SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

                                    FORM 10-K

              Annual Report Pursuant to Section 13 or 15 (d) of the
                         Securities Exchange Act of 1934

                   For the fiscal year ended December 31, 1999
                          Commission File No.: 1-14274

                         CITIZENS FIRST FINANCIAL CORP.
             (Exact name of registrant as specified in its charter)

         DELAWARE                                             37-1351861
(State or other jurisdiction of                       (I.R.S. Employer I.D. No.)
incorporation or organization)

            2101 North Veterans Parkway, Bloomington, Illinois 61704
               (Address of principal executive offices) (Zip Code)

                  Registrant's telephone number: (309) 661-8700
        Securities registered pursuant to Section 12(g) of the Act: None
           Securities registered pursuant to Section 12(b) of the Act:

                     Common Stock par value $0.01 per share
                                (Title of class)

                             American Stock Exchange
                     (Name of exchange on which registered)

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

      Yes |X| No |_|

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

      The aggregate market value of the voting stock held by non-affiliates of
the registrant, i.e., persons other than directors and executive officers of the
registrant is $23,759,454 and is based upon the last sales price as quoted on
The American Stock Exchange for March 14, 2000.

      The Registrant had 1,958,015 shares of Common Stock outstanding as of
March 14, 2000.

                       DOCUMENTS INCORPORATED BY REFERENCE

      Portions of the Annual Report to Stockholders for the year ended December
31, 1999, are incorporated by reference into Part II of this Form 10-K.

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

                                      INDEX

                                                                            PAGE

PART I
         Item 1    Business....................................................1
         Item 2    Properties.................................................23
         Item 3    Legal Proceedings..........................................24
         Item 4    Submission of Matters to a Vote of Security Holders........24
         Supplemental Information - Executive Officers of the Registrant

PART II

         Item 5    Market for Registrant's Common Equity and Related
                   Stockholder Matters .......................................25
         Item 6    Selected Financial Data....................................25
         Item 7    Management's Discussion and Analysis of Financial
                   Condition and Results of Operations........................25
         Item 7A   Quantitative and Qualitative Disclosures about
                   Market Risk................................................25
         Item 8    Financial Statements and Supplementary Data................25
         Item 9    Changes in and Disagreements With Accountants on
                   Accounting and Financial Disclosures.......................25

PART III

         Item 10   Directors and Executive Officers of the Registrant.........25
         Item 11   Executive Compensation.....................................26
         Item 12   Security Ownership of Certain Beneficial Owners
                   and Management.............................................26
         Item 13   Certain Relationships and Related Transactions.............26

PART IV
         Item 14   Exhibits, Financial Statement Schedules, and Reports on
                   Form 8-K ..................................................26

Signatures....................................................................28
<PAGE>

                                     PART I

Item 1 Business

General

      Citizens First Financial Corp. (the "Company") was incorporated under
Delaware law in January 1996. The Company completed its initial public offering
of 2,817,500 shares of common stock on May 1, 1996 in connection with the
conversion of Citizens Savings Bank, F.S.B (the "Bank") from the mutual to stock
form of ownership (the "Conversion"). The Company is a savings and loan holding
company and is subject to regulation by the Office of Thrift Supervision
("OTS"), and the Securities and Exchange Commission ("SEC"). Currently, the
Company does not transact any material business other than through its
subsidiary, the Bank. At December 31, 1999, the Company had total assets of
$316.6 million, total deposits of $220.2 million and total stockholders' equity
of $34.3 million.

      The Bank was originally chartered in 1888 by the State of Illinois and in
1989 became a federally chartered savings bank. In April 1999, the Bank was
converted from a federally chartered savings bank to an Illinois state savings
bank. The Bank's principal business consists of the acceptance of retail
deposits from the general public in the area surrounding its branch offices and
the investment of those deposits, together with funds generated from operations
and borrowings, in one- to four-family residential mortgage loans, multi-family,
commercial real estate, consumer and other loans. The Bank originates loans for
investment and for sale. Currently, it is the Bank's policy to sell, on a
servicing retained basis, most longer-term fixed rate one- to four-family
mortgage loans it originates as a method of controlling its growth, managing its
interest rate risk and increasing its loan servicing fee income. The Bank's
revenues are derived principally from interest on its mortgage, consumer and
commercial loans, loan servicing fees and, to a lesser extent, the interest on
its securities. The Bank's primary source of funds are deposits, principal and
interest payments on loans and securities, borrowings from the Federal Home Loan
Bank of Chicago and, to a lesser extent, proceeds from the sale of loans and
securities. The Bank had two wholly-owned service corporations, CSL Service
Corporation and Fairbury Financial Services Corp. CSL Service Corporation is an
Illinois-chartered corporation that has a joint venture with an independent
insurance agency and a participant in a joint venture that has purchased and is
developing commercial real estate. Fairbury Financial Services Corp., an
Illinois-chartered corporation, that serviced previously sold tax deferred
annuities and long-term care insurance policies that it sold on an agency basis
was merged into CSL Service Corporation in January, 1999.

Market Area and Competition

      The Bank is a community-oriented savings institution offering a variety of
financial products and services to meet the needs of the communities it serves.
The Bank's deposit gathering is concentrated in the communities surrounding its
six offices located in the municipalities of Bloomington, Normal, Eureka and
Fairbury, Illinois which are part of McLean, Woodford and Livingston Counties.
In January 2000, the Company entered into a purchase agreement for the sale of
certain fixed assets and assumption of deposit liabilities of a branch located
in Eureka, Illinois. McLean County comprises the greater Bloomington/Normal
metropolitan area and Woodford, Tazewell and Livingston Counties are adjacent to
the greater Bloomington/Normal metropolitan area. The economy in McLean,
Woodford, Tazewell and Livingston Counties has historically benefitted from the
presence of the national and regional headquarters of State Farm Insurance
Company, the Mitsubishi Motors Corporation, Caterpillar, GTE, the Eureka
Company, Illinois Farm Bureau, Illinois State University and Illinois Wesleyan
University as well as a variety of agricultural related businesses. These
counties are the primary market area for the Bank's lending and deposit
gathering activities.


                                       -1-
<PAGE>

      The Bank faces significant competition both in making loans and in
attracting deposits. The greater Bloomington/Normal metropolitan area is a
highly competitive market. The Bank faces direct competition from a significant
number of financial institutions operating in its market area, many with a
state-wide or regional presence and in some cases a national presence. Many of
these financial institutions are significantly larger and have greater financial
resources than the Bank. State Farm Insurance Company, Bloomington-Normal's
largest business, has opened a savings bank, which it will operate through its
agents on a national basis. The Bank's competition for loans comes principally
from commercial banks, savings and loan associations, mortgage banking
companies, credit unions and insurance companies. Its most direct competition
for deposits has historically come from savings and loan associations and
commercial banks. In addition, the Bank faces increasing competition for
deposits from non-bank institutions such as brokerage firms and insurance
companies in such areas as short-term money market funds, corporate and
government securities funds, mutual funds and annuities. Competition may also
increase as a result of the lifting of restrictions on the interstate operations
of financial institutions.

Investment Activities

      The investment policy of the Bank, as approved by the Board of Directors,
requires management to maintain adequate liquidity and generate a favorable
return on investments without incurring undue interest rate and credit risk. The
Bank has invested primarily in U.S. Agency securities, a Federal Home Loan Bank
demand investment account, eligible mutual funds, corporate securities and U.S.
government sponsored agency issued mortgage-backed securities. SFAS 115 requires
the Bank to designate its securities as held to maturity, available for sale or
held for trading. The Bank does not currently maintain a portfolio of securities
categorized as held to maturity or held for trading. The Bank's investment
securities generally consist of U.S. Agency obligations and mortgage-backed and
mortgage-related securities. The Bank's mortgage-backed securities consist of
pass through certificates representing interests in pools of fixed and
adjustable rate mortgage loans issued or guaranteed by FNMA, FHLMC or GNMA. At
December 31, 1999, the Bank's portfolio of investment and mortgage-backed
securities totaled $16.1 million, all of which was categorized as available for
sale.

      In recent periods, the Bank has primarily invested in securities in order
to maintain liquid assets for its operations and as a means of utilizing its
excess funding not necessary for loan originations. The Board of Directors
reviews all of the activity in the investment portfolio on a monthly basis.

Lending Activities

      Origination, Sale, Servicing and Purchase of Loans. The Bank's loan
origination activities are conducted primarily by its loan personnel, operating
at its six branch offices. All loans originated by the Bank are underwritten by
the Bank pursuant to the Bank's policies and procedures. The Bank originates
both adjustable-rate and fixed-rate mortgage loans, commercial loans and
consumer loans. The Bank's ability to originate loans is dependent upon the
relative customer demand for the type of loan and demand for fixed-rate or
adjustable-rate loans, which is affected by the current and expected future
level of interest rates.

      While the Bank has in the past, from time to time, sold adjustable-rate
one- to four-family loans and retained mortgage loans with terms of 10 years or
more, it is currently the general policy of the Bank to originate for sale in
the secondary market one- to four-family fixed-rate mortgage loans with
maturities exceeding ten years and to originate for investment all
adjustable-rate one- to four-family mortgage loans and fixed-rate one- to
four-family mortgage loans with maturities of ten years or less.

      One- to-Four Family Mortgage Lending. The Bank currently offers both
fixed-rate and adjustable-rate mortgage loans secured by one- to-four family
residences located in the Bank's primary market area, with


                                      -2-
<PAGE>

maturities of up to thirty years. While the Bank has originated such loans
secured by properties outside its market area, substantially all of such loans
at December 31, 1999 were secured by property located in the Bank's primary
market area. One- to-four family mortgage loan originations are generally
obtained from the Bank's loan representatives operating in its branch offices
and their contacts with the local real estate industry, existing or past
customers, and members of the local communities.

      Multi-Family Lending. The Bank originates fixed and adjustable-rate
multi-family mortgage loans generally secured by 5 to 70 unit apartment and
student housing buildings located in the Bank's primary market area. In reaching
its decision on whether to make a multi-family loan, the Bank considers the
qualifications and financial condition of the borrower as well as the value and
condition of the underlying property. The factors considered by the Bank
include: the net operating income of the mortgaged premises before debt service
and depreciation; the debt coverage ratio (the ratio of net earnings to debt
service); and the ratio of loan amount to appraised value.

      Commercial Real Estate Lending. The Bank originates adjustable-rate
commercial real estate loans that are generally secured by properties used for
business purposes such as small office buildings or a combination of residential
and retail facilities located in the Bank's primary market area.

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

      Construction and Land Lending. The Bank originates loans for the
acquisition and development of commercial and residential property located in
its primary market area. These loans are offered to local developers and
individuals. The majority of the Bank's construction loans are originated
primarily to finance the construction of one- to four-family, owner-occupied
residential properties and multi-family properties located in the Bank's primary
market area. Such loans are offered for the construction of properties that are
pre-sold or for which permanent financing has been secured, as well as for
properties that are not pre-sold or for which permanent financing has not been
secured.

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

      Commercial Lending. The Bank offers commercial loans to businesses
operating in the Bank's primary market area on a selective basis.

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


                                      -3-
<PAGE>

difficult to appraise and may fluctuate in value based on the success of the
business. Included in this total are agricultural loans made within our lending
area. These agricultural loans are generally offered with one year terms in
amounts up to $500,000 and are generally secured by crops, equipment and other
assets and personal guarantees.

      Consumer and Other Lending. The Bank's portfolio of consumer and other
loans primarily consist of fixed-rate, fixed-term home equity loans, adjustable
home equity lines of credit, loans secured by automobiles, home improvement
loans, loans secured by deposit accounts and unsecured personal loans.

      Loan Servicing. The Bank generally services all loans it retains for
investment and also services a portfolio of one- to four-family mortgage loans
for others which is primarily generated from its loan sale activity. Loan
servicing includes collecting and remitting loan payments, accounting for
principal and interest, making inspections as required of mortgaged premises,
contacting delinquent mortgagors, supervising foreclosures and property
dispositions in the event of unremedied defaults, making certain insurance and
tax payments on behalf of the borrowers and generally administering the loans.

Deposit Activities

      Deposits. The Bank offers a variety of deposit accounts with a range of
interest rates and terms. The Bank's deposit accounts consist of savings, NOW
accounts, checking accounts, money market accounts and certificate accounts. The
Bank also offers certificate of deposit accounts with balances in excess of
$100,000 at negotiated rates (jumbo certificates) and Individual Retirement
Accounts ("IRAs"). For the year ended December 31, 1999, the average balance of
core deposits (savings, NOW, money market and non-interest-bearing checking
accounts) totaled $50.6 million, or 25.2%, of total average deposits. The flow
of deposits is influenced significantly by general economic conditions, changes
in money market rates, prevailing interest rates and competition. The Bank's
deposits are obtained predominantly from the areas in which its branch offices
are located. The Bank relies primarily on customer service and long-standing
relationships with customers to attract and retain these deposits; however,
market interest rates and rates offered by competing financial institutions
significantly affect the Bank's ability to attract and retain deposits. The Bank
uses traditional means of advertising its deposit products, including radio and
print media and generally does not solicit deposits from outside its market
area. While certificate accounts in excess of $100,000 are accepted by the Bank,
the Bank does not actively solicit such deposits nor does the Bank currently use
brokers to obtain deposits. The Bank has attempted to increase its deposit
customer base and decrease its level of dependency on certificate accounts by
offering interest free checking accounts without minimum balance requirements.


                                       -4-
<PAGE>

Statistical Data

INVESTMENT SECURITIES

      The amortized cost, gross unrealized gains, gross unrealized losses and
approximate market value of the investment securities at the dates indicated
were:

<TABLE>
<CAPTION>
                                                          Gross        Gross
                                            Amoritzed  Unrealized   Unrealized      Fair
                                            Cost       Gains        Losses         Value
                                              -------     -------       -------   -------
                                                         (Dollars in thousands)
<S>                                           <C>         <C>           <C>        <C>
Available for sale at December 31, 1999:
   Federal agencies                           $ 7,502                   $   288   $ 7,214
   Mortgage-backed securities                   8,144                       258     7,886
   Other asset-backed securities                   15                                  15
   Marketable equity securities                 1,000                        12       988
                                              -------     -------       -------   -------
       Total available for sale               $16,661                   $   558   $16,103
                                              =======     =======       =======   =======

Available for sale at December 31, 1998:
   Federal agencies                           $ 6,500     $     6       $     2   $ 6,504
   Mortgage-backed securities                  10,380          10            91    10,299
   Other asset-based securities                   231                                 231
   Marketable equity securities                 1,000                         1       999
                                              -------     -------       -------   -------
       Total available  for sale              $18,111     $    16       $    94   $18,033
                                              =======     =======       =======   =======

Available for sale at December 31, 1997:
   Federal agencies                           $ 4,209     $    14       $     4   $ 4,219
   Mortgage-backed securities                  14,210                       175    14,035
   Other asset-backed securities                   46                                  46
   Marketable equity securities                 1,000           2                   1,002
                                              -------     -------       -------   -------
      Total available for sale                $19,465     $    16       $   179   $19,302
                                              =======     =======       =======   =======
</TABLE>


                                      -5-
<PAGE>

The balance of Federal Home Loan Bank of Chicago stock owned at December 31 is
as follows:

                                      Cost
                     --------------------------------------
                             (Dollars in thousands)
                      1999            1998            1997
                      ----            ----            ----

                     $2,853          $1,971          $2,453
                     ======          ======          ======

The fair value of Federal Home Loan Bank stock approximates cost.
The yield on the stock is approximately 6.75% at December 31, 1999.

The maturity distribution (dollars in thousands) and average yields for the
securities available for sale portfolio at December 31, 1999 were:

                        Within 1 Year        1 - 5 Years        5 - 10 Years
                       ---------------     ---------------    ---------------
                       Amount    Yield     Amount    Yield    Amount    Yield
                       ------    -----     ------    -----    ------    -----

   Federal agencies    $  988     4.98%    $2,444    6.37%    $3,782    6.58%
                       ------    ------    ------    -----    ------    -----
       Total           $  988     4.98%    $2,444    6.37%    $3,782    6.58%
                       ======    ======    ======    =====    ======    =====

<TABLE>
<CAPTION>
                                                      Marketable Equity,
                                                      Mortgage and Other
                               Due After Ten Year   Asset-Backed Securities         Total
                               ------------------   -----------------------         -----
                                Amount    Yield     Amount         Yield      Amount     Yield
                                 -----    -----     -------        -----      -------    -----
<S>                              <C>       <C>      <C>            <C>        <C>        <C>
Federal agencies                                                              $7,2144     6.29%
Marketable equity securities                        $   988         5.34%         988     5.34
Mortgage-backed securities                            7,886         6.22        7,886     6.22
Other asset-backed securities                            15         5.44           15     5.44
                                 -----    ------    -------        -----      -------    -----
      Total                      $ -0-     0.00%    $ 8,889        6.11%      $16,103    6.20%
                                 =====    ======    =======        =====      =======    =====
</TABLE>


                                      -6-
<PAGE>

LOAN PORTFOLIO
Types of Loans

<TABLE>
<CAPTION>
                                        1999       1998       1997       1996       1995
                                        ----       ----       ----       ----       ----
                                                     (Dollars in thousands)
<S>                                   <C>        <C>        <C>        <C>        <C>
Commercial loans                      $ 12,694   $ 12,727   $ 16,863   $  8,063   $  6,865
Real estate loans:
   Construction and land                72,636     40,946     15,862     12,489     12,353
   Commercial                           26,633     24,073     25,610      8,934      8,679
   Residential                         153,070    150,273    168,938    174,253    152,177
Consumer and other loans                16,151     12,072     12,345     11,444     11,719
                                      --------   --------   --------   --------   --------
   Total                               281,184    240,091    239,618    215,183    191,793

Deferred premium on sale of loans            3         11         33         34         39
                                      --------   --------   --------   --------   --------

   Total gross loans                   281,187    240,102    239,651    215,217    191,832

Less:
   Undisbursed portion of loans (1)     15,623      7,189      9,049      3,397      2,859
   Unearned interest
   Deferred loan fees                       11         29        293        266        200
   Allowance for loan losses             1,679      1,256        840        512        412
                                      --------   --------   --------   --------   --------

Loans, net                            $263,874   $231,628   $229,469   $211,042   $188,361
                                      ========   ========   ========   ========   ========
</TABLE>

(1) The undisbursed portion of loans represents amounts included in gross loans
above that have been approved, but not disbursed to the borrower.

Loans held for sale at December 31, 1999, 1998, 1997, 1996 and 1995 were
$3,007,425, $5,245,872, $2,393,567, $3,027,468 and $-0-, respectively, were not
included in the above totals.

Maturities and Sensitivities of Loans to Changes in Interest Rates

Presented in the table below are the maturities of loans (excluding commercial
real estate, residential real estate and consumer and other loans) outstanding
as of December 31, 1999. Also presented are the amounts due after one year
classified according to the sensitivity to changes in interest rates.

                                                    Maturing
                                           --------------------------
                                           Within      1-5     Over 5
                                           1 Year     Years     Years     Total
                                           -------   -------   -------   -------
                                                  (Dollars in thousands)

Commercial loans                           $ 7,307   $ 4,413    $  974   $12,694
Real estate loans-Construction and
    Land                                    37,569    33,457     1,610    72,636
                                           -------   -------    ------   -------
     Total                                 $44,876   $37,870    $2,584   $85,330
                                           =======   =======    ======   =======


                                      -7-
<PAGE>

                                                                 Maturing
                                                           -------------------
                                                            1 - 5       Over
                                                            Years      5 Years
                                                           -------     -------
                                                          (Dollars in thousands)

Loans maturing after one year with:
   Fixed rates                                             $26,928      $2,584
   Variable rate                                            10,942           0
                                                           -------      ------
      Total                                                $37,870      $2,584
                                                           =======      ======

Risk Elements

                                                            December
                                                --------------------------------
                                                1999   1998   1997   1996   1995
                                                ----   ----   ----   ----   ----
                                                     (Dollars in thousands)
Nonaccruing loans                               $435   $129   $737   $198   $311

Loans contractually past due 90 days or
    more other than nonaccuring                  134    250    211    369    637

Restructured loans                               314    325    341    463    364

Nonaccruing loans are loans which are reclassified to a nonaccruing status when
in management's judgment the collateral value and financial condition of the
borrower do not justify accruing interest. Interest previously recorded but not
deemed collectible is reversed and charged against current income. Interest
income on these loans is then recognized when collected.

Restructured loans are loans for which the contractual interest rate has been
reduced or other concessions are granted to the borrower because of a
deterioration in the financial condition of the borrower resulting in the
inability of the borrower to meet the original contractual terms of the loans.

Interest income of approximately $26,000 for the year ended December 31, 1999,
was recognized on the nonaccruing and restructured loans listed in the table
above, whereas interest income of approximately $45,000 would have been
recognized under their original loan terms.

Potential Problem Loans:

Management has identified certain other loans totaling $250,000 as of December
31, 1999, not included in the risk elements table, which are current as to
principal and interest, about which there are doubts as to the borrowers'
ability to comply with present repayment terms.

The Bank generates commercial, mortgage and consumer loans from customers
located primarily in Central Illinois. The Bank's loans are generally secured by
specific items of collateral including real property, consumer assets, and
business assets. Although the Bank has a diversified loan portfolio, a
substantial portion of their debtors' ability to honor their contracts is
dependent upon economic conditions in Central Illinois.


                                      -8-
<PAGE>

The Company accounts for impaired loans in accordance with SFAS No. 114 and No.
118, "Accounting by Creditors for an Impairment of a Loan" and "Accounting by
Creditors for Impairment of a Loan - Income Recognition and Disclosures". These
Statements require that impaired loans within the scope of these Statements be
measured at the present value of expected future cash flows discounted at the
loan's effective interest rate, or as a practical expedient, at the loan's
observable market price or fair value of the collateral, if the loan is
collateral dependent. A loan is impaired when, based on current information and
events, it is probable that a creditor will be unable to collect all amounts
due, both principal and interest, according to the contractual terms of the
note. The amount of impaired loans outstanding at December 31, 1999 and 1998 and
during 1999 and 1998 were immaterial. The Company considers 1-4 family real
estate and consumer loans to be homogeneous and are therefore excluded from the
separate identification for evaluation of impairment.

Allowance for Loan Losses and Impaired Loans

      The allowance for loan losses is maintained at a level management believes
to be adequate to provide for known and potential risks inherent in the loan
portfolios. On a quarterly basis, management assesses the adequacy of the
allowance for loan losses. Management's evaluation of the adequacy of the
allowance considers such factors as prior loss experience, loan delinquency
levels and trends, loan portfolio growth and reviews of impaired loans and the
value of underlying collateral securing these loans. The analysis of the
commercial and industrial loan portfolio includes assessments based on historic
loan losses and current quality grades of specific credits, current delinquent
and non-performing loans, current economic conditions, growth in the portfolio
and the results of recent audits and regulatory examinations. For the review of
the adequacy of the allowance for loan losses for real estate loans, assessments
are based on current economic conditions and real estate values, historic loan
losses and current quality grades of specific credits, recent growth and current
delinquent and non-performing loans. The adequacy of the allowance for loan
losses as it pertains to the consumer loan portfolio is based on the assessments
of current economic conditions, historic loan losses and the mix of loans,
recent growth and the current delinquent and non-performing loans.

      Although the risk of non-payment for any reason exists with respect to all
loans, certain other more specific risks are associated with each type of loan.
The primary risks associated with commercial loans are quality of the borrower's
management and the impact of national and local economic factors. Currently the
business atmosphere remains stable for the local economy in the McLean,
Livingston and Tazewell County areas. Risk associated with real estate loans
include concentrations of loans in a loan type, such as residential real estate,
decline in real estate values and a sudden rise in interest rates. Individual
loans face the risk of borrower's unemployment as a result of deteriorating
economic conditions or renewed contract differences between unions and
management of several large companies in the Company's market area. The
Company's strategy with respect to addressing and managing these types of risks
is for the Company to follow its loan policies and underwriting criteria.

      The Company has substantially increased its investment in commercial,
commercial real estate and construction and land loans since December 31, 1996.
Because of the higher degree of risk associated with these types of loans, the
Company has undertaken to increase its allowance for loan losses to reflect this
increased risk.


                                      -9-
<PAGE>

      A provision for loan losses is charged to income to increase the allowance
to a level deemed to be adequate based on management's evaluation. When a loan
or a part thereof is considered by management to be uncollectible, a charge is
made against the allowance. Recoveries of previously charged-off loans are
credited back to the allowance. The following table summarizes the changes in
the allowance for loan losses for the last five years (in thousands):

Summary of Loan Loss Experience

<TABLE>
<CAPTION>
                                                  1999      1998         1997        1996        1995
                                                 -----------------------------------------------------
<S>                                              <C>       <C>         <C>         <C>         <C>
Balance at January 1                             $1,256       $840        $512        $412        $353

Loan charged off (net):
Commercial loans                                     --         (8)         --          --          --
Real estate loans:
   Construction and land                             --         (7)         --          --          --
   Commercial                                        --         --         (32)         --          --
   Residential                                      (57)       (32)       (106)        (47)        (59)
Consumer and other loans                             --         --         (32)        (20)         (5)
                                                 ------    -------     -------     -------     -------
Net charge-offs                                     (57)       (47)       (188)        (67)        (64)
                                                 ------    -------     -------     -------     -------
Provision for loan losses                           480        463         516         167         123
                                                 ------    -------     -------     -------     -------
Balance at December 31                           $1,679    $ 1,256     $   840     $   512     $   412
                                                 ======    =======     =======     =======     =======

Ratio of net charge-offs during the period to
  average loans outstanding during the period      0.02%      0.02%       0.08%       0.03%       0.03%
                                                 ======    =======     =======     =======     =======
</TABLE>

      For many years, the Company has minimized credit risk by adhering to sound
underwriting and credit review policies. These policies are reviewed at least
annually and changes approved by the board of directors. Senior management is
actively involved in business development efforts and maintenance and monitoring
of credit underwriting approval.

      Management believes the allowance for loan losses is adequate to absorb
probable loan losses and that the policies and procedures in place to identify
and monitor loans for potential losses are satisfactory.


                                      -10-
<PAGE>

Allocation of the Allowance for Loan Losses

      Presented below is an analysis of the composition of the allowance for
loan losses (in thousands of dollars) and percent of each category to total
loans:

                            1999               1998               1997
--------------------------------------------------------------------------------
                                    % of               % of               % of
                          Amount   Total     Amount   Total     Amount   Total
--------------------------------------------------------------------------------
Commercial loans          $  405    24.12%   $  320    25.48%   $  213    25.36%
Real estate loans:
   Construction and land     210    12.51        70     5.57        40     4.76
   Commercial                285    16.97       120     9.55       116    13.81
   Residential               480    28.59       435    34.63       393    46.78
Consumer and other loans     120     7.15        75     5.97        78     9.29
Unallocated                  179    10.66       236    18.80         0      0.0
                             ---    -----       ---    -----         -      ---

     Total                $1,679    100.0%   $1,256    100.0%   $  840    100.0%
                          ======    =====    ======    =====    ======    =====

                                               1996                1995
--------------------------------------------------------------------------------
                                                       % of               % of
                                             Amount    Total     Amount   Total
--------------------------------------------------------------------------------

Commercial loans                              $ 68     13.28%    $ 56     13.59%
Real estate loans:
   Construction and land                        46      8.98       16      3.88
   Commercial                                   36      7.03       56     13.59
   Residential                                 222     43.37      182     44.18
Consumer and other loans                       140     27.34      130     31.55
Unallocated                                      0       0.0        0       0.0
                                              ----     -----     ----     -----

    Total                                     $512     100.0%    $412     100.0%
                                              ====     =====     ====     =====

The percentage of the allocation of the allowance for loan losses among the
various categories have changed for the years 1995 through 1999 to reflect the
changes in the types of loans that the Company was originating, the degree of
risk associated with these loans and the performance of specific loans. The
increased investment in the higher risk commercial, commercial real estate and
construction and land loans is reflected in the increased allowance attributed
to these classifications. The unallocated portion of the allowance for loan
losses represents the amount that is necessary to cover any current adverse
conditions on the loan portfolio such as the deterioration in the agricultural
industry.


                                      -11-
<PAGE>

DEPOSITS AND BORROWINGS

Deposits

      The following table shows the average amount of deposits and average rate
of interest paid thereon for the years indicated.

<TABLE>
<CAPTION>
                                       1999                    1998                      1997
                                       ----                    ----                      ----
                                                Weighted                 Weighted                Weighted
                                                 Average                  Average                 Average
                                    Amount        Rate       Amount        Rate       Amount       Rate
                                    ------        ----       ------        ----       ------       ----
                                                            (Dollars in thousands)
<S>                                <C>            <C>       <C>           <C>        <C>           <C>
Balance at December 31:
Noninterest bearing deposits        $14,217       0.00%     $ 10,333      0.00%      $  7,531      0.00%
Money market deposit accounts        12,542       3.40%       10,345      2.26%         9,703      2.41%
Savings deposits                     19,003       2.20%       17,221      2.40%        16,921      2.48%
NOW accounts                         19,079       1.76%       16,668      2.27%        14,930      2.26%
Certificate of deposit and
   other time deposits              150,068       5.36%      147,591      5.77%       148,812      5.83%
                                   --------       -----     --------      ----       --------      ----
     Total deposits                $214,909       4.29%     $202,158      4.72%      $197,897      4.89%
                                   ========       =====     ========      ====       ========      ====
</TABLE>

As of December 31, 1999, certificates of deposit and other time deposits of
$100,000 or more mature as follows:

<TABLE>
<CAPTION>
                                                              Maturing
                                       --------------------------------------------------
                                      3 Months      3-6         6-12      Over 12
                                       or less     Months      Months      Months       Total
                                       -------     ------      ------      ------       -----
                                                      (Dollars in thousands)
<S>                                    <C>         <C>         <C>         <C>         <C>
Certificates of deposit and other
   time deposits                       $4,580      $2,949      $7,456      $3,702      $18,687
                                       ======      ======      ======      ======      =======
Per cent                               24.51%      15.78%      39.90%      19.81%      100.00%
                                       ======      ======      ======      ======      =======
</TABLE>


                                      -12-
<PAGE>

Borrowings

      At December 31, 1999, the Bank had $57,073,000 in outstanding advances
from the FHLB. It is the policy of the Bank to utilize advances from the FHLB as
an alternative to retail deposits to fund its operations and may do so in the
future as part of its operating strategy. The FHLB advance was collateralized
primarily by certain of the Bank's mortgage loans and mortgage-backed securities
and secondarily by the Bank's investment in capital stock of the FHLB. FHLB
advances are made pursuant to several different credit programs, each of which
has its own interest rate and range of maturities. The maximum amount that the
FHLB will advance to member institutions, including the Bank, fluctuates from
time to time in accordance with the policies of the FHLB. At December 31, 1999,
the Company had $17,000,000 in FHLB borrowings with a weighted average rate of
5.22% which were callable at various dates.

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

                                                        At or For the Year
                                                        Ended December 31,
                                                  -----------------------------
                                                    1999       1998       1997
                                                    ----       ----       ----
                                                       (Dollars In thousands)
FHLB advances:

         Average balance outstanding ...........  $45,481    $33,573    $33,858
                                                  =======    =======    =======

         Maximum amount outstanding at
         any month-end during the period .......  $57,073    $39,415    $46,067
                                                  =======    =======    =======

         Balance outstanding at end of
         period ................................  $57,073    $39,410    $33,944
                                                  =======    =======    =======

         Weighted average interest rate
         during the period .....................     5.67%      6.37%      6.26%
                                                  =======    =======    =======

         Weighted average interest rate
         at end of period ......................     5.79%      5.67%      6.08%
                                                  =======    =======    =======

RETURN ON EQUITY AND ASSETS

                                                     1999       1998       1997
                                                     ----       ----       ----

Return on assets (net income divided by
   average total assets)                             0.40%      0.73%      0.69%
Return on equity (net income divided by
   average equity)                                   3.38%      5.54%      4.88%
Dividend payout ratio (dividends per
   share divided by net income per share)           17.67%      0.00%      0.00%
Equity to assets ratio (average equity
   divided by average total assets)                 11.73%     13.11%     14.15%


                                      -13-
<PAGE>

Subsidiary Activities

      At December 31, 1999, the Bank had a wholly-owned service corporation,
CSL Service Corporation ("CSL"), an Illinois chartered company. A prior service
corporation, Fairbury Financial Service Corp. was merged into CSL in January,
1999. CSL is a participant in a joint venture with an independent insurance
agency (Hometown Insurance) and a participant in a joint venture real estate
development (Williamsburg Place LLC) which has purchased and is developing
commercial real estate.

Personnel

      As of December 31, 1999, the Bank had 87 authorized full-time employee
positions and 38 authorized part-time employee positions. The employees are not
represented by a collective bargaining unit and the Bank considers its
relationship with its employees to be good.

                           REGULATION AND SUPERVISION

General

      The Company, as a savings and loan holding company, is required to file
certain reports with, and otherwise comply with the rules and regulations of
the OTS under the Home Owners' Loan Act, as amended (the "HOLA").


<PAGE>

      The Bank is an Illinois state chartered savings bank and its deposit
accounts are insured up to applicable limits by the FDIC under the Savings
Association Insurance Fund (the "SAIF"). The Bank is subject to extensive
regulation by the Illinois Office of Banks and Real Estate Commissioner ( the
"Commissioner"), as its chartering authority, and by the FDIC, as deposit
insurer. The Bank must file reports with the Commissioner and the FDIC
concerning its activities and financial condition, in addition to obtaining
regulatory approval prior to entering into certain transactions such as
establishing branches and mergers with, or acquisitions of, other depository
institutions. There are periodic examinations by the Commissioner and the FDIC
to assess the Bank's compliance with various regulatory requirements and
financial condition. This regulation and supervision establishes a framework of
activities in which a savings bank can engage and is intended primarily for the
protection of the insurance fund and depositors. The regulatory structure also
gives the regulatory authorities discretion in connection with their supervisory
and enforcement activities and examination policies, including policies with
respect to classification of assets and the establishment of adequate loan loss
reserves for regulatory purposes. Any change in such regulation, whether by the
Commissioner, the FDIC or through legislation, could have a material adverse
impact on the Company and the Bank and their operations and stockholders. The
Holding Company will also be required to file certain reports with and otherwise
comply with the rules and regulations, of the OTS, the Commissioner and of the
Securities and Exchange Commission (the "SEC") under the federal securities
laws. Certain of the regulatory requirements applicable to the Bank and to the
Holding Company are referred to below or elsewhere herein. However, the
description of such requirements is not exhaustive and it does not purport to be
a complete description of the applicable laws and regulations.


                                      -14-
<PAGE>

      The Commissioner has established a schedule for the assessment of
"supervisory fees" upon all Illinois savings banks to fund the operations of the
Commissioner. These supervisory fees are computed on the basis of each savings
bank's total assets (including consolidated subsidiaries) and are payable at the
end of each calendar quarter. A schedule of fees has also been established for
certain filings made by Illinois savings banks with the Commissioner. The
Commissioner also assesses fees for examinations conducted by the Commissioner's
staff, based upon the number of hours spent by the Commissioner's staff
performing the examination. During the year ended December 31, 1999, the Bank
paid approximately $30,000 in supervisory fees and expenses.

Regulations

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

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

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

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

            Total Capital to Risk-Weighted Assets                14.0%
            Tier I Leverage Ratio                                 9.2%
            Tier I to Risk-Weighted Assets                       13.3%

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


                                      -15-
<PAGE>

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

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

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

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

Prompt Corrective Regulatory Action

      Federal law requires, among other things, that the federal bank regulatory
authorities take "prompt corrective action" with respect to banks that do not
meet minimum capital requirements. For these purposes, the law establishes
various capital categories. The FDIC has adopted regulations to implement the
prompt corrective action legislation. Under the regulations, an institution is
deemed to be "undercapitalized" if it has a total risk-based capital ratio of
less than 8%, a Tier I risk-based capital ratio of less than 4%, or generally a
leverage ratio of less than 4%. An institution is deemed to be "significantly
undercapitalized" if it has a risk-based capital ratio of less than 6%, a Tier I
risk-based capital ratio of less than 3%, or a leverage ratio of less than 3%.
An institution is deemed to be "critically undercapitalized" if it has a ratio
of tangible equity (as defined in the regulations) to total assets that is equal
to or less than 2%.

      "Undercapitalized" banks are subject to growth, capital distribution
(including dividend) and other limitations and are required to submit a capital
restoration plan. A bank's compliance with such plan must be guaranteed by any
company that controls the undercapitalized institution in an amount equal to the
lesser of 5% of the Bank's total assets when deemed undercapitalized or the
amount necessary to achieve the status of adequately capitalized. If an
"undercapitalized" bank fails to submit an acceptable plan, it is treated as if
it is


                                      -16-
<PAGE>

"significantly undercapitalized". "Significantly undercapitalized" banks are
subject to one or more of a number of additional restrictions, including but not
limited to an order by the FDIC to sell sufficient voting stock to become
adequately capitalized, requirements to reduce total assets and cease receipt of
deposits from correspondent banks or dismiss directors or officers. "Critically
undercapitalized" institutions also may not make any payment of principal or
interest on certain subordinated debt or extend credit for a highly leveraged
transaction or enter into any material transaction outside the ordinary course
of business. In addition, subject to a narrow exception, the appointment of a
receiver or conservator is required for a "critically undercapitalized"
institution within 270 days after it obtains such status.

Transactions with Affiliates

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

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

Enforcement

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

      The Commissioner is given authority by Illinois law to appoint a
conservator or receiver for an Illinois savings bank under certain circumstances
including, but not limited to, insolvency, a substantial dissipation of assets
due to violation of law, regulation, order of the Commissioner or an unsafe or
unsound practice. The FDIC also has authority under federal law to appoint a
conservator or receiver for an insured savings bank under certain circumstances.


                                      -17-
<PAGE>

Insurance of Deposit Accounts

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

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

      The Bank's SAIF assessment rate for 1999 was zero basis points, therefore
no premium was paid for the period. Payments toward the FICO bonds amounted to
approximately $123,000. The FDIC has authority to increase insurance
assessments. A significant increase in SAIF insurance premiums would likely have
an adverse effect on the operating expenses and results of operations of the
Bank. Management cannot predict what insurance assessment rates will be in the
future.

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

Federal Reserve System

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

Federal Home Loan Bank System

      The Bank is a member of the FHLB system, which consists of 12 regional
FHLBs. The FHLB provides a central credit facility primarily for member
institutions. The Bank, as a member of the FHLB, is required to acquire and hold
shares of capital stock in an amount at least equal to 1% of the aggregate
principal amount of its unpaid residential mortgage loans and similar
obligations at the beginning of each year, or 1/20 of its advances (borrowings)
from the FHLB, whichever is greater. The Bank is in compliance with this
requirement with an investment in FHLB stock at December 31, 1999 of $2,853,700.


                                      -18-
<PAGE>

      The FHLBs are required to provide funds for the resolution of insolvent
thrifts and to contribute funds for affordable housing programs. These
requirements could reduce the amount of dividends that the FHLBs pay to their
members and could result in the FHLBs imposing a higher rate of interest on
advances to their members. For the years ended December 31, 1999, 1998 and 1997,
cash dividends from the FHLB to the Bank amounted to approximately, $159,000,
$138,000 and $134,000, respectively.

Holding Company Regulation

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

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

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

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


                                      -19-
<PAGE>

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


                                      -20-
<PAGE>

FEDERAL AND STATE INCOME TAXATION

Federal Taxation

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

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

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

      The 1996 Act Under the 1996 Act, for its current and future taxable
years, as a "Small Bank", the Bank is permitted to make additions to its tax bad
debt reserves under an Experience Method based on total loans. However, the Bank
is required to recapture (i.e. take into income) over a six year period the
excess of the balance of its tax bad debt reserves as of December 31, 1996 over
the balance of such reserves as of December 31, 1987. As of December 31, 1995,
the Bank's tax bad debt reserve exceeded the balance of such reserve as of
December 31, 1987 by $326,713.

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

      The amount of additional taxable income created from a non-dividend
distribution is an amount that, when reduced by the tax attributable to the
income, is equal to the amount of the distribution. Thus, if the Bank makes a
non-dividend distribution to the Company, approximately one and one-half times
the amount of such distribution (but not in excess of the amount of such
reserves) would be includable in income for federal income


                                      -21-
<PAGE>

tax purposes, assuming a 35% federal corporate income tax rate. The Bank does
not intend to pay dividends that would result in a recapture of any portion of
its tax bad debt reserves.

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

State Taxation

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

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

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


                                      -22-
<PAGE>

Item 2 Properties

      The Bank conducts its business through an executive and full service
office located in Normal and five other full service branch offices. The Company
believes that the Bank's current facilities are adequate to meet the present and
immediately foreseeable needs of the Bank and the Company. In January 2000, the
Company entered into a purchase and assumption of deposits agreement for the
sale of certain fixed assets and assumption of deposit liabilities for the
branch located in Eureka, Illinois. It is anticipated this transaction will be
finalized in the second quarter of 2000.

<TABLE>
<CAPTION>
                                Leased or      Original Year     Net Book Value at  Deposits per
                 Location         Owned     Leased or Acquired   December 31, 1999    Office
----------------------------    ---------   ------------------   -----------------  ------------
                                                                        (In thousands)
<S>                               <C>               <C>                     <C>         <C>
Executive Branch Office:
2101 North Veterans Parkway*
Bloomington, Illinois  61704      Owned             1997                    $4,541      $25,711

Branch Offices:
301 Broadway*
Normal, Illinois  61761           Owned             1963                       712       59,582

2402 E. Washington*               Owned             1980                       867       44,430
Bloomington, Illinois  61704

1722 Hamilton Road*               Owned             1995                     1,366       11,985
Bloomington, Illinois  61704

115 N. Third Street*              Owned             1981                       818       51,790
Fairbury, Illinois  61739

205 S. Main *                     Owned             1974                       226       26,739
Eureka, Illinois  61530                                                        ---       ------

Total                                                                      $ 8,530    $ 220,237
                                                                           =======    =========
</TABLE>

* An automated teller machine is located at each office.
None of the properties owned by the Company are subject to any encumbrance.


                                      -23-
<PAGE>

Item 3 Legal Proceedings

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

Item 4 Submission of Matters to a Vote of Security Holders

      No matters were submitted during the fourth quarter of 1999 to a vote of
security holders, through the solicitation of proxies or otherwise.

SUPPLEMENTAL INFORMATION - EXECUTIVE OFFICERS OF THE REGISTRANT

The names, ages and positions with the Company and subsidiary bank of all
executive officers of the Company are listed below:

                            Officers with the Company     Principal Occupation
       Name and Age         And Subsidiary Bank           During Past Five Years
       ------------         -------------------           ----------------------

C. William Landefeld , 60   President and Chief           President and Chief
                            Executive Officer, Citizens   Executive Officer,
                            First Financial Corp.;        Citizens First
                            President and Chief           Financial Corp. since
                            Executive Officer, Citizens   1996; President and
                            Savings Bank.                 Chief Executive
                                                          Officer, Citizens
                                                          Savings Bank since
                                                          1987

Richard F. Becker, 52       Senior Vice President and     Senior Vice President
                            Secretary, Citizens First     and Secretary,
                            Financial Corp.; Senior       Citizens First
                            Vice President and            Financial Corp. since
                            Secretary, Citizens Savings   1996, Senior President
                            Bank.                         and Secretary,
                                                          Citizens Savings Bank
                                                          since 1996, Vice
                                                          President, Citizens
                                                          Savings Bank since
                                                          1979.

Dallas G. Smiley, 53        Senior Vice President and     Senior Vice President
                            Chief Financial Officer,      and Chief Financial
                            Citizens First Financial      Officer, Citizens
                            Corp.; Senior Vice            First Financial Corp.
                            President and Chief           since 1996, Senior
                            Financial Officer, Citizens   President and Chief
                            Savings Bank.                 Financial Officer,
                                                          Citizens Savings Bank
                                                          since 1995, Vice
                                                          President and Chief
                                                          Financial Officer,
                                                          Citizens Savings Bank
                                                          since 1987.


                                      -24-
<PAGE>

                                     PART II

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

      Information relating to the market for registrant's common equity,
dividends paid and related stockholder matters appears in the registrant's 1999
Annual Report to Stockholders on page 42 and is incorporated herein by
reference.

Item 6 Selected Financial Data

      Information required under this item is incorporated by reference to page
5 of the Company's 1999 Annual Report to Stockholders under the caption
"Selected Financial Data".

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

      The above-captioned information appears under Management's Discussion and
Analysis of Results of Operations and Financial Condition in the registrant's
1999 Annual Report to Stockholders on pages 6 through 10 and 13 through 15 and
is incorporated herein by reference.

Item 7A Quantitative and Qualitative Disclosures about Market Risk

      The information required under this item is incorporated by reference to
pages 11 and 12 of the Company's 1999 Annual Report to Stockholders.

Item 8 Financial Statements and Supplementary Data

      The Consolidated Financial Statements of Citizens First Financial Corp.
and its subsidiaries, together with the report thereon by Olive LLP for the year
ended December 31, 1999 appears in the registrant's 1999 Annual Report to
Stockholders on pages 16 through 42 and are incorporated herein by reference.

Item 9 Changes In and Disagreements with Accountants on Accounting and Financial
Disclosure

      None.

                                    PART III

Item 10 Directors and Executive Officers of the Registrant

      The information required under this item relating to directors in
incorporated by reference to the registrant's 2000 Proxy Statement furnished to
its stockholders in connection with an annual meeting to be held April 24, 2000
(the "2000 Proxy Statement"), under the caption "Election of Directors",which
Proxy Statement has been filed with the Commission. The information required
under this item relating to executive officers is set forth in Part I,
"Supplemental Information - Executive Officers of the Registrant" of this annual
report on Form 10-K.


                                      -25-
<PAGE>

Item 11 Executive Compensation

      The information relating to directors' and executive compensation is
incorporated herein by reference to the registrant's Proxy Statement for the
Annual Meeting of Shareholders to be held on April 24, 2000 at pages 14 through
20.

Item 12 Security Ownership of Certain Beneficial Owners and Management

      The information required under this item is incorporated by reference to
pages 12 and 13 of the registant's 2000 Proxy Statement, under the captions
"Security Ownership of Directors, Nominees for Directors, Most Highly
Compensated Executive Officers and All Directors and Executive Officers as a
Group" and "Security Ownership of Shareholder Holding 5% or More", which Proxy
Statement has been filed with the Commission.

Item 13 Certain Relationships and Related Transactions

      The information relating to certain relationships and related transactions
is incorporated herein by reference to the registrant's Proxy Statement for the
Annual Meeting of Shareholders to be held on April 24, 2000 at page 16 under the
caption "Transactions with Certain Related Persons".

                                     PART IV

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

      (a)   The following documents are filed as a part of this report:

            (1)   Financial Statements

            Consolidated Financial Statements of the Company
            are incorporated by reference to the following indicated
            pages of the 1999 Annual Report to Stockholders

                                                                            PAGE

            Independent Auditor's Report......................................16

            Consolidated Balance Sheet as of
            December 31, 1999 and 1998........................................17

            Consolidated Statement of Income for the
            years ended December 31, 1999, 1998 and 1997......................18

            Consolidated Statement of Changes in Stockholders' Equity
            for the years ended December 31, 1999, 1998 and 1997..............19

            Consolidated Statement of Cash Flows for the
            years ended December 31, 1999, 1998 and 1997...................20-21


                                      -26-
<PAGE>

            Notes to Consolidated Financial Statements.....................22-41

            The remaining information appearing in the Annual Report to
            Stockholders is not deemed to be filed as part of this report,
            except as expressly provided herein.

            (2)   Financial Statement Schedules

                  All schedules are omitted because they are not required or
                  applicable, or the required information is shown in the
                  consolidated financial statements or the notes thereto.

            (3)   Exhibits

                  The following exhibits are filed as part of this report.

            3.1   Certificate of Incorporation of Citizens First Financial
                  Corp.*

            3.2   Bylaws of Citizens First Financial Corp.*

            4.0   Stock Certificate of Citizens First Financial Corp.*

            10.1  Citizens Savings Bank, F.S.B. Employee Stock Ownership Plan*

            10.2  Form of Employment Agreement between Citizens Savings Bank,
                  F.S.B. and certain executive officers*

            10.3  Form of Employment Agreement between Citizens First Financial
                  Corp. and certain executive officers*

            10.4  Form of Citizens Savings Bank, F.S.B. Supplemental Executive
                  Retirement Plan*

            10.5  Form of Change in Control Agreement between Citizens Savings
                  Bank, F.S.B. and certain executive officers*

            10.6  Form of Citizens Savings Bank, F.S.B. Supplemental Executive
                  Retirement Plan*

            10.7  Form of Citizens Savings Bank, F.S.B. Employee Severance
                  Compensation Plan*

            10.8  Citizens First Financial Corp. 1997 Stock-Based Incentive
                  Plan**

            13.0  Portions of 1999 Annual Report to Stockholders (filed
                  herewith)

            21.0  Subsidiary information is incorporated herein by reference to
                  "Part I - Subsidiaries"

            23.0  Consent of Olive LLP

            27.0  Financial Data Schedule

----------
            *     Incorporated herein by reference to the Exhibits to Form SB-2,
                  Registration Statement, filed on January 24, 1997 and any
                  amendments thereto, Registration No. 333-556.

            **    Incorporated herein by reference to the Proxy Statement for
                  the Special Meeting of Shareholders held on November 12, 1997.

      (b)   Reports on Form 8-K:

            A report on Form 8-K was filed on October 1, 1999, to announce the
            start of a stock repurchase program of 5% of the Company's
            outstanding shares of common stock.

                                      -27-
<PAGE>

                                   SIGNATURES

      Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, on this 30th day of
March, 1999.

                                        CITIZENS FIRST FINANCIAL CORP.


                                        By: /s/ C. William Landefeld
                                            ------------------------------------
                                            C. William Landefeld
                                            President, Chief Executive Officer
                                            and Director

                                        Date: March 30, 2000

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

            Name                                Title               Date
            ----                                -----               ----


/s/ C. William Landefeld            President, Chief Executive
-------------------------------     Officer and Director          March 30, 2000
C. William Landefeld                (principal executive
                                    officer)


/s/ Dallas G. Smiley                Senior Vice President,
-------------------------------     Treasurer and Chief           March 30, 2000
Dallas G. Smiley                    Financial Officer
                                    (principal accounting and
                                    financial officer)


/s/ Dr. Lowell M. Thompson          Director                      March 30, 2000
-------------------------------
Dr. Lowell M. Thompson


/s/ Paul J. Hoffman                 Director                      March 30, 2000
-------------------------------
Paul J. Hoffman


/s/ Jeffrey M. Solberg              Director                      March 30, 2000
-------------------------------
Jeffrey M. Solberg


/s/ Ronald C. Wells                 Director                      March 30, 2000
-------------------------------
Ronald C. Wells


/s/ L. Carl Borngasser              Director                      March 30, 2000
-------------------------------
L. Carl Borngasser


/s/ Arthur W. Mier                  Director                      March 30, 2000
-------------------------------
Arthur W. Mier


/s/ James A. Shirk                  Director                      March 30, 2000
-------------------------------
James A. Shirk


                                      -28-