulatory capital.

Results of Operations

     The Company's  results of operations depend primarily upon the level of net
interest income,  which is the difference  between the interest income earned on
its interest-earning assets such as loans and investments,  and the costs of the
Company's  interest-bearing  liabilities,  primarily  deposits  and  borrowings.
Results  of  operations  are  also  dependent  upon the  level of the  Company's
noninterest income,  including fee income and service charges,  and are affected
by  the  level  of  its   noninterest   expenses,   including  its  general  and
administrative  expenses.  Net  interest  income  depends  upon  the  volume  of
interest-earning  assets and interest-bearing  liabilities and the interest rate
earned or paid on them, respectively.

Comparison of Operating Results for the
Years Ended September 30, 1997 and 1996

     General.  Net income for the year ended  September  30, 1997  totaled  $1.7
million,  a decrease  of $35,000  from net income of $1.8  million  for the year
ended  September  30, 1996.  The decrease was primarily due to a decrease in net
interest  income of  $318,000,  an increase in  noninterest  expense of $433,000
(excluding the SAIF special  assessment)  plus an increase in income tax expense
of $177,000,  partially offset by the elimination of the SAIF special assessment
of $860,000 from the prior year.

     Net Interest Income. Net interest income decreased $318,000 to $6.7 million
for the year ended  September  30,  1997 from $7.0  million  for the prior year.
Interest  income  decreased  $167,000 due to a $4.0 million  decrease in average
interest-earning assets to $223.8 million from $227.8 million,  primarily due to
the liquidation of assets for stock repurchases of $9.8 million during the year,
partially  offset by an increase  of six basis  points in the  weighted  average
yield to 7.37%  during the year ended  September  30, 1997 from 7.31%  the prior
year.  Interest  expense  increased by $151,000 for the year ended September 30,
1997 to $9.8 million  from $9.7 million the prior year.  The increase was due to
an increase of $2.3 million in average  savings and borrowings in the year ended
September  30, 1997 as well as an  increase  of two basis  points in the average
cost of funds to 5.53% from 5.51%.  A  decrease  in the net  interest  margin to
2.98% from 3.07% during the year was primarily due to a significant  decrease in
the ratio of interest-earning  assets to interestbearing  liabilities  primarily
due to treasury  stock  purchases  of $9.8 million  which  reduced the amount of
interest-earning assets by 4.3%.

     Interest Income.  Interest income  decreased  $167,000 to $16.5 million for
the year ended  September  30, 1997 from $16.7  million for the prior year.  The
decrease was primarily  due to a decrease of $487,000 in interest  earned on all
categories of investments,  dropping to $8.6 million from $9.1 million, due to a
reduction in average outstanding balances of $8.3 million to $127.5 million from
$135.8  million,  partially  offset  by an  increase  in the  average  yield  on
securities to 6.76% from 6.71%. The decrease in investment  income was partially
offset by an increase in interest on

                                       13
<PAGE>

loans of  $269,000 to $7.6  million  from $7.3  million  which was the result of
average outstanding loans of $3.6 million during the year, partially offset by a
decrease of four basis points in the average loan yield to 8.22% from 8.26%.

     Interest Expense.  Interest expense increased  $151,000 to $9.8 million for
the year ended September 30, 1997 from $9.7 million for the prior year. Interest
on deposits  decreased $249,000 as average  interest-bearing  deposits decreased
$4.1 million to $119.4 million for the year ended September 30, 1997 from $123.5
million for the prior year.  The cost of savings  decreased  to 5.18% from 5.21%
primarily due to most maturing  certificates  renewing at lower rates.  Interest
expense on borrowed money increased $400,000 as the average balance of borrowing
from the  Federal  Home Loan Bank of  Chicago  increased  $6.4  million to $58.3
million for the year ended  September 30, 1997 from $51.9  million for the prior
year. The cost of borrowings remained unchanged at 6.25%.

     Provision  for Loan  Losses.  The  provision  for loan losses  decreased to
$37,000 for the year ended  September  30, 1997 from $70,000 for the prior year.
The  provision is based on a formula  which  weighs  loans by property  type and
delinquency status. There were no significant individual loans which contributed
to the  calculation  of the allowance and there were no regulatory  requests for
additional  provisions for loan losses during the years ended September 30, 1997
or 1996.

     Other  Income.  Other income of $267,000 for the year ended  September  30,
1997 was unchanged from the prior year. A reduction in loan fees of $67,000, due
to a lower number of new loan originations and increased loan costs, (especially
for home equity and commercial  loans),  was partially  offset by an increase of
$56,000 in gains on sales of investments.

     Other Expenses.  Other expenses  decreased $427,000 to $4.8 million for the
year ended September 30, 1997 from $5.2 million for the prior year primarily due
to the SAIF  special  assessment  of $860,000 in 1996 and a reduction in regular
FDIC  insurance  premiums of $180,000 in 1997.  These  decreases  were partially
offset by an increase of $465,000 in compensation  expenses to $2.7 million from
$2.2 million  primarily due to the Bank's  efforts to develop a commercial  loan
capability and the  additional  cost of the RRP benefit plan which began in June
1996.  Occupancy and equipment expense increased  $110,000 during the year ended
September 30, 1997 to $772,000  from  $662,000 the prior year.  The increase was
primarily due to  significant  repairs and  maintenance  at the  Schaumburg  and
Burbank offices and increased costs associated with an upgraded  computer system
installed  in the spring of 1996 and two ATM  machines  installed in the fall of
1996.

     Provision  for Income  Taxes.  The  provision  for income  taxes  increased
$177,000 for the year ended September 30, 1997 to $340,000 from $163,000 for the
prior year.  This  increase  was due to an increase in state income tax due to a
reduction  in  exempt  interest  on U.S.  Government  obligations  as well as an
increase in federal tax due to a reduction in allowable  low-income  housing tax
credits  because of a tax loss at the Bank level for the current year created by
the SAIF special assessment,

Comparison of Operating Results for the
Years Ended September 30, 1996 and 1995

     General.  Net income for the year ended  September  30, 1996  totaled  $1.8
million,  an increase of $405,000  from net income of $1.4  million for the year
ended  September 30, 1995.  The increase was due primarily to an increase in net
interest income of $2.4 million and a reduction in the provision for loan losses
of  $93,000,  partially  offset by an increase  in  noninterest  expense of $1.6
million  (including  an $860,000  SAIF  special  assessment)  and an increase in
income taxes of $511,000.

     Net Interest  Income.  Net interest  income  increased $2.4 million to $7.0
million for the year ended  September  30,  1996 from $4.6  million for the same
period in 1995.  Interest  income  increased  $2.6  million due to  increases in
average  interest-earning assets to $227.8  million  from $192.2  million due to
proceeds  from the  Conversion  being  deployed  and an increase in the weighted
average  yield to 7.31%  during  the 1996  period  from  7.30%  during  the 1995
period.  The increase in interest income was partially  offset by an increase in
interest  expense of $275,000 to $9.7 million for the year ended  September  30,
1996 from $9.4 million for the previous  year. The increase was the result of an
increase in average  savings and borrowings in the year ended September 30, 1996
as well as an increase of ten basis points in

                                       14
<PAGE>


the average cost of funds to 5.51% from 5.41% the previous year. The increase in
the net  interest  margin  during the year was due  primarily  to a  significant
increase in the ratio of interest-earning assets to interest-bearing liabilities
as the result of the stock conversion in September 1995.

     Interest  Income.  Interest income  increased $2.6 million to $16.6 million
for the year ended  September  30,  1996 from $14.0  million for the prior year.
This  increase  was  primarily  due to an  increase  in the  interest  earned on
mortgage-backed securities of $1.4 million caused by a $15.0 million increase in
the average  outstanding  balance of mortgage-backed  securities,  as well as an
increase  in the  average  yield on these  securities  to 6.91%  from 6.42% as a
result of adjustable-rate  mortgage-backed securities  resetting at higher rates
during  the  year  and a  greater  proportion  of  higher  yielding  fixed-rated
securities.  Interest on tax-exempt securities increased $472,000 as the average
outstanding  balance of these  securities  increased to $23.3 million from $17.5
million,  and the yield increased to 6.35% for the year ended September 30, 1996
from 5.77% for the prior year. Also, interest on investment securities increased
$556,000 as the average  balance  increased by $13.0 million,  but was partially
offset by a decrease  in the  average  yield to 6.31%  from 8.61%.  The  average
yield on loans increased by seven basis points to 8.26% from 8.19% as new higher
yielding  fixed-rate  loans replaced by lower yielding  fixed-rate loans and the
average outstanding balance increased by $1.5 million.

     Interest Expense.  Interest expense increased  $275,000 to $9.7 million for
the year ended September 30, 1996 from $9.4 million for the prior year. Interest
on deposits  decreased $101,000 as average  interest-bearing  deposits decreased
$5.3 million to $123.5 million for the year ended September 30, 1996 from $128.8
million for the prior year.  The cost of savings  increased  to 5.21% from 5.07%
due  primarily to maturing  certificates  renewing at higher  rates,  especially
earlier in the year.  Also,  due in part to the  increase  in  general  interest
rates,  the  proportion  of the Bank's  deposits  consisting  of  noncertificate
accounts  declined,  thus  contributing  to the  increase  in the Bank's cost of
funds.  Interest  expense on borrowed  money  increased  $376,000 as the average
balance of borrowings  from the FHLB of Chicago  increased $7.0 million to $52.0
million for the year ended  September  30, 1996 from $45.0 million for the prior
year,  partially  offset by a decline  in the cost of  borrowings  to 6.25% from
6.37% due primarily to a greater  concentration of shorter-term advances than in
the previous year.

     Provision  for Loan  Losses.  The  provision  for loan losses  decreased to
$70,000 for the year ended  September 30, 1996 from $163,000 for the prior year.
The  provision  is based  upon  management's  review  of the loan  portfolio  by
property type and delinquency status. There were no significant individual loans
which contributed to the increase in the allowance, and there were no regulatory
requests  for  additional  provisions  for loan  losses  during  the year  ended
September 30, 1996 and 1995.

     Other  Income.  Other  income  increased  $1.0 million  for  the year ended
September  30,  1996.  The increase  was  primarily  the result of a decrease of
$892,000 in unrealized  losses on securities  held-for-sale  as the Bank adopted
SFAS 115 effective  December 1, 1994 and thereafter no longer charged unrealized
losses on securities  available-for-sale to operations. The cumulative effect of
the change of this  accounting  principle,  net of tax,  resulted  in a one-time
$907,000  credit to  earnings.  Other  income  increased  due to an  increase of
$90,000 in net gains on mortgage-backed securities available-for-sale.

     Other Expenses.  Other expenses  increased $1.6 million to $5.2 million for
the year  ended  September  30,  1996  from  $3.6  million  for the  prior  year
primarily  due to the SAIF special  assessment of $860,000.  Also,  compensation
related expenses  increased $410,000 due to normal increases in salaries and the
additional  costs of ESOP and RRP benefit plans.  Occupancy  expenses  increased
$22,000 during the year ended September 30, 1996 due primarily to an increase in
real estate taxes.  Legal,  audit, and examination  expenses  increased $136,000
during the year ended  September  30, 1996  primarily  as a result of becoming a
public company in September  1995.  Advertising  expense  increased  $110,000 to
$458,000 for the year ended September 30, 1996 due primarily to additional costs
of operating as a public company.

                                       15
<PAGE>


     Provision  for Income Taxes.  The  provision for income taxes  increased to
$163,000  for the year ended  September  30, 1996 from a benefit of $348,000 for
the prior year.  This increase was due to an increase of $1.8 million in pre-tax
income to $1.9  million for the year ended  September 30, 1996 from $120,000 for
the prior year.  The Company  realized a tax reduction due to tax-exempt  income
and low-income housing tax credits.

 Analysis of Net Interest Income

     Net interest income  represents the difference  between  interest earned on
interest-earning assets and interest paid on interest-bearing  liabilities.  Net
interest  income  depends  on  the  volumes  of   interest-earning   assets  and
interest-bearing liabilities and the interest rates earned or paid on them.

                                       16
<PAGE>

     The  following  table sets forth  certain  information  relating to average
balance  sheet and  reflects  the average  yield on assets and  average  cost of
liabilities  for the periods  indicated and the average  yields earned and rates
paid.  Such yields and costs are  derived by  dividing  income or expense by the
average  balance of assets or  liabilities,  respectively,  for the most periods
presented. Average balances are derived from month-end balances. Management does
not believe that the use of month-end balances instead of daily average balances
has caused any material differences in the information presented.

<TABLE>
<CAPTION>
                                              Year Ended                      Year Ended                         Year Ended
                                             September 30                    September 30                       September 30
(dollars in thousands)                           1997                            1996                               1995    
---------------------             ------------------------------  --------------------------------   -------------------------------
                                    Average    Interest             Average      Interest             Average     Interest
                                  Outstanding   Earned/   Yield/  Outstanding     Earned/   Yield/   Outstanding   earned/    Yield/
                                    Balance       Paid     Rate     Balance        Paid      Rate     Balance        Paid      Rate
                                    -------       ----     ----     -------        ----      ----     -------        ----      ----
<S>                                <C>         <C>         <C>      <C>         <C>          <C>      <C>        <C>           <C>  
Assets                            
Interest-earning Assets:          
 Loans receivable ................ $ 92,931    $  7,642    8.22%    $ 89,288    $  7,373     8.26%    $ 87,820   $  7,191      8.19%
 Mortgage-backed securities ......   87,169       6,061    6.95       88,034       6,082     6.91       73,054      4,690      6.42
 Investment securities ...........   18,015       1,153    6.40       24,440       1,542     6.31       11,447        986      8.61
 Tax-exempt securities ...........   22,236       1,405    6.32       23,341       1,482     6.35       17,508      1,010      5.77
                                     ------       -----    ----       ------       -----     ----       ------      -----      ----
 FHLB and FRB stock ..............    3,452         233    6.75        2,706         182     6.73        2,335        152      6.51
                                                 ------    ----                   ------     ----                  -----       ----
 Total interest-earning assets ...  223,803      16,494    7.37      227,809      16,661     7.31      192,164     14,029      7.30
                                    -------      ------    ----      -------      ------     ----      -------     ------      ----
Noninterest-earning assets .......    9,282                            7,155                             6,508
                                   ========                          =======                           =======
 Total Assets .................... $233,085                          234,964                           198,672
                                                                                        
Liabilities and                   
Equity Capital                    
Interest-bearing Liabilities:     
 Savings deposits ................   20,453         608    2.97       21,662         710     3.28       25,316        806      3.18
 NOW and Money Market Accounts ...   10,380         414    3.99       11,149         444     3.98       11,801        477      4.04
 Certificate accounts ............   88,524       5,155    5.82       90,646       5,272     5.82       91,650      5,244      5.72
                                     ------       -----    ----       ------       -----     ----       ------      -----      ----
 Borrowings ......................   58,328       3,646    6.25       51,950       3,246     6.25       45,024      2,870      6.37
                                                  -----    ----                    -----     ----                   -----      ----
 Total interest-bearing           
   liabilities ...................  177,685       9,823    5.53      175,407       9,672     5.51      173,791      9,397      5.41
                                    -------       -----    ----      -------       -----     ----      -------      -----      ----
Noninterest-bearing liabilities ..    4,754                            4,042                             4,504                     
 Total Liabilities ...............  182,439                          179,449                           178,295                     
                                    -------                          -------                           -------                     
 Total Equity ....................   50,646                           55,515                            20,377                     
                                    =======                         ========                          ========                     
  Total Equity and Retained       
   Earnings ...................... $233,085                         $234,964                          $198,672                     
                                                 ======                           ======                           ======    
 Net interest income .............               $6,671                           $6,989                           $4,632          
                                                           ====                              ====                              ====
 Net interest rate spread (3) ....                         1.84%                             1.80%                             1.89%
                                   ========                         ========                          ========                
 Net interest-earning assets ..... $ 46,118                         $ 52,402                          $ 18,373                     
                                                                                                           
 Net yield on average interest-                            ====                              ====                              ====
   earning assets ................                         2.98%                             3.07%                             2.41%
 Ratio of average interest-       
   earnings assets to average                      ====                             ====                              ====
   interest-bearing liabilities ..                 1.26x                            1.30x                             1.11x
                                                                                                               
</TABLE>
<PAGE>

                                                       Ten Months Ended
                                                         September 30
                                                            1995(1)
                                            ------------------------------------
                                              Average       Interest
                                            Outstanding      Earned/     Yield/
                                              Balance         Paid        Rate
                                              -------         ----        ----
Assets
Interest-earning Assets:
  Loans receivable ........................   $ 87,775     $  6,000       8.20%
  Mortgage-backed securities ..............     73,829        4,020       6.53
  Investment securities ...................     13,303          748       6.75
  Tax-exempt securities ...................     17,752          953       6.44
                                                ------         ----       ----
  FHLB and FRB stock ......................      2,361          130       6.61
                                                              -----       ----
    Total interest-earning assets .........    195,020       11,851       7.29
                                               -------       ------       ----
Noninterest-earning assets ................      6,313
                                              ========
    Total Assets ..........................   $201,333
                                              
Liabilities and
Equity Capital
Interest-bearing Liabilities:
  Savings deposits ........................     24,027          643       3.21
  NOW and Money Market Accounts ...........     12,860          399       3.72
  Certificate accounts ....................     92,471        4,510       5.85
                                                ------        -----       ----
  Borrowings ..............................     45,940        2,445       6.39
                                                              -----       ----
    Total interest-bearing liabilities ....    175,298        7,997       5.47
                                               -------        -----       ----
Noninterest-bearing liabilities ...........      3,570
    Total Liabilities .....................    178,868
                                               -------
    Total Equity ..........................     22,465
                                              ========
      Total Equity and Retained Earnings ..   $201,333
                                                             ======
Net interest income .......................                  $3,854
                                                                          ====
Net interest rate spread(3) ...............                               1.82%
                                              ========                       
Net interest-earning assets ...............   $ 19,722
                                              
Net yield on average interest-earning                                     ====
  assets ..................................                               2.37%
                                                                           
Ratio of average interest-earning
  assets to average interest-bearing                           ====
  liabilities .............................                    1.11x
                                                                

(1)  During 1995,  the Company  changed its fiscal year end from  November 30 to
     September 30.
(2)  Yield/Rate for the ten months ended September 30, 1995 has been annualized.
(3)  Interest rate spread represents the difference  between the average rate on
     interest-earning  assets  and  the  average  cost  of  in  interest-bearing
     liabilities.

                                       17
<PAGE>

     The following  table presents the weighted  average yields earned on loans,
investments and other  interest-earning  assets,  and the weighted average rates
paid on savings  deposits and the  resultant  interest rate spreads at the dates
indicated.
<TABLE>
<CAPTION>

                                       AT          AT          AT            AT
                                  SEPTEMBER 30 SEPTEMBER 30 SEPTEMBER 30  NOVEMBER 30
                                      1997        1996       1995(1)        1994
                                      ----        ----       -------        ----
Weighted average yield on:
<S>                                   <C>        <C>          <C>           <C>  
  Loans receivable ...............    7.69%      7.58%        7.65%         7.64%
  Mortgage-backed securities .....    7.14%      7.10%        6.97%         6.31%
  Tax-exempt securities ..........    6.24%      6.27%        6.39%         6.53%
  Investment securities ..........    6.62%      6.48%        6.77%         6.72%
  Other interest-earning assets ..    6.63%      5.75%        6.21%         5.60%
     Combined weighted average                                            
       yield on interest-earning                                            
       assets ...................     7.25%      7.14%        7.18%         7.00%
Weighted average rate paid on:                                            
  Savings deposits ..............     2.80%      3.05%        3.05%         3.25%
  NOW and Money Market accounts       3.92%      3.90%        4.23%         4.02%
  Certificate accounts ..........     5.86%      5.78%        5.92%         5.24%
  Borrowings ....................     6.24%      6.05%        6.33%         6.10%
     Combined weighted average                                              
       rate paid on interest-                                                 
       bearing liabilities ......     5.53%      5.44%        5.53%         5.06%
  Interest rate spread ..........     1.72%      1.70%        1.65%         1.94%
  Interest rate spread based on                                          
       taxable equivalent yields.                                          
       for tax-exempt securities.     1.91%      1.93%        1.92%         2.26%
</TABLE>


During  1995,  the  Company  changed  its fiscal  year end from  November  30 to
September 30.


Rate/Volume Analysis of Net Interest Income
                                                                           
     The schedule on the following page presents the dollar amount of changes in
interest income and interest  expense for major  components of  interest-earning
assets and interest-bearing  liabilities.  It distinguishes  between the changes
related to outstanding  balances and that due to the changes in interest  rates.
For each category of interest-earning  assets and interest-bearing  liabilities,
information is provided on changes  attributable to (i) changes in volume (i.e.,
changes  in  volume  multiplied  by old rate) and (ii)  changes  in rate  (i.e.,
changes in rate multiplied by old volume).  For purposes of this table,  changes
attributable  to both rate and volume,  which  cannot be  segregated,  have been
allocated  proportionately  to the  change  due to volume  and the change due to
rate.

                                       18
<PAGE>

<TABLE>
<CAPTION>

                                               YEARS ENDED SEPTEMBER 30    YEARS ENDED SEPTEMBER 30    TEN MONTHS ENDED SEPTEMBER 30
(dollars in thousands)                               1997 vs. 1996                1996 vs. 1995                1995 vs. 1994 
----------------------                       ---------------------------   -------------------------   -----------------------------
                                                  INCREASE (DECREASE)          INCREASE (DECREASE)           INCREASE (DECREASE)
                                                   IN NET INTEREST              IN NET INTEREST               IN NET INTEREST
                                                    INCOME DUE TO                INCOME DUE TO                 INCOME DUE TO
                                             ---------------------------    ------------------------      --------------------------
                                              VOLUME     RATE      TOTAL    VOLUME     RATE    TOTAL      VOLUME     RATE     TOTAL
                                              ------     ----      -----    ------     ----    -----      ------     ----     -----
Interest Income:
<S>                                          <C>          <C>       <C>       <C>        <C>      <C>       <C>      <C>        <C> 
  Loans receivable .......................   $  305       (36)      269       120        62       182       103      (195)      (92)
  Mortgage-backed securities .............      (57)       36       (21)    1,014       378     1,392       544       554     1,098
  Investment securities ..................     (411)       22      (389)    1,092      (536)      556       179       (71)      108
  Tax-exempt securities ..................      (70)       (7)      (77)      362       110       472       144        10       154
  FHLB and FRB Stock .....................       50         1        51        25         5        30        22         6        28
                                             ------       ----     ----     -----      ----     -----       ---       ---     -----
   Total interest income .................     (183)       16      (167)    2,613        19     2,632       992       304     1,296
                                             ======       ====     =====    =====      ====     =====       ===       ===     =====

 Interest Expense:
  Savings deposits .......................      (38)      (64)     (102)     (121)       25       (96)      (90)       75       (15)
  NOW and Money Market accounts ..........      (31)        1       (30)      (26)       (7)      (33)       (1)       51        50
  Certificate accounts ...................     (117)       --      (117)      (59)       87        28       375       658     1,033
  Borrowings .............................      400        --       400       432       (56)      376       519       176       695
                                             ------     -----      ----      -----      ----     -----      ---       ---     -----
   Total interest expense ................   $  214       (63)      151       226        49       275       803       960     1,763
                                             ======     =====      ====      =====      ====     =====      ===       ===     =====
 Net interest income .....................                         (318)                        2,357                          (467)
                                                                   ====                         =====                          ==== 
</TABLE>

During 1995,  the Company  changed its fiscal year from November 30 to September
30.

                                       19
<PAGE>


Impact of Inflation and Changing Prices

     The  consolidated  financial  statements and related data presented  herein
have been prepared in accordance with generally accepted  accounting  principles
which require the  measurement  of financial  position and operating  results in
terms  of  historical  dollars  without  considering  changes  in  the  relative
purchasing  power of money over time due to  inflation.  The  primary  impact of
inflation on the operations of the Company is reflected in [increased/decreased]
operating costs. Unlike most industrial  companies,  virtually all of the assets
and liabilities of a financial  institution are monetary in nature. As a result,
interest  rates,  generally,  have  a more  significant  impact  on a  financial
institution's performance than does inflation. Interest rates do not necessarily
move in the same  direction  or to the same  extent  as the  prices of goods and
services.

Impact of New Accounting Standards

     Accounting   for   Transfers   and   Servicing  of  Financial   Assets  and
Extinguishment  of  Liabilities.  In December  1996,  the  Financial  Accounting
Standards Board ("FASB") issued Statement of Financial  Accounting Standards No.
127 ("SFAS No. 127"),  "Deferral of the Effective Date of Certain  Provisions of
FASB Statement No. 125." The statement delays for one year the implementation of
SFAS No. 125, as it relates to (1) secured  borrowings and  collateral,  and (2)
for the transfers of financial  assets that are part of  repurchase  agreements,
dollar-rolls,  securities lending and similar transactions.  The Company adopted
portions of SFAS No. 125 (those not deferred by SFAS No. 127) effective  January
1, 1997.  Adoption of these  portions did not have a  significant  effect on the
Company's financial  condition or results of operations.  Based on its review of
SFAS No. 125,  management does not believe that adoption of the portions of SFAS
No. 125 which have been deferred by SFAS No. 127 will have a material  effect on
the Company.

     Accounting  for  Earnings  Per Share.  In  February  1997,  the FASB issued
Statement of Financial Accounting Standards No. 128 ("SFAS No. 128"),  "Earnings
Per Share." This  statement  establishes  standards for computing and presenting
earnings  per share  (EPS) and  applies to entities  with  publicly  held common
stock. This statement  simplifies the standard for computing  earnings per share
previously  found  in  Accounting  Principles  Board  Opinion  ("APB")  No.  15,
"Earnings Per Share" and makes them comparable to  international  EPS standards.
It replaces the presentation of primary EPS with a presentation of basic EPS and
fully diluted EPS with diluted EPS. It also requires dual  presentation of basic
EPS and diluted EPS on the face of the income  statement  for all entities  with
complex capital  structures and requires a  reconciliation  of the numerator and
denominator of the basic EPS computation to the numerator and denominator of the
diluted EPS computation.

     Basic EPS,  unlike  primary  EPS,  excludes  dilution  and is  computed  by
dividing income available to common stockholders by the weighted-average  number
of common shares outstanding for the period.  Diluted EPS reflects the potential
dilution that could occur if securities or other contracts to issue common stock
were  exercised  or  converted  into common stock or resulted in the issuance of
common  stock that then shared in the  earnings  of the  entity.  Diluted EPS is
computed similarly to fully diluted EPS under APB No. 15.

     SFAS No. 128 is effective  for  financial  statements  for both interim and
annual  periods  ending  after  December 15, 1997.  the  following  presentation
illustrates  pro  forma  basic  and  diluted  earnings  per  share  based on the
provisions of SFAS No. 128:


                                                 PERIODS ENDED SEPTEMBER 30
                                             -----------------------------------
                                                1997        1996        1995
                                                ----        ----        ----
Weighted average number of common
  shares outstanding used in basic
  earnings per share calculation ........    3,230,218    3,633,541    3,570,750
Add common stock equivalents for
  shares issuable under Stock Option Plan       71,508        1,293           --
                                             ---------    ---------    ---------
Weighted average number of shares
  outstanding adjusted for common
  stock equivalent ......................    3,301,726    3,634,834    3,570,750
                                             =========    =========    =========

Net income ..............................   $1,745,447    1,779,842    1,812,284
                                             ---------    ---------    ---------
Basic earnings per share ................   $      .54          .49          .50
                                             ---------    ---------    ---------
Diluted earnings per share ..............   $      .53          .49          .50
                                             =========    =========    =========

                                       20
<PAGE>

     Disclosure of Information  about Capital  Structure.  In February 1997, the
FASB issued Statement of Financial  Accounting Standards No. 129, "Disclosure of
Information   about  Capital   Structure"   ("SFAS  No.  129").  This  statement
establishes  standards  for  disclosing  information  about an entity's  capital
structure.  It supersedes specific  disclosure  requirements of APB Opinions No.
10, "Omnibus  Opinion-1966,"  and No. 15, "Earnings Per Share," and SFAS No. 47,
"Disclosure of Long-Term  Obligations,"  and consolidates them in this statement
for ease of retrieval  and for greater  visibility to nonpublic  entities.  This
statement  is  effective  for  financial  statements  for periods  ending  after
December  15,  1997.  It  contains  no changes in  disclosure  requirements  for
entities that were previously subject to the requirements of Opinions No. 10 and
No. 15 and SFAS No. 47 and,  therefore,  is not  expected to have a  significant
impact on the consolidated  financial  condition or results of operations of the
Company.

     Reporting  Comprehensive Income. In June 1997, the FASB issued Statement of
Financial Accounting Standards No. 130, "Reporting  Comprehensive Income" ("SFAS
No. 130"). This statement establishes standards for reporting and the display of
comprehensive income and its components (revenues, expenses, gains, losses) in a
full set of general-purpose financial statements.  SFAS No. 130 is effective for
fiscal  years  beginning  after  December  15,  1997.  The  Company  has not yet
determined the impact of adopting this statement.

     Disclosures  about  Segments of an Enterprise and Related  Information.  In
June 1997, the FASB issued Statement of Financial  Accounting Standards No. 131,
"Disclosures about Segments of an Enterprise and Related Information" ("SFAS No.
131") which becomes  effective  for fiscal years  beginning  after  December 15,
1997.  SFAS No. 131  establishes  standards  for  the way that  public  business
enterprises report information about operating segments and requires enterprises
to report selected  information  about operating  segments in interim  financial
reports.  The  Company  has not yet  determined  the  impact  of  adopting  this
statement.

     The foregoing does not constitute a  comprehensive  summary of all material
changes or  developments  affecting  the manner in which the  Company  keeps its
books and records and performs its financial accounting responsibilities.  It is
intended only as a summary of some of the recent pronouncements made by the FASB
which are of particular interest to financial institutions.

                                       21
<PAGE>


                          INDEPENDENT AUDITORS' REPORT

The Board of Directors
Damen Financial Corporation
Schaumburg, Illinois


     We have audited the consolidated statements of financial condition of Damen
Financial  Corporation  and  subsidiaries as of September 30, 1997 and 1996, and
the  related  consolidated  statements  of  earnings,  changes in  stockholders'
equity,  and cash flows for the periods ended September 30, 1997, 1996 and 1995.
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 audits to obtain
reasonable  assurance about whether the  consolidated  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 Damen
Financial  Corporation and  subsidiaries at September 30, 1997 and 1996, and the
results of their operations and their cash flows for the periods ended September
30,  1997,  1996 and  1995 in  conformity  with  generally  accepted  accounting
principles.

/s/ Cobitz, Vandenberg & Fennessy

October 30, 1997
Hickory Hills, Illinois


                                       22

<PAGE>

<TABLE>
<CAPTION>

                                                                                             SEPTEMBER 30               SEPTEMBER 30
                                                                                                 1997                       1996
                                                                                                 ----                       ----
Assets
<S>                                                                                              <C>                        <C>    
Cash and amounts due from depository institutions ............................                   500,455                    170,034
Interest-bearing deposits ....................................................                 1,590,529                  1,011,197
                                                                                           -------------              -------------
 Total cash and cash equivalents .............................................                 2,090,984                  1,181,231
Investment securities (fair value:
  1997 - $1,845,400; 1996 - $1,777,000) (note 2) .............................                 1,845,383                  1,776,979
Investment securities, available for sale,
  at fair value (note 3) .....................................................                35,874,298                 43,342,710
Mortgage-backed securities (fair value:
  1997 - $27,548,700; 1996 - $34,641,300) (note 4) ...........................                27,869,570                 35,503,531
Mortgage-backed securities, available for
  sale, at fair value (note 5) ...............................................                56,740,190                 52,594,450
Loans receivable (net of allowance for loan
  losses: 1997 - $332,000; 1996 - $345,000) (note 6) .........................                97,244,031                 91,145,893
Foreclosed real estate .......................................................                    79,000                         --
Stock in Federal Home Loan Bank and
  Federal Reserve Bank of Chicago ............................................                 3,698,500                  3,110,500
Accrued interest receivable (note 7) .........................................                 1,551,284                  1,661,087
Office properties and equipment-net (note 8) .................................                 3,473,326                  3,502,987
Prepaid expenses and other assets (note 9) ...................................                   642,654                    736,041
                                                                                                 -------                    -------
 Total assets ................................................................               231,109,220                234,555,409
                                                                                           =============              =============

Liabilities and Stockholders' Equity
Liabilities:
Deposits (note 10) ...........................................................               125,746,001                118,973,335
Borrowed money (note 11) .....................................................                56,500,000                 59,600,000
Advance payments by borrowers for taxes
  and insurance ..............................................................                   722,141                    638,768
Other liabilities (note 12) ..................................................                 2,202,115                  2,473,435
                                                                                               ---------                  ---------
 Total liabilities ...........................................................               185,170,257                181,685,538
                                                                                             -----------                -----------

Stockholders' Equity:
Preferred stock, $.01 par value; authorized
  100,000 shares; none outstanding ...........................................                        --                         --
Common stock, $.01 par value;  authorized
   4,500,000 shares; 3,967,500 shares
   issued and 3,109,220  shares  outstanding
   at September 30, 1997 and 3,770,117 shares
   outstanding at September 30, 1996 .........................................                    39,675                     39,675
Additional paid-in capital ...................................................                38,452,948                 38,345,966
Retained earnings, substantially restricted ..................................                22,100,190                 21,131,170
Unrealized gain on securities available for
   sale, net of income taxes .................................................                 1,382,560                    167,679
Treasury  stock, at cost (858,280 and
   197,383 shares at September 30,
   1997 and 1996) ............................................................               (12,117,799)                (2,311,375)
Common stock acquired by Employee Stock
   Ownership Plan ............................................................                (2,550,800)                (2,762,400)
Common stock awarded by Recognition and
   Retention Plan ............................................................                (1,367,811)                (1,740,844)
                                                                                              ----------                 ----------
 Total stockholders' equity (notes 16 and 17) ................................                45,938,963                 52,869,871
                                                                                              ----------                 ----------
Commitments and contingencies (notes 19 and 20)
 Total liabilities and stockholders' equity ..................................             $ 231,109,220                234,555,409
                                                                                           =============                ===========
</TABLE>

See accompanying notes to consolidated financial statements.

                                       23
<PAGE>

<TABLE>
<CAPTION>
                                                                                 YEAR ENDED           YEAR ENDED    TEN MONTHS ENDED
                                                                                SEPTEMBER 30         SEPTEMBER 30     SEPTEMBER 30
                                                                                    1997                 1996             1995
                                                                                    ----                 ----             ----
Interest income:
<S>                                                                            <C>                    <C>                 <C>      
    Loans ..............................................................       $  7,641,587           7,372,382           5,999,647
    Mortgage-backed securities .........................................          6,061,307           6,081,879           4,019,530
    Tax-exempt securities ..............................................          1,404,976           1,482,104             952,843
    Interest and dividends on other investments ........................          1,153,274           1,541,742             748,169

    Dividends on FHLB and FRB stock ....................................            232,721             182,342             130,350
                                                                               ------------        ------------        ------------
      Total interest income ............................................         16,493,865          16,660,449          11,850,539
                                                                               ------------          ----------          ----------
Interest expense:
      Deposits .........................................................          6,176,720           6,426,006           5,551,631
      Borrowings .......................................................          3,646,005           3,245,920           2,445,028
                                                                               ------------        ------------        ------------
        Total interest expense .........................................          9,822,725           9,671,926           7,996,659
                                                                               ------------        ------------        ------------
        Net interest income before provision for loan losses ...........          6,671,140           6,988,523           3,853,880
Provision for loan losses ..............................................             36,618              70,000             163,146
                                                                               ------------        ------------        ------------
        Net interest income after provision for loan losses ............          6,634,522           6,918,523           3,690,734
                                                                               ------------        ------------        ------------
Non-interest income:
      Loan fees and service charges ....................................
                                                                                     42,491             108,797              68,818
      Gain (loss) on sale of:
        Mortgage-backed securities, available for sale .................            (17,365)              4,064             (13,553)
        Investment securities, available for sale ......................            157,083              79,509              16,820
      Other income .....................................................             84,866              74,171              66,364
                                                                               ------------        ------------        ------------
        Total non-interest income ......................................            267,075             266,541             138,449
                                                                               ------------        ------------        ------------
</TABLE>


(continued on next page)

                                       24
<PAGE>

<TABLE>
<CAPTION>

                                                                                YEAR ENDED           YEAR ENDED     TEN MONTHS ENDED
                                                                               SEPTEMBER 30         SEPTEMBER 30       SEPTEMBER 30
(continued)                                                                        1997                 1996               1995
-----------                                                                        ----                 ----               ----
<S>                                                                             <C>                 <C>                  <C>
Noninterest expense:
  Compensation, employee benefits, and related
    expenses (notes 13 and 14) ........................................          $2,655,881           2,190,681           1,500,551
  Advertising and promotion ...........................................             462,815             457,918             320,383
  Occupancy and equipment expense (note 8) ............................             772,045             661,776             526,983
  Data processing .....................................................             122,488             100,862              75,889
  Insurance expense ...................................................              72,727              73,058              55,962
  Federal insurance premiums (note 18) ................................             114,674             295,265             245,714
  SAIF special assessment (note 18) ...................................                  --             860,000                  --
  Legal, audit, and examination services ..............................             272,702             264,659             114,976
  Other operating expenses ............................................             343,019             338,543             191,827
                                                                                 ----------          ----------          ----------
     Total non-interest expense .......................................           4,816,351           5,242,762           3,032,285
                                                                                 ----------          ----------          ----------
 Net income before income taxes and change in
    accounting principle ..............................................           2,085,246           1,942,302             796,898
 Provision for federal and state income taxes
    (benefit) (note 15) ...............................................             339,799             162,460            (108,206)
                                                                                 ----------          ----------          ----------
 Net income before change in accounting principle .....................           1,745,447           1,779,842             905,104
                                                                                 ----------          ----------          ----------
 Cumulative effect of change in accounting for
    securities available for sale, net of tax effect ..................                  --                  --             907,180
      Net income ......................................................          $1,745,447           1,779,842           1,812,284
                                                                                 ==========          ==========          ==========
  Earnings per share - primary
  Income before change in accounting principle ........................          $      .53                 .49                 .25
  Cumulative effect of Change in accounting for
    securities available for sale, net ................................                  --                  --                 .25
                                                                                 ----------          ----------          ----------
      Net income ......................................................          $      .53                 .49                 .50
                                                                                 ==========          ==========          ==========
 Earnings per share - fully diluted
  Income before change in accounting principle ........................          $      .53                 .49                 .25
  Cumulative effect of change in accounting for
    securities available for sale, net ................................                  --                  --                 .25
                                                                                 ----------          ----------          ----------
      Net income ......................................................          $      .53                 .49                 .50
                                                                                 ==========          ==========          ==========

 Dividends declared per common share ..................................          $      .24                  12                  --
                                                                                 ==========          ==========          ==========
</TABLE>


See accompanying notes to consolidated financial statements.

                                       25
<PAGE>


<TABLE>
<CAPTION>
                                                                        Unrealized
                                                                      Gain (Loss) on             Common       Common
                                                  Additional            Securities                Stock       Stock
                                           Common  Paid-In    Retained   Available   Treasury    Acquired     Awarded
                                            Stock  Capital    Earnings   For Sale      Stock     By ESOP      By RRP       Total
                                            -----  -------    --------   --------      -----     -------      ------       -----
<S>                                       <C>     <C>        <C>        <C>         <C>         <C>         <C>         <C>
Balance at November 30, 1994 ............ $    --       --   17,965,213    (91,450)       --          --          --    17,873,763
  Additions (deductions) for the ten
    months ended September 30, 1995:
  Cumulative effect of change in
    accounting for securities available
    for sale, net of tax effect,
    at December 1, 1994 .................                               (1,126,880)                                     (1,126,880)
  Net income ............................                     1,812,284                                                  1,812,284
  Adjustment of securities to fair value,
    net of tax effect ...................                                2,004,800                                       2,004,800
  Net proceeds of common stock issued in
    stock conversion ....................  39,675 38,280,338                                    (3,174,000)             35,146,013
                                          ------- ---------- ---------- ---------- -----------  ----------  ----------  ----------
Balance at September 30, 1995 ...........  39,675 38,280,338 19,777,497    786,470          --  (3,174,000)         --  55,709,980
  Additions (deductions) for the year
    ended September 30, 1996:
  Net income ............................                     1,779,842                                                  1,779,842
  Adjustment of securities to fair value,
    net of tax effect ...................                                 (618,791)                                       (618,791)
  Purchase of treasury stock (197,383
    shares) .............................                                           (2,311,375)                         (2,311,375)
  Purchase of stock for RRP .............                                                                   (1,865,187) (1,865,187)
  Amortization of award of RRP stock ....                                                                      124,343     124,343
  Contribution to fund ESOP loan ........             65,628                                       411,600                 477,228
  Dividends declared on common stock ....                      (426,169)                                                  (426,169)
                                          ------- ---------- ---------- ---------- -----------  ----------  ----------  ----------
Balance at September 30, 1996 ...........  39,675 38,345,966 21,131,170    167,679  (2,311,375) (2,762,400) (1,740,844) 52,869,871
  Additions (deductions) for the year
    ended September 30, 1997:
  Net income ............................                     1,745,447                                                  1,745,447
  Adjustment of securities to fair value,
    net of tax effect ...................                                1,214,881                                       1,214,881
  Tax benefit related to employee stock
    plans ...............................             27,800                                                                27,800
  Purchase of treasury stock (660,897
    shares) .............................                                           (9,806,424)                         (9,806,424)
  Amortization of award of RRP stock ....                                                                      373,033     373,033
  Contribution to fund ESOP loan ........             79,182                                       211,600                 290,782
  Dividends declared on common stock ....                      (776,427)                                                  (776,427)
                                          ------- ---------- ---------- ---------- -----------  ----------  ----------  ----------
Balance at September 30, 1997 ........... $39,675 38,452,948 22,100,190  1,382,560 (12,117,799) (2,550,800) (1,367,811) 45,938,963
                                          ======= ========== ========== ========== ===========  ==========  ==========  ==========
</TABLE>

See accompanying notes to consolidated financial statements.

                                       26

<PAGE>

<TABLE>
<CAPTION>
                                                                                 YEAR ENDED       YEAR ENDED    TEN MONTHS ENDED
                                                                                SEPTEMBER 30     SEPTEMBER 30     SEPTEMBER 30
                                                                                    1997             1996             1995
                                                                                ------------     ------------   ----------------
<S>                                                                             <C>                <C>              <C>      
Cash flows from operating activities:
Net income .................................................................    $ 1,745,447        1,779,842        1,812,284
 Adjustments to reconcile net income to net cash from Operating activities:
  Depreciation .............................................................        196,102          177,333          148,761
  Amortization of cost of stock benefit plans ..............................        663,815          601,572               --
  Provision for loan losses ................................................         36,618           70,000          163,146
  Decrease in deferred loan income .........................................       (312,174)        (110,405)         (22,526)
  Federal Home Loan Bank stock dividend ....................................             --               --          (34,300)
  (Increase) decrease in prepaid and deferred federal and state income taxes       (156,187)          18,602          600,783
  (Gain) loss on sale of mortgage-backed securities, available for sale ....         17,365           (4,064)          13,553
  Gain on sale of investment securities, available for sale ................       (157,083)         (79,509)         (16,820)
  Unrealized (gain) loss on securities, held for sale ......................             --               --       (1,537,000)
  (Increase) decrease in accrued interest receivable .......................        109,803         (473,474)        (177,809)
  Increase (decrease) in accrued interest payable ..........................        (16,900)        (286,500)         470,600
  (Increase) decrease in other assets ......................................         15,462          (22,055)         (24,998)
  Increase (decrease) in other liabilities .................................       (725,622)         900,543          402,198
                                                                                -----------      -----------      -----------
Net cash provided by operating activities ..................................      1,416,646        2,571,885        1,797,872
                                                                                -----------      -----------      -----------
Cash flows from investing activities:
  Purchase of investment securities, available for sale ....................     (7,221,615)     (19,553,246)      10,076,434)
  Purchase of investment securities ........................................       (216,326)        (785,126)        (191,498)
  Purchase of mortgage-backed securities, available for sale ...............    (12,178,505)     (22,963,828)     (18,910,930)
  Purchase of mortgage-backed securities ...................................             --         (229,361)      (2,985,736)
  Proceeds from sales of investment securities, available for sale .........      9,472,341        3,133,750          515,000
  Proceeds from sales of mortgage-backed securities, available for sale ....      1,816,256          919,975        1,288,365
  Proceeds from maturities of investment securities, available for sale ....      6,195,769        6,547,993        2,340,706
  Proceeds from maturities of investment securities ........................        147,922           97,922          118,081
  Proceeds from maturities of mortgage-backed securities, available for sale      7,435,734        8,364,322        2,391,513
  Proceeds from maturities of mortgage-backed securities ...................      7,633,961        7,259,192        5,284,201
  Proceeds from redemption of Federal Home Loan Bank stock .................         55,500          130,000               --
  Purchase of Federal Home Loan Bank and Federal Reserve Bank stock ........       (643,500)        (670,500)        (315,700)
  Disbursements for loans ..................................................    (23,846,339)     (19,814,855)     (12,006,880)
  Loan repayments ..........................................................     18,023,757       16,264,628       12,536,002
  Property and equipment expenditures ......................................       (166,441)        (347,662)         (73,026)
                                                                                -----------      -----------      -----------
Net cash provided by (for) investing activities ............................      6,508,514      (21,646,796)     (20,086,336)
                                                                                -----------      -----------      -----------
</TABLE>

(continued on next page)

                                       27

<PAGE>


<TABLE>
<CAPTION>
                                                                                 YEAR ENDED       YEAR ENDED    TEN MONTHS ENDED
                                                                                SEPTEMBER 30     SEPTEMBER 30     SEPTEMBER 30
(continued)                                                                         1997             1996             1995
-----------                                                                     ------------     ------------   ----------------
<S>                                                                             <C>                <C>              <C>      
Cash flows from financing activities:
  Net proceeds from sale of common stock .....................................           --               --       35,146,013
  Deposit receipts ...........................................................   80,168,443       66,969,226       67,708,828
  Deposit withdrawals ........................................................  (77,870,072)     (79,780,537)     (71,146,187)
  Interest credited to deposit accounts ......................................    4,474,295        5,152,886        3,858,888
  Proceeds from borrowed money ...............................................  179,400,000      181,100,000       99,200,000
  Repayment of borrowed money ................................................ (182,500,000)    (167,000,000)     (97,700,000)
  Increase (decrease) in advance payments by borrowers for taxes and insurance       83,373       (2,162,546)         958,953
  Purchase of RRP stock ......................................................           --       (1,865,187)              --
  Purchase of treasury stock .................................................   (9,806,424)      (2,311,375)              --
  Dividends paid on common stock .............................................     (965,022)        (209,484)              --
                                                                                -----------      -----------      -----------
Net cash provided by (for) financing activities ..............................   (7,015,407)        (107,017)      38,026,495
                                                                                -----------      -----------      -----------
Increase (decrease) in cash and cash equivalents .............................      909,753      (19,181,928)      19,738,031
Cash and cash equivalents at beginning of period .............................    1,181,231       20,363,159          625,128
                                                                                -----------      -----------      -----------
Cash and cash equivalents at end of period ...................................  $ 2,090,984        1,181,231       20,363,159
                                                                                ===========      ===========      ===========
Cash paid during the period for:
  Interest ...................................................................  $ 9,839,625        9,958,426        7,526,059
  Income taxes ...............................................................      350,142          232,229               --
Non cash investing activities:
  Transfer of loans to foreclosed real estate ................................  $    79,000               --               --
                                                                                ===========      ===========      ===========
</TABLE>

See accompanying notes to consolidated financial statements.

                                       28

<PAGE>

1.   Summary of Significant Accounting Policies
     ------------------------------------------

Damen  Financial   Corporation   (the  "Company")  is  a  Delaware   corporation
incorporated  on June 30, 1995 for the purpose of becoming  the savings and loan
holding  company for Damen  Federal Bank for Savings (the  "Savings  Bank").  On
September 29, 1995,  the Savings Bank converted from a mutual to a stock form of
ownership,  and the Company  completed its initial public offering,  and, with a
portion of the net proceeds,  acquired all of the issued and outstanding capital
stock of the Savings  Bank (the  "Conversion").  In addition,  management,  upon
completion of the  Conversion,  elected to change the Company's  fiscal year end
from November 30 to September 30. During the current fiscal year,  Damen Federal
Bank for  Savings  applied  for and  received  approval  from the  Office of the
Comptroller  of the Currency to convert its charter from a federal  savings bank
to a national bank.  Effective  February 27, 1997, (the "Savings Bank" converted
to a national bank and changed its name to Damen National Bank ("the Bank"), and
the Company  ceased to be a savings and loan  holding  company and became a bank
holding company.

     The accounting and reporting  policies of the Company and its  subsidiaries
conform to generally  accepted  accounting  principles  and to general  practice
within  the  financial  institution  industry.   The  preparation  of  financial
statements in conformity with generally accepted accounting  principles requires
management to make estimates and assumptions that affect the reported amounts of
assets and  liabilities  and disclosure of contingent  assets and liabilities at
the date of the financial  statements  and the reported  amounts of revenues and
expenses  during the reporting  period.  Actual  results could differ from those
estimates. The following is a description of the more significant policies which
the Company  follows in preparing  and  presenting  its  consolidated  financial
statements.

Principles of Consolidation

The accompanying  consolidated  financial statements include the accounts of the
Company,  and its wholly owned  subsidiary,  Damen  National Bank and the Bank's
wholly owned  subsidiary,  Dasch,  Inc.  Significant  intercompany  balances and
transactions have been eliminated in consolidation.

Investment Securities and Mortgage-Backed Securities, Available for Sale

Investment  securities  available  for  sale are  recorded  in  accordance  with
Statement of Financial  Accounting  Standards  ("SFAS") No. 115  "Accounting for
Certain  Investments in Debt and Equity  Securities".  SFAS No. 115 requires the
use of fair value  accounting for  securities  available for sale or trading and
retains the use of the amortized  cost method for securities the Company has the
positive ability and intent to hold to maturity.

     SFAS No. 115 requires the classification of debt and equity securities into
one of three categories:  held to maturity, trading, or available for sale. Held
to maturity  securities  are measured at amortized  cost.  Unrealized  gains and
losses for trading  securities are included in income.  Unrealized holding gains
and  losses on  available  for sale  securities  are  excluded  from  income and
reported net of taxes as a separate component of stockholders' equity.

     The Company  holds a portfolio of  securities  classified  as available for
sale which are  carried at current  fair  values.  Premiums  and  discounts  are
amortized and accreted into income over the remaining life of the security using
the level yield method.  Unrealized gains and losses are recorded in a valuation
allowance,  which is included as a separate  component of stockholders'  equity,
net of related income taxes.  Gains and losses on the sale of available for sale
securities  are  determined  using the  specific  identification  method and are
reflected in earnings when realized.

Investment Securities and Mortgage-Backed Securities, Held to Maturity

These securities are carried at cost,  adjusted for amortization of premiums and
accretion  of  discounts  over the term of the  security  using the level  yield
method.  These  securities are not carried at fair value because the Company has
both the ability and the intent to hold them to maturity.

Loans Receivable and Related Fees

Loans are stated at the principal amount  outstanding,  net of loans in process,
deferred  fees and the  allowance  for losses.  Interest on loans is credited to
income as earned and  accrued  only if deemed  collectible.  Loans are placed on
nonaccrual status when, in the opinion of management, the full timely collection
of principal or

                                       29

<PAGE>

interest is in doubt. As a general rule, the accrual of interest is discontinued
when  principal  or  interest  payments  become 90 days past due or  earlier  if
conditions  warrant.  When a loan is placed  on  nonaccrual  status,  previously
accrued but unpaid interest is charged against current income.

     Loan  origination  fees are being  deferred in accordance  with SFAS No. 91
"Accounting for  Nonrefundable  Fees and Costs  Associated  with  Originating or
Acquiring  Loans and Initial Direct Costs of Leases'.  This  statement  requires
that loan  origination  fees and direct loan  origination  costs for a completed
loan be netted  and then  deferred  and  amortized  into  interest  income as an
adjustment of yield.

     The  Company  has adopted the  provisions  of SFAS No. 114  "Accounting  by
Creditors for  Impairment of a Loan" and SFAS No. 118  "Accounting  by Creditors
for Impairment of a Loan - Income Recognition and Disclosures". These statements
apply to all loans that are identified for evaluation except for large groups of
smaller-balance   homogeneous   loans  that  are   collectively   evaluated  for
impairment.   These  loans  include,  but  are  not  limited  to,  credit  card,
residential mortgage and consumer installment loans.

     Under these  statements,  of the  remaining  loans which are  evaluated for
impairment (a loan is considered impaired when, based on current information and
events, it is probable that a creditor will be unable to collect all amounts due
according  to the  contractual  terms  of the  loan  agreement),  there  were no
material  amounts of loans which met the  definition  of an impaired loan during
the year ended September 30, 1997 and no loans to be evaluated for impairment at
September 30, 1997,

Allowance for Loan Losses

The determination of the allowance for loan losses involves  material  estimates
that are  susceptible to significant  change in the near term. The allowance for
loan losses is  maintained  at a level  adequate  to provide for losses  through
charges to operating  expense.  The allowance is based upon past loss experience
and other factors which, in management's judgement,  deserve current recognition
in estimating losses. Such other factors considered by management include growth
and  composition of the loan  portfolio,  the  relationship of the allowance for
losses to outstanding loans, and economic conditions.

     Management  believes that the allowance is adequate.  While management uses
available  information  to recognize  losses on loans,  future  additions to the
allowance may be necessary based on changes in economic conditions. In addition,
various regulatory  agencies,  as an integral part of their examination process,
periodically  review the  Company's  allowance  for losses.  Such  agencies  may
require the  Company to  recognize  additions  to the  allowance  based on their
judgements about information available to them at the time of their examination.

Foreclosed Real Estate

Real estate  acquired  through  foreclosure  or deed in lieu of  foreclosure  is
carried  at the  lower  of  fair  value  minus  estimated  costs  to sell or the
acquisition  cost.  Valuations are  periodically  performed by management and an
allowance  for loss is  established  by a charge to  operations  if the carrying
value of a property exceeds its fair value minus estimated costs to sell.

Depreciation

Depreciation  of office  properties and equipment is accumulated on the straight
line basis over the estimated lives of the related assets.

Income Taxes

The provision  for federal and state income taxes is based on earnings  reported
in the financial  statements.  Deferred  income taxes arise from  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 estimated  future tax
consequence  attributable  to the  differences  between the financial  statement
carrying  amount of existing  assets and  liabilities  and their  respective tax
bases.  Deferred tax assets and liabilities are measured using enacted tax rates
in effect for the year in which those  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  in income for the period that  includes  the
enactment date.

                                       30

<PAGE>

Consolidated  Statement of Cash Flows

For the purposes of reporting cash flows,  the Company has defined cash and cash
equivalents to include cash on hand,  amounts due from depository  institutions,
and  interest-bearing  deposits in other financial  institutions,  with original
maturities of three months or less.

Earnings per Share

Earnings  per share for the year ended  September  30,  1997 was  determined  by
dividing  net income for the period by  3,290,145  and  3,301,726,  the weighted
average  number of primary and fully  diluted  shares of common stock and common
stock  equivalents  outstanding.  Stock  options are  regarded  as common  stock
equivalents  and are  therefore  considered  in both  primary and fully  diluted
earnings per share calculations. Common stock equivalents are computed using the
treasury stock method.  ESOP shares not committed to be released to participants
are not  considered  outstanding  for purposes of  computing  earnings per share
amounts.

2.   Investment Securities, Held to Maturity
     ---------------------------------------

Investment securities held to maturity are summarized as follows:

<TABLE>
<CAPTION>
                                                         GROSS      GROSS
                                           AMORTIZED  UNREALIZED  UNREALIZED     FAIR
                                              COST       GAINS      LOSSES      VALUE
                                           ---------  ----------  ----------    -----
<S>                                       <C>             <C>         <C>       <C>
SEPTEMBER 30, 1997
Debt securities (a) ..................... $  940,190      10          --        940,200
Investment in limited partnerships (b) ..    905,193       7          --        905,200
                                          ----------     ---         ---      ---------
                                          $1,845,383      17          --      1,845,400
                                          ==========     ===         ===      =========
SEPTEMBER 30, 1996
Debt securities (a) ..................... $  836,328      --          28        836,300
Investment in limited partnerships (b) ..    940,651      49          --        940,700
                                          ----------     ---         ---      ---------
                                          $1,776,979      49          28      1,777,000
                                          ==========     ===         ===      =========
</TABLE>

(a)  Investment  in notes  secured  by  mortgages  originated  by the  Community
     Investment  Corporation  and the  National  Housing  Service;  the weighted
     average  yield on these notes was 7.65% and 7.00% at September 30, 1997 and
     1996, respectively.

(b)  Investment in limited partnership ventures for the purpose of investment in
     low-income  housing projects  qualifying for tax credits over approximately
     the next ten years.

3.   Investment Securities, Available for Sale
     -----------------------------------------

This portfolio is being  accounted for at fair value in accordance with SFAS No.
115. A summary of investment securities available for sale is as follows:

                                                  GROSS      GROSS
                                   AMORTIZED   UNREALIZED  UNREALIZED     FAIR
                                      COST        GAINS      LOSSES      VALUE
                                   ---------   ----------  ----------    -----
SEPTEMBER 30, 1997
United States Government
  and agency securities ......... $11,040,166     35,202     24,202   11,051,166
Tax-exempt securities (a) .......  21,095,241  1,397,994         --   22,493,235
Corporate equity securities .....   2,146,891    183,006         --    2,329,897
                                  -----------  ---------    -------   ----------
                                  $34,282,298  1,616,202     24,202   35,874,298
                                  ===========  =========    =======   ==========
SEPTEMBER 30, 1996
United States Government
  and agency securities ......... $15,012,555      8,772    236,772   14,784,555
Tax-exempt securities ...........  24,011,328  1,021,068    127,598   24,904,798
Corporate equity securities .....   3,547,827    105,530         --    3,653,357
                                  -----------  ---------    -------   ----------
                                  $42,571,710  1,135,370    364,370   43,342,710
                                  ===========  =========    =======   ==========

During the year ended September 30, 1997, the Company sold securities  realizing
gross  proceeds of  $9,472,341  and gross gains of $321,434  and gross losses of
$164,351. Proceeds from the sale of investment securities totaled $3,133,750 for
the year ended September 30, 1996, and $515,000 for the ten month period ended

                                       31

<PAGE>

September  30,  1995.  Gross gains of $104,824  and $16,820 and gross  losses of
$25,315 and $-0- were  realized  for the periods  ended  September  30, 1996 and
1995, respectively.  In addition, during the current period, the increase in net
unrealized gains of $821,000,  net of the tax effect of $336,610,  resulted in a
$484,390 credit to stockholders' equity.

(a)  Consists of  obligations  of school,  city and park  districts  and general
     obligations of various cities and  municipalities.  All securities carry at
     least a AA  rating  due to  financial  strength  or  because  of  insurance
     enhancements.  At September 30, 1997,  there were 64 tax-exempt  securities
     with  an  average   balance  of   approximately   $336,000.   The   largest
     concentration  (approximately  $9,975,000) of securities are located within
     the State of Illinois with the remainder spread throughout the country.

     Tax-exempt  securities  with a cost basis of $5,612,000 and a fair value of
     approximately  $6,033,000 are pledged as collateral to secure the uninsured
     portions of various municipalities'  certificates of deposit at the Bank as
     of September 30, 1997.

The contractual maturity of these investments are summarized as follows:

<TABLE>
<CAPTION>
                                                SEPTEMBER 30             SEPTEMBER 30
                                                    1997                     1996
                                           -----------------------  ----------------------
                                            AMORTIZED       FAIR     AMORTIZED      FAIR
                                               COST        VALUE        COST       VALUE
                                            ---------      -----     ---------     -----
<S>                                        <C>           <C>         <C>         <C>      
TERM TO MATURITY
Due in one year or less .................  $ 2,096,897   2,128,479   3,907,611   3,952,816
Due after one year through five years ...   10,641,030  10,972,237  13,432,689  13,550,809
Due after five years through ten years ..    6,947,655   7,174,873   6,186,134   6,189,207
Due after ten years .....................   14,596,716  15,598,709  19,045,276  19,649,878
                                           -----------  ----------  ----------  ----------
                                           $34,282,298  35,874,298  42,571,710  43,342,710
                                           ===========  ==========  ==========  ==========
</TABLE>

4.   Mortgage-Backed Securities, Held to Maturity
     --------------------------------------------

The  investment  in  mortgage-backed  securities  held to  maturity  consists of
collateralized   mortgage   obligations  and  real  estate  mortgage  investment
conduits, and is summarized as follows:

                                                  GROSS      GROSS
                                   AMORTIZED   UNREALIZED  UNREALIZED     FAIR
                                      COST        GAINS      LOSSES      VALUE
                                   ---------   ----------  ----------    -----
SEPTEMBER 30, 1997
CMOs and REMICs
  FHLMC - fixed rate ............ $ 3,334,844       783       11,527   3,324,100
  FNMA - fixed rate (a) .........   5,454,152     8,348       69,200   5,393,300
  Privately issued
    fixed rate (a) ..............   9,752,405    59,630       87,435   9,724,600
    adjustable rate (a) .........   9,328,169     7,737      229,206   9,106,700
                                  -----------    ------      -------  ----------
                                  $27,869,570    76,498      397,368  27,548,700
                                  ===========    ======      =======  ==========
Weighted average interest rate ..        6.85%

SEPTEMBER 30, 1996
CMOs and REMICs
  FHLMC - fixed rate ............ $ 4,459,202        --       86,702   4,372,500
  FNMA - fixed rate .............   6,215,360        --      273,460   5,941,900
  Privately issued
     fixed rate .................  12,845,415    62,203      228,518  12,679,100
     adjustable rate ............  11,983,554     8,246      344,000  11,647,800
                                  -----------    ------      -------  ----------
                                  $35,503,531    70,449      932,680  34,641,300
                                  ===========    ======      =======  ==========
Weighted average interest rate ..        6.87%

(a)  Mortgage-backed securities with a cost basis of $3,135,769 and a fair value
     of  approximately  $3,128,500 are pledged as collateral to secure  advances
     from the Federal Home Loan Bank of Chicago, and mortgage-backed  securities
     with a cost basis of $534,689  and a fair value of $540,600  are pledged as
     collateral  to secure the  uninsured  portions  of various  municipalities'
     certificates of deposit at the Bank.

                                       32

<PAGE>

5.   Mortgage-Backed Securities, Available for Sale
     ----------------------------------------------

Mortgage-backed  securities  available  for sale are  recorded  at fair value in
accord ance with SFAS No. 115. This portfolio is summarized as follows:

<TABLE>
<CAPTION>
                                                          GROSS      GROSS
                                           AMORTIZED   UNREALIZED  UNREALIZED     FAIR
                                              COST        GAINS      LOSSES      VALUE
                                           ---------   ----------  ----------    -----
SEPTEMBER 30, 1997
<S>                                       <C>            <C>          <C>      <C>      
FHLMC participation certificates
  adjustable rate (a)(b) ................ $ 3,059,204    171,131      2,487    3,227,848
  fixed rate ............................     741,428     25,010         --      766,438
FNMA participation certificates
  adjustable rate (a)(b) ................   8,549,198    175,493     15,296    8,709,395
  fixed rate (a) ........................     637,108      1,884     16,029      622,963
GNMA participation certificates
  adjustable rate (b) ...................   7,259,175    136,536      1,506    7,394,205
  fixed rate (a)(b) .....................  23,275,018    279,452     39,091   23,515,379
Conventional participation certificates
  adjustable rate .......................   6,658,548    123,256     20,341    6,761,463
CMOs and REMICs
  FNMA - fixed rate (a) .................     742,757      3,767         --      746,524
       - adjustable rate ................   2,101,887      1,630     18,450    2,085,067
Privately issued
  fixed rate ............................   2,962,856         --     51,948    2,910,908
                                          -----------    -------    -------   ----------
                                          $55,987,179    918,159    165,148   56,740,190
                                          ===========    =======    =======   ==========
Weighted average interest rate                   7.28%
</TABLE>

<TABLE>
<CAPTION>
                                                          GROSS      GROSS
                                           AMORTIZED   UNREALIZED  UNREALIZED     FAIR
                                              COST        GAINS      LOSSES      VALUE
                                           ---------   ----------  ----------    -----
SEPTEMBER 30, 1996
<S>                                       <C>            <C>         <C>       <C>      
FHLMC participation certificates
  adjustable rate ....................... $ 4,155,038    122,291      3,719    4,273,610
  fixed rate ............................     868,757      6,603         --      875,360
FNMA participation certificates
  adjustable rate .......................  10,162,121    129,199     40,868   10,250,452
  fixed rate ............................     686,796      4,516     13,850      677,462
GNMA participation certificates
  adjustable rate .......................   6,467,392     24,789     28,084    6,464,097
  fixed rate ............................  18,736,355     22,890    396,914   18,362,331
Conventional participation certificates
  adjustable rate .......................   7,169,611    105,547     42,220    7,232,938
CMOs and REMICs
  FNMA - fixed rate .....................   1,875,500         --     80,500    1,795,000
  Privately issued - fixed rate .........   2,956,459         --    293,259    2,663,200
                                          -----------    -------    -------   ----------
                                          $53,078,029    415,835    899,414   52,594,450
                                          ===========    =======    =======   ==========
Weighted average interest rate ..........        7.25%
</TABLE>

(a)  Mortgage-backed securities with a cost basis of $4,859,373 and a fair value
     of  approximately  $4,941,200  are  pledged  as  collateral  to secure  the
     uninsured  portions of various  municipalities'  certificates of deposit at
     the Bank.

(b)  Mortgage-backed  securities  with a cost  basis of  $14,623,529  and a fair
     value of  approximately  $14,909,400  are pledged as  collateral  to secure
     advances from the Federal Home Loan Bank of Chicago.

During the year ended  September  30,  1997,  the Company  sold  mortgage-backed
securities available for sale realizing gross proceeds of $1,816,256, and losses
of $17,365. During the year ended September 30, 1996, the Company sold mortgage-
backed  securities  available  for sale  realizing  gross  proceeds of $919,975,
profits  of  $7,829  and   losses  of   $3,765.   Proceeds   from  the  sale  of
mortgage-backed securities

                                       33

<PAGE>

totaled $1,288,365 for the ten month period ended September 30, 1995,  resulting
in losses of $13,553.  In addition,  during the current period,  the increase in
net unrealized gains of $1,236,590, net of the tax effect of $506,099,  resulted
in a $730,491 credit to stockholders' equity.

6.   Loans Receivable
     ----------------

Loans receivable consist of the following:

                                    SEPTEMBER 30            SEPTEMBER 30
                                        1997                    1996
                                    ------------            ------------
Mortgage loans:
  One-to-four family ..............  $79,586,001              77,725,129
  Multi-family ....................   12,237,282              12,239,019
  Non-residential .................    4,573,444               3,316,557
Construction ......................      528,909                      --
                                     -----------              ----------
    Total mortgage loans ..........   96,925,636              93,280,705

Other loans:
  Secured lines of credit .........    2,009,733                      --
  Loans on deposits ...............      226,550                 260,467
  Other ...........................       24,400                      --
                                     -----------              ----------
Total loans receivable ............   99,186,319              93,541,172
                                     -----------              ----------
Less:
  Loans in process ................      338,592                 466,409
  Deferred loan fees ..............    1,271,696               1,583,870
  Allowance for loan losses .......      332,000                 345,000
                                     -----------              ----------
Loans receivable, net .............  $97,244,031              91,145,893
                                     ===========              ==========
Weighted average interest rate ....         7.69%                   7.58%


     There were seven  loans  delinquent  three  months or more and  nonaccruing
totaling  $196,966,  or .2% of total loans in force as of  September  30,  1997.
Comparable figures at September 30, 1996 were eight loans totaling $350,528,  or
 .4% of total loans.  The Bank has  established  an allowance  for loan losses of
$332,000 at September 30, 1997 as required by its internal policies.

     For the years ended  September 30, 1997 and 1996,  and the ten months ended
September 30, 1995, gross interest income which would have been recorded had the
non-accruing loans been current in accordance with their original terms amounted
to approximately $16,500, $8,900 and $4,800, respectively.

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

                                 YEAR ENDED       YEAR ENDED    TEN MONTHS ENDED
                                SEPTEMBER 30     SEPTEMBER 30     SEPTEMBER 30
                                    1997             1996             1995
                                ------------     ------------   ----------------
Balance, beginning of period ..   $345,000          275,000          125,000
Provision for loan losses .....     36,618           70,000          163,146
Charge-offs ...................    (49,618)              --          (13,146)
                                  --------          -------          -------
Balance, end of period ........   $332,000          345,000          275,000
                                  ========          =======          =======

At September  30, 1997,  1996 and 1995,  loans  serviced for others  amounted to
$-0-, $86,015 and $96,365, respectively.

                                       34

<PAGE>

     The Bank is required to maintain  qualifying  mortgage  collateral  for the
Federal  Home Loan Bank of Chicago  representing  170  percent  of current  Bank
credit. At September 30, 1997 and 1996 the Bank met this requirement. Qualifying
mortgage collateral is defined as fully disbursed, whole first mortgage loans on
improved residential  property.  The mortgages must not be past due more than 90
days.  They must not be otherwise  pledged or  encumbered  as security for other
indebtedness, and the documents must be in the physical possession or control of
the Bank. The documents that govern the determination of the qualifying mortgage
collateral  are the (a)  Federal  Home  Loan  Bank of  Chicago's  Credit  Policy
Statement,  dated February 1, 1993, and (b) the Advances,  Collateral Pledge and
Security  Agreement  between the  institution  and the Federal Home Loan Bank of
Chicago.

7.   Accrued Interest Receivable
     ---------------------------

Accrued interest receivable is summarized as follows:

                                               SEPTEMBER 30       SEPTEMBER 30
                                                   1997               1996
                                               ------------       ------------
U.S. Government and agency securities ........  $  208,801           305,281
Mortgage-backed securities ...................     529,709           574,659
Tax-exempt securities ........................     391,420           468,047
Loans receivable .............................     369,875           248,248
Allowance for uncollected interest on loans ..     (20,436)           (8,900)
Other investments ............................      71,915            73,752
                                                ----------         ---------
                                                $1,551,284         1,661,087
                                                ==========         =========
8.   Office Property and Equipment
     -----------------------------

Depreciation,  computed by the straight  line  method,  amounted to $196,102 and
$177,333 for the years ended  September 30, 1997 and 1996,  and $148,761 for the
ten months ended  September  30,  1995.  Office  properties  and  equipment  are
summarized as follows:

                                            SEPTEMBER 30            SEPTEMBER 30
                                                1997                    1996
                                            ------------            ------------

Cost:  
  Land - Chicago .........................   $  181,411                 181,411
  Land - Burbank .........................      112,000                 112,000
  Land - Schaumburg ......................      840,000                 840,000
  Office building - Chicago ..............      349,113                 349,113
  Office building - Burbank ..............      752,773                 752,773
  Office building - Schaumburg ...........    1,821,818               1,820,093
  Parking lot improvements ...............       47,394                  47,394
  Furniture, fixtures, and equipment .....    1,564,635               1,399,919
  Automobiles ............................       32,880                  32,880
                                             ----------               ---------
                                              5,702,024               5,535,583
                                             ----------               ---------
Less accumulated depreciation:
  Office building - Chicago ..............      349,113                 349,113
  Office building - Burbank ..............      125,318                 106,494
  Office building - Schaumburg ...........      249,033                 194,171
  Parking lot improvements ...............       47,394                  47,394
  Furniture, fixtures, and equipment .....      977,740                 860,964
  Automobiles ............................       14,100                   8,460
                                             ----------               ---------
                                              1,762,698               1,566,596
                                             ----------               ---------
Less valuation allowance:
  Office building Schaumburg .............      466,000                 466,000
                                             ----------               ---------
                                             $3,473,326               3,502,987
                                             ==========               =========

                                       35

<PAGE>
9. Prepaid Expenses and Other Assets
------------------------------------

Prepaid expenses and other assets consist of the following:

                                             SEPTEMBER 30       SEPTEMBER 30
                                                 1997               1996
                                             ------------       ------------
Current federal and state income tax
  overpayment--net ........................    $498,750                 --
Deferred federal and state income tax
  benefit--net (a) ........................          --            576,675
Prepaid examination fees ..................      15,860             15,964
Prepaid federal insurance premiums ........      19,115             72,926
Other prepaid insurance ...................      29,229             29,047
Prepaid advertising .......................       1,570             24,510
Other prepaid expenses ....................      76,604             14,317
Accounts receivable .......................       1,526              2,602
                                               --------            -------
                                               $642,654            736,041
                                               ========            =======

(a)  The approximate tax effect of temporary  differences  that give rise to the
     Company's net deferred tax asset at September 30, 1996 under SFAS 109 is as
     follows:

SEPTEMBER 30, 1996                                 ASSETS   LIABILITIES   NET
------------------                                 ------   -----------   ---
 Loan fees deferred for financial
    reporting purposes                           $  454,355        --   454,355
 Bad debt reserves established for
    financial reporting purposes                    141,450        --   141,450
 Increases to tax bad debt reserves
    since January 1, 1988                                --  (384,701) (384,701)
 Accelerated depreciation for tax purposes               --   (91,842)  (91,842)
 Valuation allowance on office building             191,060        --   191,060
 Unrealized gain on securities available for sale        --  (119,740) (119,740)
 Nondeductible incentive plan expense                50,981        --    50,981
 SAIF special assessment (note 18)                  352,600        --   352,600
 Other items                                             --   (17,488)  (17,488)
                                                 ----------  --------  --------
                                                 $1,190,446  (613,771)  576,675
                                                 ==========  ========   =======

10. Deposits
------------

Deposit accounts are summarized as follows:

                                                 SEPTEMBER 30       SEPTEMBER 30
                                                     1997               1996
                                                 ------------       ------------
Passbook accounts ........................       $ 19,938,383         20,385,674
Certificates .............................         95,071,195         87,823,338
NOW and money market accounts ............         10,736,423         10,764,323
                                                 ------------        -----------
Total ....................................       $125,746,001        118,973,335
                                                 ============        ===========

The composition of deposit accounts by interest rates is as follows:

                                               SEPTEMBER 30         SEPTEMBER 30
                                                   1997                 1996
                                               ------------         ------------
Noninterest bearing ....................       $     87,231             104,237
2.00 - 3.99% ...........................         21,668,240          22,078,773
4.00 - 4.99 ............................          9,610,160          13,671,245
5.00 - 5.99 ............................         62,247,299          58,439,500
6.00 - 6.99 ............................         29,466,580          15,996,973
7.00 - 7.99 ............................          1,530,587           7,392,701
8.00 - 8.99 ............................            433,888             424,211
9.00 - 9.99 ............................            702,016             865,695
                                               ------------         -----------
Total ..................................       $125,746,001         118,973,335
                                               ============         ===========

Weighted average interest rate .........               5.21%               5.14%

                                       36
<PAGE>

A summary of certificates of deposit by maturity is as follows:

                                                SEPTEMBER 30        SEPTEMBER 30
                                                    1997                1996
                                                ------------        ------------
Within 12 months .......................         $60,259,565         54,076,495
12 months to 24 months .................          23,928,672         17,541,274
24 months to 36 months .................           5,961,203         10,141,388
36 months to 48 months .................           2,650,080          3,993,695
Over 48 months .........................           2,271,675          2,070,486
                                                 -----------         ----------
Total ..................................         $95,071,195         87,823,338
                                                 ===========         ==========

Interest expense on deposits consists of the following:

                                                                     TEN MONTHS
                                       YEAR ENDED     YEAR ENDED        ENDED
                                      SEPTEMBER 30   SEPTEMBER 30   SEPTEMBER 30
                                          1997           1996           1995
                                      ------------   ------------   ------------
Passbook accounts .................    $  607,646        709,803        642,662
Certificates ......................     5,154,822      5,271,871      4,509,964
NOW and money market accounts .....       414,252        444,332        399,005
                                       ----------      ---------      ---------
Total .............................    $6,176,720      6,426,006      5,551,631

The aggregate  amount of deposit  accounts with a balance of $100,000 or greater
was  approximately  $33,400,000  and $32,100,000 at September 30, 1997 and 1996,
respectively.  Deposits  in excess of  $100,000  are not  insured by the Federal
Deposit Insurance Corporation.

11. Borrowed Money
------------------

Borrowed money consists of the following:

                                                  SEPTEMBER 30      SEPTEMBER 30
                                                      1997              1996
                                                  ------------      ------------
Federal Home Loan Bank Advances--
Due date and current rates:
  Period ended within 12 months
    Weighted average fixed rate
      of 6.29% at September 30, 1997 .........     $11,500,000       23,500,000
    Weighted average adjustable rate
      of 5.75% at September 30, 1997 .........       7,000,000          600,000
  Period from 12 months to 24 months
    Weighted average fixed rate
      of 6.32% at September 30, 1997 .........       9,000,000        8,500,000
  Period from 24 months to 36 months
    Weighted average fixed rate
      of 6.04% at September 30, 1997 .........      11,000,000        9,000,000
  Period from 36 months to 48 months
    Weighted average fixed rate
      of 6.77% at September 30, 1997 .........       9,000,000        8,000,000
  Period from 48 months and thereafter
    Weighted average fixed rate
      of 6.19% at September 30, 1997 .........       9,000,000       10,000,000
                                                   -----------       ----------
                                                   $56,500,000       59,600,000
                                                   ===========       ==========

 Weighted average interest rate ..............            6.24%            6.05%

See notes 4, 5 and 6 of the  consolidated  financial  statements  for collateral
securing this indebtedness.

                                       37
<PAGE>

     Interest is accrued on all  borrowings  and recorded in other  liabilities.
Interest  expense on borrowed  money totaled  $3,646,005  and $3,245,920 for the
years ended September 30, 1997 and 1996, and $2,445,028 for the ten months ended
September 30, 1995.

     In  connection  with  the  Company's  initial  public  offering,  the  Bank
established an Employee Stock Ownership Plan (ESOP).  The ESOP was funded by the
proceeds  from a loan from the  Company.  The loan  carries an interest  rate of
6.73% and  matures  in the year  2010.  The loan is secured by the shares of the
Company  purchased  with the loan  proceeds.  The  Bank  has  committed  to make
contributions  to the ESOP sufficient to allow the ESOP to fund the debt service
requirements of the loan.

12. Other Liabilities
---------------------

Other liabilities consist of the following:
                                                     SEPTEMBER 30   SEPTEMBER 30
                                                         1997           1996
                                                     ------------   ------------
Current federal and state income tax
  liability--net .................................    $       --        53,650
Deferred federal and state income tax
  liability--net (a) .............................       741,537            --
Accrued interest on borrowed money ...............       293,700       303,600
Accrued interest on deposits .....................       251,000       258,000
Accrued real estate taxes ........................       169,000       160,000
Accrued SAIF special assessment (note 18) ........            --       860,000
Promissory note for capital contribution due
  Kedzie Limited Partnership .....................       497,045       497,045
Other accrued expenses ...........................       123,984        85,644
Accrued dividends payable ........................            --       216,685
Accounts payable and other items .................       125,849        38,811
                                                      ----------     ---------
                                                      $2,202,115     2,473,435
                                                      ==========     =========

(a)  The approximate tax effect of temporary  differences  that give rise to the
     Company's  net deferred tax  liability at September 30, 1997 under SFAS No.
     109 is as follows:

SEPTEMBER 30, 1997                               ASSETS   LIABILITIES     NET
------------------                               ------   -----------     ---
Loan fees deferred for financial
  reporting purposes .........................  $365,007          --    365,007
Bad debt reserves established for financial
  reporting purposes .........................   136,120          --    136,120
Increases to tax bad debt reserves since
  January 1, 1988 ............................        --    (384,701)  (384,701)
Accelerated depreciation for tax purposes ....        --    (132,697)  (132,697)
Valuation allowance on office building .......   191,060          --    191,060
Unrealized gain on securities available
  for sale ...................................        --    (962,449)  (962,449)
Nondeductible incentive plan expense .........    70,200          --     70,200
Other items ..................................        --     (24,077)   (24,077)
                                                --------  ----------   --------
                                                $762,387  (1,503,924)  (741,537)
                                                ========  ==========   ======== 
13. Benefit Plan
----------------

The Bank has a  self-administered  deferred profit sharing plan which covers all
full-time  employees  over 21 years of age with one or more years of  continuous
employment. This plan is funded by employer contributions,  which are determined
annually by the Bank's Board of Directors.  No  contributions  were made for the
periods ended September 30, 1997, 1996 or 1995.

                                       38
<PAGE>

14. Director, Officer and Employee Plans
----------------------------------------

Stock Option Plan. On May 9, 1996, the  stockholders of the Company approved the
Damen  Financial  Corporation  1996 Stock Option and Incentive  Plan. This is an
incentive  stock  option plan for the  benefit of the  directors,  officers  and
employees  of the Company and its  affiliates.  The number of shares  authorized
under the Plan is 396,750,  equal to 10.0% of the total number of shares  issued
in the Conversion.  As of June 13, 1996,  376,909 options were granted at $11.63
per share, exercisable at a rate of approximately 20% per year commencing May 9,
1997,  and expiring ten years from the date of grant.  On April 1, 1997,  19,837
additional  options were granted at $14.56 per share,  exercisable  at a rate of
20% per year  commencing  April 1, 1998, and expiring ten years from the date of
grant.  Four  options  are  reserved  for future  grants.  75,382  options  were
exercisable  as of September 30, 1997. The following is an analysis of the stock
option  activity for each of the years in the three year period ended  September
30, 1997 and the stock options outstanding at the end of the respective periods.

                                                            EXERCISE PRICE
                                             NUMBER    -------------------------
OPTIONS                                    OF SHARES     PER SHARE      TOTAL
-------                                    ---------     ---------      -----
Outstanding at September 30, 1995 .......         0   
Granted .................................   376,909        $11.63     $4,383,452
Exercised ...............................         0
Forfeited ...............................         0
                                           --------       -------      ---------
Outstanding at September 30, 1996 .......   376,909         11.63      4,383,452
Granted .................................    19,837         14.56        288,827
Exercised ...............................         0
Forfeited ...............................         0
                                           --------       -------      ---------
Outstanding at September 30, 1997 .......   396,746     $11.63-14.56  $4,672,279
                                            =======     ============  ==========
Exercisable at September 30, 1997 .......    73,661        $11.63     $  856,677
                                             ======        ======     ==========
Options available for future
  grants at September 30, 1997 ..........         4
                                            =======

The Company has elected to follow  Accounting  Principles  Board  Opinion No. 25
"Accounting   for  Stock  Issued  to   Employees"   (APB  No.  25)  and  related
interpretations in accounting for its employee stock options.  Under APB No. 25,
because the exercise  price of the Company's  employee  stock options equals the
market  price of the  underlying  stock on the date of  grant,  no  compensation
expense is recognized.

     The  Company   implemented   SFAS  No.  123   "Accounting  for  Stock-Based
Compensation"  during the year ended September 30, 1997. The Company will retain
its current  accounting  method for its  stock-based  compensation  plans.  This
statement  will only result in additional  disclosures  for the Company,  and as
such, its adoption did not, nor is it expected to have, a material impact on the
Company's financial condition or its results of operations.

     The  following  summarizes  the pro forma net  income as if the fair  value
method of accounting for stock-based compensation plans had been utilized:

                                                YEAR ENDED           YEAR ENDED
                                               SEPTEMBER 30         SEPTEMBER 30
                                                   1997                 1996
                                               ------------         ------------
Net income (as reported) ..................     $1,745,447            1,779,842
Pro forma net income ......................      1,664,987            1,753,022

Earnings per share (as reported) ..........           $.53                  .49
Pro forma earnings per share ..............            .51                  .48

The pro forma results  presented above may not be  representative of the effects
reported in pro forma net income for future years.

     The fair value of the option grants for the years ended  September 30, 1997
and 1996 was  estimated  using the Black  Scholes  Method,  using the  following
assumptions:  dividend yield of approximately  2.0%, expected volatility of 10%,
risk free interest rate of 6.25%, and an expected life of approximately 10 years
during both periods.

                                       39
<PAGE>

Employee Stock  Ownership  Plan. In conjunction  with the  Conversion,  the Bank
formed an Employee Stock Ownership Plan ("ESOP").  The ESOP covers substantially
all employees  with more than one year of  employment  and who have attained the
age of 21. The ESOP borrowed  $3,174,000 from the Company and purchased  317,400
common  shares  issued  in  the   Conversion.   The  Bank  will  make  scheduled
discretionary  cash  contributions  to the ESOP sufficient to service the amount
borrowed.  In accordance  with generally  accepted  accounting  principles,  the
unpaid balance of the ESOP loan,  which is comparable to unearned  compensation,
is reported as a reduction of stockholders'  equity.  Total contributions by the
Bank to the ESOP which were used to fund principal and interest  payments on the
ESOP debt totaled  $392,158 and $609,808 for the years ended  September 30, 1997
and 1996, respectively.

     On November  22,  1993,  the AICPA  issued  Statement of Position No. 93-6,
"Employers' Accounting for Employee Stock Ownership Plans" ("SOP No. 93-6"). SOP
No. 93-6 provides  guidance for accounting for all ESOPs.  SOP No. 93-6 requires
that the  issuance or sale of treasury  shares to the ESOP be reported  when the
issuance or sale occurs and that  compensation  expense be recognized for shares
committed  to be  released to directly  compensate  employees  equal to the fair
value of the shares committed. In addition, SOP No. 93-6 requires that leveraged
ESOP debt and related interest expense be reflected in the employer's  financial
statements.  Prior practice was to recognize  compensation  expense based on the
amount of the  employer's  contributions  to the ESOP. SOP No. 93-6 is effective
for fiscal years  beginning  after December 31, 1992. The application of SOP No.
93-6 results in fluctuations  in compensation  expense as a result of changes in
the fair value of the Company's  common stock;  however,  any such  compensation
expense  fluctuations  will result in an  offsetting  adjustment  to  additional
paid-in  capital.  For the years ended  September 30, 1997 and 1996,  additional
compensation  expense of  $79,182  and  $65,628  was  recognized  as a result of
implementation of this accounting principle.

Recognition and Retention Plan. On May 9, 1996, the  stockholders of the Company
approved the Damen  Financial  Corporation  1996  Recognition and Retention Plan
("RRP"). This plan was established to award shares to directors and to employees
in key management positions in order to provide them with a proprietary interest
in the Company in a manner  designed to encourage  such employees to remain with
the Company. The number of shares authorized under the Plan is 158,700, equal to
4.0% of the total number of shares issued in the  Conversion.  These shares were
purchased in the open market  during the quarter  ended June 30, 1996 at a total
cost of $1,865,187.  As of September 30, 1997, 146,796 shares were awarded,  and
are vesting at a rate of 20% per year,  while  11,904  shares are  reserved  for
future awards.

     The $1,865,187  contributed to the RRP is being  amortized to  compensation
expense as the plan  participants  become vested in those shares.  For the years
ended  September 30, 1997 and 1996,  $373,033 and $124,343 had been amortized to
expense. The unamortized cost, which is comparable to deferred compensation,  is
reflected as a reduction of stockholders' equity.

15. Income Taxes
----------------

The Company has adopted  Statement of  Financial  Accounting  Standards  No. 109
(SFAS No. 109) which requires a change from the deferred method to the liability
method of accounting  for income taxes.  Under the  liability  method,  deferred
income taxes are recognized for the tax consequences of "temporary  differences"
by  applying  statutory  tax rates  applicable  to future  years to  differences
between  the  financial  statement  carrying  amounts  and tax bases of existing
assets and liabilities.

     Among the  provisions  of SFAS No. 109 which  impact the Company is the tax
treatment of bad debt  reserves.  SFAS No. 109 provides that a deferred asset is
to be recognized for the bad debt reserve  established  for financial  reporting
purposes and requires a deferred tax  liability to be recorded for  increases in
the tax bad debt reserve  since January 1, 1988,  the effective  date of certain
changes  made  by the Tax  Reform  Act of 1986  to the  calculation  of  savings
institutions'  bad debt deduction.  Accordingly,  retained earnings at September
30, 1997 includes approximately  $3,994,000 for which no deferred federal income
tax liability has been recognized.

                                       40
<PAGE>
The provision for income taxes consists of the following:
                                                                     TEN MONTHS
                                     YEAR ENDED      YEAR ENDED         ENDED
                                    SEPTEMBER 30    SEPTEMBER 30    SEPTEMBER 30
                                        1997            1996            1995
                                    ------------    ------------    ------------
Current (benefit) ..............     $(136,703)        438,031        (210,600)
Deferred (benefit) .............       476,502        (275,571)        102,394
                                     ---------        --------        --------
                                     $ 339,799         162,460        (108,206)
                                     =========         =======        ======== 

A  reconciliation  of the  statutory  federal  income tax rate to the  effective
income tax rate is as follows:
                                                                     TEN MONTHS
                                       YEAR ENDED     YEAR ENDED        ENDED
                                      SEPTEMBER 30   SEPTEMBER 30   SEPTEMBER 30
                                          1997           1996           1995
                                      ------------   ------------   ------------
 Statutory federal income tax rate ..     34.0%          34.0%          34.0%
 State income taxes .................      4.6            3.1            4.7
 Tax-exempt interest income .........    (22.9)         (22.8)         (40.7)
 Tax credits ........................       --           (5.4)         (13.2)
 Other ..............................        6           (0.5)           1.6
                                          ----           ----            ---
 Effective income tax rate...........     16.3%           8.4%         (13.6)%
                                          ====            ===          =====  

Deferred income tax expense  (benefit)  consists of the following tax effects of
timing differences:
                                                                     TEN MONTHS
                                     YEAR ENDED      YEAR ENDED         ENDED
                                    SEPTEMBER 30    SEPTEMBER 30    SEPTEMBER 30
                                        1997            1996            1995
                                    ------------    ------------    ------------
Loan fees .........................   $ 89,348        136,026        113,507
Book provision for loan losses
  less than (in excess of) tax
  bad debt deduction ..............      5,330        (28,700)       (61,500)
Depreciation ......................     40,855         24,737          7,666
Compensation related expenses .....    (19,219)       (50,981)            --
SAIF special assessment ...........    352,600       (352,600)            --
Other, net ........................      7,588         (4,053)        42,721
                                      --------       --------        -------
                                      $476,502       (275,571)       102,394
                                      ========       ========        =======

16. Regulatory Capital Requirements
-----------------------------------

Capital  standards  require banks to satisfy two separate capital  requirements.
Under these standards, banks must maintain "core" (Tier 1) capital equal to 3.0%
of adjusted total assets, and a combination of core and "supplementary" (Tier 2)
capital  equal to 8.0% of  "risk-weighted"  assets.  For purposes of meeting the
core and risk-based capital ratios,  the stockholders'  equity of Damen National
Bank  must be  adjusted  for  unrealized  gains  on debt and  equity  securities
available  for sale,  net of taxes.  Adjusted  total assets are the Bank's total
assets as determined under general accepted accounting principles,  adjusted for
unrealized gains on debt and equity securities available for sale, net of taxes.

     In determining compliance with the risk-based capital requirement, the Bank
is allowed to use both core  capital  and  supplementary  capital  provided  the
amount of  supplementary  capital used does not exceed the Bank's core  capital.
Supplementary  capital of Damen  National  Bank is defined to include all of the
Bank's general loss allowance.  The risk-based  capital  requirement is measured
against  risk-weighted  assets  which  equals  the  sum of  each  asset  and the
credit-equivalent  amount of each off-balance  sheet item after being multiplied
by an assigned risk weight.

     At September 30, 1997 and 1996, the Bank's regulatory equity capital was as
follows:

SEPTEMBER 30, 1997                              CORE CAPITAL  RISK-BASED CAPITAL
------------------                              ------------  ------------------
Stockholders' equity .........................  $ 40,630,341      40,630,341
Unrealized gain on debt and equity securities
  available for sale, net of taxes ...........    (1,288,560)     (1,288,560)
General loss allowances ......................            --         332,000
                                                  ----------         -------
Regulatory capital computed ..................    39,341,781      39,673,781
Minimum capital requirements .................     6,724,000       6,998,000
                                                   ---------       ---------
Regulatory capital excess ....................  $ 32,617,781      32,675,781
                                                ============      ==========
Computed capital ratio .......................         17.55%          45.35%
Minimum capital ratio ........................          3.00            8.00
                                                        ----            ----
Regulatory capital excess ....................         14.55%          37.35%
                                                       =====           ===== 
                                       41
<PAGE>

SEPTEMBER 30, 1996                              CORE CAPITAL  RISK-BASED CAPITAL
------------------                              ------------  ------------------
Stockholders' equity .........................  $ 37,747,723      37,747,723
Unrealized gain on debt and equity securities
  available for sale, net of taxes ...........      (219,679)       (219,679)
General loss allowances ......................            --         345,000
                                                  ----------         -------

Regulatory capital computed ..................    37,528,044      37,873,044
Minimum capital requirements .................     6,659,000       6,033,000
                                                   ---------       ---------

Regulatory capital excess ....................  $ 30,869,044      31,840,044

Computed capital ratio .......................         16.91%          50.22%
Minimum capital ratio ........................          3.00            8.00
                                                        ----            ----

Regulatory capital excess ....................         13.91%          42.22%
                                                       =====           ===== 

17. Stockholders' Equity
------------------------

As part of the Conversion,  the Bank  established a liquidation  account for the
benefit of all  eligible  depositors  who  continue  to maintain  their  deposit
accounts  in the Bank  after  conversion.  In the  unlikely  event of a complete
liquidation of the Bank,  each eligible  depositor will be entitled to receive a
liquidation  distribution  from the liquidation  account,  in the  proportionate
amount of the then current adjusted  balance for deposit  accounts held,  before
distribution  may be made with respect to the Bank's capital stock. The Bank may
not declare or pay a cash dividend to the Company on, or repurchase  any of, its
capital  stock if the effect  thereof  would cause the retained  earnings of the
Bank to be reduced below the amount required for the liquidation account. Except
for  such  restrictions,  the  existence  of the  liquidation  account  does not
restrict the use or application of retained earnings.

     In  addition,  the  Bank  may  not  declare  or pay  cash  dividends  on or
repurchase  any of its shares of common stock if the effect  thereof would cause
stockholders'   equity  to  be  reduced  below  applicable   regulatory  capital
maintenance  requirements  or if such  declaration  and payment would  otherwise
violate regulatory requirements.

     Unlike  the  Bank,   the  Company  is  not  subject  to  these   regulatory
restrictions  on the payment of  dividends  to its  stockholders.  However,  the
Company's  source  of funds for  future  dividends  may  depend  upon  dividends
received by the Company from the Bank.

18. SAIF Special Assessment and its Impact on SAIF Insurance Premiums
---------------------------------------------------------------------

The  deposits  of Damen  National  Bank,  are  presently  insured by the Savings
Association Insurance Fund ("SAIF"), which together with the Bank Insurance Fund
("BIF"),  are  the two  insurance  funds  administered  by the  Federal  Deposit
Insurance Corporation ("FDIC").  Financial institutions which are members of the
BIF are experiencing  substantially lower deposit insurance premiums because the
BIF has  achieved  its  required  level of  reserves  while the SAIF has not yet
achieved its required  reserves.  In order to help  eliminate this disparity and
any  competitive   disadvantage  due  to  disparate  deposit  insurance  premium
schedules, legislation to recapitalize the SAIF was enacted in September 1996.

     The legislation  required a special  one-time  assessment of  approximately
65.7 cents per $100 of SAIF insured deposits held by the Bank at March 31, 1995.
The one-time special assessment had resulted in a charge to earnings of $860,000
during the year ended September 30, 1996. The after-tax  effect of this one-time
charge to  earnings  totaled  $507,400.  The  legislation  is  intended to fully
recapitalize  the SAIF fund so that  commercial  bank and  thrift  deposits  are
charged  the same FDIC  premiums  beginning  January 1,  1997.  As of such date,
deposit insurance premiums for highly rated institutions, such as the Bank, have
been substantially reduced.

     The Bank,  however,  will  continue to be subject to an  assessment to fund
repayment  of  the  Financing  Corporation's  ("FICO")  obligations.   The  FICO
assessment for SAIF insured institutions will be 6.48 cents per $100 of deposits
while BIF insured  institutions  will pay 1.52 cents per $100 of deposits  until
the year 2000 when the  assessment  will be imposed at the same rate on all FDIC
insured institutions.

                                       42
<PAGE>

19. Financial Instruments with Off-Balance Sheet Risk
-----------------------------------------------------

The Company is a party to various  transactions  with off-balance  sheet risk in
the normal course of its business.  These transactions are primarily commitments
to  originate or purchase  loans.  These  financial  instruments  carry  varying
degrees of credit and  interest-rate  risk in excess of amounts  recorded in the
consolidated financial statements.

     Commitments to originate  mortgage  loans totaling  $5,938,000 at September
30,  1997  represent  amounts  which the Bank  plans to fund  within  the normal
commitment period of 60 to 90 days. Of this amount, $3,595,000 are in fixed rate
commitments  with rates  ranging  from  7.35% to 9.25%,  and  $2,343,000  are in
adjustable  rate  commitments.  At September 30, 1996,  commitments to originate
mortgage  loans  totaled  $591,000 with fixed rates ranging from 7.12% to 8.88%.
Because the credit worthiness of each customer is reviewed prior to extension of
the  commitment,  the  Bank  adequately  controls  their  credit  risk on  these
commitments,  as it does to  loans  recorded  on the  balance  sheet.  The  Bank
conducts all of its lending  activities in the Chicagoland area which it serves.
Management   believes  the  Bank  has  a  diversified  loan  portfolio  and  the
concentration of lending  activities in these local  communities does not result
in an acute dependency upon economic conditions of the lending region.

     The Bank has approved,  but unused, equity lines of credit of approximately
$1,243,000  at  September  30,  1997.  Approval of lines of credit is based upon
underwriting standards and limitations similar to conventional lending.

     At  September  30,  1997,  the Bank  was  committed  to fund an  additional
investment  of $798,000,  through the year 2000,  in notes secured by adjustable
rate  mortgage  loans,  issued  by the  Community  Investment  Corporation.  The
outstanding  commitment to fund this investment  totaled $1,005,000 at September
30, 1996. The notes have an average maturity date of approximately twenty years.

     The Bank has  issued a letter of credit in the amount of  $409,275  for the
benefit of the City of Chicago in connection with the Kedzie Limited Partnership
(see note 2).

20. Contingencies
-----------------

The Bank is,  from time to time,  a party to  certain  lawsuits  arising  in the
ordinary  course of its  business,  wherein it enforces its  security  interest.
Management, based upon discussions with legal counsel, believes that the Company
and the Bank are not engaged in any legal  proceedings  of a material  nature at
the present time.

21. Disclosures About the Fair Value of Financial Instruments
-------------------------------------------------------------

The following  methods and  assumptions  were used to estimate the fair value of
each class of financial instruments for which it is practicable to estimate that
value:

Cash and cash equivalents:  For cash and interest-bearing deposits, the carrying
amount is a reasonable estimate of fair value.

U.S.  Government and agency securities:  Fair values for securities are based on
quoted market prices as published in financial publications.

Mortgage-backed securities: Fair values for mortgage-backed securities are based
on average quotes received from a third-party broker.

Loans receivable:  The fair values of fixed-rate  one-to-four family residential
mortgage  loans are based on quoted  market  prices  of  similar  loans  sold in
conjunction  with  securitization  transactions.   The  fair  values  for  other
fixed-rate  mortgage loans are estimated  using  discounted  cash flow analyses,
using  interest rates  currently  being offered for loans with similar terms and
collateral to borrowers of similar credit  quality.  For  adjustable-rate  loans
which reprice monthly and with no significant change in credit risk, fair values
approximate carrying values.

                                       43
<PAGE>

Other investments:  Fair values for other investments are based on quoted market
prices received from third-party sources.

Deposit  liabilities:  The fair value of demand deposits,  passbook accounts and
money market deposits is the amount payable on demand at the reporting date. The
fair value of fixed maturity certificates of deposit is estimated by discounting
the future cash flows using the rates currently  offered for deposits of similar
original maturities.

Borrowed money:  Rates currently  available to the Company for debt with similar
terms and original maturities are used to estimate fair value of existing debt.

Financial  instruments with off-balance sheet risk: Fair values of the Company's
off-balance sheet financial instruments,  which consists of loan commitments and
letters of credit, are based on fees charged to enter into these agreements.  As
the Company currently charges no fees on these instruments,  no estimate of fair
value has been made.

The estimated fair values of the Company's financial instruments are as follows:

                                    SEPTEMBER 30              SEPTEMBER 30
                                        1997                      1996
                             -------------------------  ------------------------
                               CARRYING        FAIR      CARRYING        FAIR
                                AMOUNT        VALUE       AMOUNT        VALUE
                             ------------  -----------  -----------  -----------
Financial assets:
 Cash and cash equivalents . $  2,090,984    2,090,984    1,181,231    1,181,231
 Investment securities .....    1,845,383    1,845,400    1,776,979    1,777,000
 Investment securities,
   available for sale ......   35,874,298   35,874,298   43,342,710   43,342,710
 Mortgage-backed securities    27,869,570   27,548,700   35,503,531   34,641,300
 Mortgage-backed securities,
   available for sale ......   56,740,190   56,740,190   52,594,450   52,594,450
 Loans receivable, gross ...   99,186,319   99,702,100   93,541,172   93,061,700

Financial liabilities:
 Deposits ..................  125,746,001  126,401,100  118,973,335  119,065,000
 Borrowed money ............   56,500,000   55,817,800   59,600,000   59,099,400

22. Condensed Parent Company Only
Financial Statements
---------------------------------

The following condensed statements of financial  condition,  as of September 30,
1997 and 1996, and condensed statements of cash flows and earnings for the years
ended  September 30, 1997 and 1996 and for the period from September 29, 1995 to
September  30,  1995  for  Damen  Financial  Corporation,   should  be  read  in
conjunction with the consolidated financial statements and the notes thereto.

Statements of Financial Condition
---------------------------------
                                                 SEPTEMBER 30       SEPTEMBER 30
                                                     1997               1996
                                                 ------------       ------------
Assets
Cash and cash equivalents ..................     $   983,285          1,120,417
Securities available for sale ..............       1,808,310         11,297,960
Loans receivable ...........................       2,550,800          2,762,400
Equity investment in subsidiaries ..........      41,747,771         40,224,816
Prepaid expenses and other assets ..........          63,112            272,100
                                                 -----------         ----------
                                                  47,153,278         55,677,693
                                                  ==========         ==========

                                                 SEPTEMBER 30       SEPTEMBER 30
                                                     1997               1996
                                                 ------------       ------------
Liabilities and Stockholders' Equity
Accounts payable ...........................          96,885            330,729
Common stock ...............................          39,675             39,675
Additional paid-in capital .................      38,308,138         38,280,338
Retained earnings ..........................      22,100,190         21,131,170
Unrealized gain (loss) on securities
  available for sale, net of taxes .........          94,000            (52,000)
Treasury stock .............................     (12,117,799)        (2,311,375)
Common stock awarded by Recognition
  and Retention Plan .......................      (1,367,811)        (1,740,844)
                                                 -----------         ----------
                                                 $47,153,278         55,677,693
                                                 ===========         ==========

                                       44
<PAGE>

Statements of Cash Flows
------------------------
<TABLE>
<CAPTION>
                                                                                  PERIOD FROM
                                                     YEAR ENDED    YEAR ENDED     SEPTEMBER 29
                                                    SEPTEMBER 30  SEPTEMBER 30  TO SEPTEMBER 30
                                                        1997          1996            1995
                                                    ------------  ------------  ---------------
<S>                                                 <C>             <C>          <C>
Operating activities:
  Net income ...................................... $ 1,745,447     1,779,842             --
  Equity in earnings of subsidiaries ..............  (1,522,955)   (1,287,312)            --
  Gain on sale of investment securities,
    available for sale ............................    (139,718)      (84,550)            --
  (Increase) decrease in accrued
    interest receivable ...........................     171,762      (182,320)            --
  Change in other assets and liabilities ..........     (82,224)      (61,737)            --
  Amortization of cost of stock benefit plans .....     373,033       124,343             --
                                                        -------       -------        -------
Net cash provided by operating activities .........     545,345       288,266             --
                                                        -------       -------        -------

Investing activities:
  Purchase of capital stock of subsidiary .........          --            --    (19,160,006)
  Loan disbursements ..............................          --            --     (3,174,000)
  Loan repayments .................................     211,600       411,600             --
  Purchase of securities available for sale .......  (2,007,981)  (15,581,411)            --
  Proceeds from maturities of investment
    securities available for sale .................     596,753     1,637,563             --
  Proceeds from sales of investment
    securities available for sale .................  11,288,597     2,643,438             --
                                                     ----------     ---------    -----------
Net cash provided by (for) investing activities ...  10,088,969   (10,888,810)   (22,334,006)
                                                     ----------   -----------    ----------- 

Financing activities:
  Net proceeds from sale of common stock ..........          --            --     38,320,013
  Accrued conversion costs ........................          --            --        121,000
  Dividends paid on common stock ..................    (965,022)     (209,484)            --
  Purchase of treasury stock ......................  (9,806,424)   (2,311,375)            --
  Purchase of RRP stock ...........................          --    (1,865,187)            --
                                                     ----------    ----------     ----------
Net cash provided by (for) financing activities ... (10,771,446)   (4,386,046)    38,441,013
                                                    -----------    ----------     ----------

Increase (decrease) in cash and cash equivalents ..    (137,132)  (14,986,590)    16,107,007
Cash and cash equivalents at beginning of period ..   1,120,417    16,107,007             --
                                                      ---------    ----------     ----------

Cash and cash equivalents at end of period ........ $   983,285     1,120,417     16,107,007
                                                    ===========     =========     ==========
</TABLE>

Statements of Earnings
----------------------
                                                                   PERIOD FROM
                                      YEAR ENDED    YEAR ENDED     SEPTEMBER 29
                                     SEPTEMBER 30  SEPTEMBER 30  TO SEPTEMBER 30
                                         1997          1996            1995
                                     ------------  ------------  ---------------
Equity in earnings of subsidiaries .. $1,522,955    1,287,312           --
Interest and dividend income ........    676,491    1,085,013           --
Gain on sale of investment
  securities, available for sale ....    139,718       84,550           --
Non-interest expense ................   (467,994)    (449,733)          --
Provision for federal and
  state income taxes ................   (125,723)    (227,300)          --
                                        --------     --------      -------
Net income .......................... $1,745,447    1,779,842           --
                                      ==========    =========      =======

23. Subsequent Event
--------------------

At the October  21, 1997 Board of  Directors'  meeting,  the Company  declared a
quarterly dividend of $.06 per share,  totaling  $186,553,  payable November 14,
1997 to shareholders of record as of October 31, 1997.

                                       45
<PAGE>

Corporate Office
----------------
200 West Higgins Road
Schaumburg, Illinois  60195

Annual Report on Form 10-K
--------------------------
A copy of Damen Financial Corporation's Annual Report on Form 10-K as filed with
the  Securities  and Exchange  Commission  may be obtained  without  charge upon
written  request to Janine M. Poronsky,  Damen Financial  Corporation,  200 West
Higgins Road, Schaumburg, Illinois 60195, or by calling (847) 882-5320.

Registrar/Transfer Agent
------------------------
Communications  regarding  change  of  address,   transfer  of  stock  and  lost
certificates should be sent to:

Registrar and Transfer Company
10 Commerce Drive
Cranford, New Jersey 07016

Accountants
-----------
Cobitz, VandenBerg & Fennessy
Suite 301
7800 West 95th Street
Hickory Hills, Illinois  60457

Dividends
---------
The  Company  paid a six cents per share  dividend to holders of record for each
quarter  since June 1996.  The Board of Directors  will  consider the payment of
future cash  dividends,  dependent on the results of  operations  and  financial
condition of the  Company,  tax  considerations,  industry  standards,  economic
conditions,  regulatory  restrictions,  general  business  practices  and  other
factors. The Company's ability to pay dividends may be dependent on the dividend
payments it receives from its subsidiary, Damen National Bank, which are subject
to regulations and the Bank's continued  compliance with all regulatory  capital
requirements.  See Note 17 of the Notes to the Consolidated Financial Statements
for information  regarding  limitations of the ability of Damen National Bank to
pay dividends to the Company.

Stock Listing
-------------
Damen  Financial  Corporation's  common  stock is traded over the counter and is
listed on the  Nasdaq  National  Market  System  under  the  symbol  "DFIN."  At
September 30, 1997, there were 3,109,220  shares of Damen Financial  Corporation
common stock issued and outstanding and there were  approximately 240 holders of
record.  The table  below shows the range of the common  stock for each  quarter
since the common  stock began  trading on October 2, 1995.  These  prices do not
represent actual  transactions  and do not include retail markups,  markdowns or
commissions.

                                           PER SHARE
                                      ------------------
QUARTER ENDED                          HIGH        LOW     DIVIDENDS
-------------                          ----        ---     ---------
December 31, 1995(1) ..............   $12.25      $11.25        --
March 31, 1996 ....................   $11.75      $10.75        --
June 30, 1996 .....................   $12.25      $11.25      $.06
September 30, 1996 ................   $12.13      $11.00      $.06
December 31, 1996 .................   $12.94      $11.75      $.06
March 31, 1997 ....................   $15.00      $12.63      $.06
June 30, 1997 .....................   $14.75      $13.88      $.06
September 30, 1997 ................   $15.75      $13.88      $.06

(1)  Reflects the period from October 2 through December 31, 1995.

The stock price  information  set forth in the table  above was  provided by the
National  Association of Securities  Dealers,  Inc. High, low and closing prices
and daily trading volume are reported in most major newspapers.

Market Makers
Chicago Capital, Inc.
The Chicago Corporation
Dean Witter Reynolds
Ernst & Company
Everen Securities, Inc.
Friedman Billings Ramsey & Co.
Herzog, Heine, Geduld, Inc.

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