<PAGE>

                            SECURITIES AND EXCHANGE
                                  COMMISSION
                            Washington, D.C. 20549
                                   FORM 10-K

                       FOR ANNUAL AND TRANSITION REPORTS
                    PURSUANT TO SECTIONS 13 OR 15(d) OF THE
                        SECURITIES EXCHANGE ACT OF 1934
(Mark One)
[X]       ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
          EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 1999

[_]       TRANSITIONAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
          EXCHANGE ACT OF 1934

For the transition period from ________________ to ______________________

                         Commission File No.  0-26292

                           COMMUNITY FINANCIAL CORP.
            ------------------------------------------------------
            (Exact name of registrant as specified in its charter)

                Illinois                                    37-1337630
----------------------------------------                -------------------
     (State or other jurisdiction                        (I.R.S. employer
   of incorporation or organization)                    identification no.)

240 E. Chestnut Street, Olney, Illinois                      62450-2295
----------------------------------------                -------------------
(Address of principal executive offices)                     (Zip Code)


      Registrant's telephone number, including area code:  (618) 395-8676

          Securities registered pursuant to Section 12(b) of the Act:
                                Not Applicable

          Securities registered pursuant to Section 12(g) of the Act:

                    Common stock, par value $.01 per share
                    --------------------------------------
                               (Title of Class)

Indicate by check mark whether the registrant (1) has filed all reports required
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or such shorter period that the registrant was required to
file such reports) and (2) has been subject to such filing requirements for the
past 90 days.   Yes  X    No ___
                    ---

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 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.  [  ]

As of March 20, 2000, the aggregate market value of the 1,485,980 shares of
Common Stock of the registrant issued and outstanding held by non-affiliates on
such date was approximately $14,581,179 based on the closing sale price of
$9.8125 per share of the registrant's Common Stock on March 20, 2000 as listed
on the Nasdaq National Market System.  For purposes of this calculation, it is
assumed that directors, executive officers and beneficial owners of more than 5%
of the registrant's outstanding voting stock are affiliates.

Number of shares of Common Stock outstanding as of March 20, 2000:  2,213,645.

                      DOCUMENTS INCORPORATED BY REFERENCE

       The following lists the documents incorporated by reference and the Part
of the Form 10-K into which the document is incorporated:

       1.  Portions of the Annual Report to Stockholders for the fiscal year
           ended December 31, 1999. (Parts I, II and IV)
       2.  Portions of Proxy Statement for 2000 Annual Meeting of Stockholders.
           (Part III)
<PAGE>

                                    PART I

Item 1.  Business
-----------------

General

     Community Financial Corp. Community Financial Corp. (the "Company") is a
bank holding company with five wholly owned bank subsidiaries headquartered in
Illinois: Community Bank & Trust, N.A. in Olney; American Bank of Illinois in
Highland; The Egyptian State Bank in Carrier Mills; Saline County State Bank in
Stonefort; and MidAmerica Bank of St. Clair County in O'Fallon (the "Bank
Subsidiaries").  The Company's principal business is overseeing the business of
its wholly owned bank subsidiaries and investing its assets.  The Company is
registered with the Federal Reserve Board as a bank holding company under the
Bank Holding Company Act ("BHCA").  At December 31, 1999, the Company had total
assets of $309.9 million, total deposits of $225.2 million and stockholders'
equity of $33.8 million.

     The Company's executive offices are located at 240 E. Chestnut Street,
Olney, Illinois 62450-2295, and its main telephone number is (618) 395-8676.

     The Bank Subsidiaries.  Community Bank & Trust, N.A. ("CB&T") is a national
bank operating through five offices serving Richland, Coles, Jasper, Lawrence
and Wayne and contiguous counties in Southeastern Illinois.  CB&T was chartered
in 1883 as Olney Building and Loan Association.  In 1961, the Bank changed its
name to Olney Savings and Loan Association.  CB&T expanded its branch office
network through a series of acquisitions of other financial institutions,
acquiring its Lawrenceville and Fairfield offices in 1983, its Charleston office
in 1989 and its Newton office in 1990.  CB&T became an Illinois state savings
bank in July 1992, at which time it adopted the title Community Bank & Trust,
sb, and converted to a federally chartered mutual savings bank under the name
Community Bank & Trust, fsb in February 1995.  In June 1995, CB&T became a
national bank and adopted its present name.  At December 31, 1999, CB&T had
total assets of $207.7 million and total deposits of $141.5 million.

     American Bank of Illinois in Highland ("ABI") is an Illinois commercial
bank operating through two offices located in Highland and Pocahontas, Illinois
and serving Bond and Madison Counties in Western Illinois.  At December 31,
1999, ABI had total assets of $31.1 million and total deposits of $26.3 million.

     The Egyptian State Bank ("Egyptian") is an Illinois commercial bank
operating through a single office located in Carrier Mills, Illinois and serving
Saline County in Southern Illinois.  At December 31, 1999, Egyptian had total
assets of $24.1 million and total deposits of $20.7 million.

     Saline County State Bank ("Saline") is an Illinois commercial bank
operating through two offices located in Stonefort and Creal Springs, Illinois
and serving Saline and Williamson Counties in Southern Illinois.  At December
31, 1999, Saline had total assets of $16.5 million and total deposits of $14.3
million.

     MidAmerica Bank of St. Clair County ("MidAmerica") is an Illinois
commercial bank operating through a single office located in O'Fallon, Illinois
and serving St. Clair County in Western Illinois.  At December 31, 1999,
MidAmerica had total assets of $28.0 million and total deposits of $22.7
million.

     CB&T's deposits are insured by the Savings Association Insurance Fund
("SAIF") of the Federal Deposit Insurance Corporation ("FDIC") up to the
applicable limits for each depositor.  CB&T is subject to comprehensive
examination, supervision, and regulation by the Office of the Comptroller of the
Currency ("OCC") and the FDIC.   The deposits of ABI, Egyptian, Saline and
MidAmerica are insured by the Bank Insurance Fund ("BIF") of the FDIC up to the
applicable limits for each depositor.  Each of those Illinois commercial banks
is subject to comprehensive examination, supervision, and regulation by the
Illinois Office of Banks and Real Estate ("OBRE") and the FDIC.  This regulation
is intended primarily for the protection of depositors.

                                       2
<PAGE>

Market Areas

     CB&T conducts its business through its main office in Olney, Illinois and
its five branch offices in Olney, Lawrenceville, Fairfield, Newton and
Charleston, Illinois.  CB&T's primary market area consists of Richland, Jasper,
Lawrence and Wayne Counties and the eastern two-thirds of Coles County,
Illinois, and each of the Bank's offices is located in the county seat of those
Counties.  CB&T also has loan and deposit customers in Clay, Crawford,
Cumberland, Edwards, Effingham, White and Wabash Counties, Illinois, which are
contiguous to its primary market area.  A significant percentage of CB&T's
lending activities are conducted in its primary market area.

     CB&T's market area is largely rural, with the exception of Charleston which
is home to a university.  The main industry in the Bank's market area is
agriculture, with most of the farms being relatively small and family owned.
The local economy also is dependent on light industry.  Major employers in the
area include Brunswick Bicycles, Prairie Farms, Golden Rule Insurance, Ruckers
Wholesale, Trim Masters Inc., Airtex, Grain Systems, Inc., Trailmobile, Wal-Mart
Stores and Distribution Center, and Eastern Illinois University. Oil production
has been present in the Bank's market area since the 1920s, but with the decline
in oil prices in recent years, production has been significantly reduced.
However, related businesses still exist in the area.

     Egyptian's and Saline's market area consists of Williamson, Johnson, Pope
and Saline Counties in Southern Illinois.  That market is largely rural.  The
main industry in these Banks' market area is agriculture, with most of the farms
being relatively small and family-owned.  The local economy also is dependent on
light industry.  Major employers in the area include Kerr-McGee Coal Co., A.R.
Clar Company and Pepsi Cola.  Coal mining has been present in the area since the
early 1900's, but with the passage of the Clean Air Act, production has been
significantly reduced due to the high sulphur content in the coal.

     ABI's market area consists of Bond and Madison Counties in Western
Illinois.  The economy is a very balanced mix of agriculture and light industry.
Most of the farms are relatively small and family-owned.  Major employers in the
area consist of Highland Machine & Screw, Basler Electric, Wicks Organ, Korte
Construction, Beeline Manufacturing, Smurfit Stone, Highland Supply, Dow Jones
Midwest Publication of the Wall Street Journal, Jakel, Inc., Artex
International, Ducoa and Trionics.  Madison County is located in what is called
the Metro-East area which consists of the area located in Illinois, across the
Mississippi River from St. Louis, Missouri.  This area is one of the fastest
growing areas in Illinois.

     MidAmerica's market area consists of St. Clair County in Western Illinois.
The economy is very stable and is mainly retail service oriented with some light
manufacturing.  Major employers in the area consist of Land of Son Dairy and
MidAmerica Air Center, a shared air center with Scott Airforce Base.  The retail
sector mainly consists of national chain stores, automobile dealers, hotel,
motel and a shopping mall anchored by national chain stores.  MidAmerica's
market area, located in the Metro-East area, 15 miles from St. Louis, Missouri,
is experiencing a housing boom with subdivisions being established throughout
the area.

                                       3
<PAGE>

Lending Activities

     General.  The Company's loan portfolio totaled $181.0 million at December
31, 1999, representing 58.4% of total assets at that date.  It is the Company's
policy to concentrate each subsidiary bank's lending within its market area.  At
December 31, 1999, $74.3 million, or 41.0%, of the total loan portfolio
consisted of single-family, residential mortgage loans.  Other loans secured by
real estate include multi-family residential and real estate loans, which
amounted to $16.5 million, or 9.1%, of the total loan portfolio at December 31,
1999.  To a lesser extent and as an accommodation to its existing customers, the
Company makes mortgage loans for the purpose of constructing primarily single-
family residences.  At December 31, 1999, construction loans totaled $5.8
million, or 3.2% of the total loan portfolio.

     In addition, the banks originate commercial business loans and agricultural
loans, which include agricultural loans secured by real estate and agricultural
operating loans and equipment loans.  At December 31, 1999, commercial business
loans amounted to $21.1 million, or 11.7%, of the Company's total loan
portfolio, and agricultural loans amounted to $20.4 million, or 11.3%, of the
total loan portfolio, which included $11.4 million of agricultural loans secured
by real estate.

     The Company also is active in the origination of consumer loans, which
primarily consist of automobile loans, credit card loans and, to a lesser
extent, home improvement loans, mobile home loans and loans secured by savings
deposits.  Consumer loans amounted to $42.9 million, or 23.7%, of the total loan
portfolio at December 31, 1999.

                                       4
<PAGE>

     Loan Portfolio Composition.  The following table sets forth selected data
relating to the composition of the Company's loan portfolio by type of loan at
the dates indicated.  At December 31, 1999, the Company had no concentrations of
loans exceeding 10% of total loans other than as disclosed below.

<TABLE>
<CAPTION>


                                                                          At December 31,
                              ------------------------------------------------------------------------------------
                                      1999                  1998                  1997              1996
                              --------------------  --------------------  -------------------  -------------------
                               Amount        %       Amount        %       Amount       %       Amount       %
                              ---------  ---------  ---------  ---------  ---------  --------  ---------  --------
                                                                         (Dollars in thousands)
<S>                           <C>        <C>        <C>        <C>        <C>        <C>       <C>        <C>
Type of Loan:
----------------------------
Real estate loans:
 Single-family residential..  $ 74,299      41.04%  $ 68,057      42.65%  $ 69,188     41.90%  $ 46,501     37.52%
 Construction...............     5,752       3.18      4,470       2.80      3,174      1.92        770       .62
 Multi-family residential
  and commercial............    16,526       9.13      9,451       5.92      9,682      5.86      2,494      2.01
Agricultural (1)............    20,406      11.27     17,624      11.05     17,865     10.82     12,226      9.87
Commercial business.........    21,116      11.66     24,706      15.48     26,511     16.06     20,129     16.24
Consumer loans:
 Automobile.................    34,355      18.97     24,199      15.17     27,104     16.41     30,360     24.50
 Credit card................     1,831       1.01      2,015       1.26      2,107      1.28      1,879      1.52
 Mobile home................     1,207        .67        997        .63        905       .55        850       .69
 Educational................         5        .01         13        .01         25       .01         29       .02
 Deposit account............     1,231        .68      1,697       1.06      1,552       .94        807       .65
 Home improvement...........       254        .14        852        .53        560       .34        694       .56
 Other......................     4,065       2.24      5,486       3.44      6,448      3.91      7,184      5.80
                              --------   --------    -------    -------    -------   -------   --------   -------
                               181,047     100.00%   159,567     100.00%   165,121    100.00%   123,923    100.00%
                                         ========               =======              =======              =======

Less:
 Loans in process...........         0                   381                   869                   96
 Allowance for loan losses..     1,580                 1,979                 1,934                1,520
                              --------              --------              --------             --------
  Total.....................  $179,467              $157,207              $162,318             $122,307
                              ========              ========              ========             ========

<CAPTION>


                                 At December 31,
                                ------------------
                                       1995
                                ------------------
                                 Amount        %
                                ---------    -----

<S>                             <C>          <C>
Type of Loan:
----------------------------
Real estate loans:
 Single-family residential..     $46,959     40.40
 Construction...............         576       .50
 Multi-family residential
  and commercial............       2,994      2.57
Agricultural (1)............       8,763      7.54
Commercial business.........      12,316     10.60
Consumer loans:
 Automobile.................      33,506     28.83
 Credit card................       1,743      1.50
 Mobile home................         978       .84
 Educational................          40       .03
 Deposit account............         705       .61
 Home improvement...........         819       .70
 Other......................       6,836      5.88
                                --------   -------
                                 166,235    100.00%
                                           =======

Less:
 Loans in process...........         227
 Allowance for loan losses..       1,514
                                --------
  Total.....................    $114,494
                                ========
</TABLE>

________________
(1)  Includes agricultural loans secured by real estate and agricultural loans
     to finance operating expenses or purchase farm equipment.

                                       5
<PAGE>

     Loan Maturities.  The following table sets forth certain information at
December 31, 1999 regarding the dollar amount of loans maturing in the portfolio
based on their contractual terms to maturity, including scheduled repayments of
principal.  Demand loans, loans having no stated schedule of repayments and no
stated maturity, and overdrafts are reported as due in one year or less.  The
table below does not include any estimate of prepayments which significantly
shorten the average life of all mortgage loans and may cause the repayment
experience to differ from that shown below.

<TABLE>
<CAPTION>
                                                  Due After        Due After
                              Due During the      1 through         5 Years
                               Year Ending      5 Years After        After
                               December 31,     December 31,      December 31,
                                   2000             1999              1999         Total
                              --------------    -------------     ------------   ---------
                                                        (In thousands)

<S>                           <C>               <C>               <C>            <C>
Real estate mortgage......         $18,207          $34,235         $21,857        $ 74,299
Real estate construction..           5,752                0               0           5,752
Agricultural..............           6,510            7,497           6,399          20,406
Commercial business.......           6,125           10,411           4,580          21,116
Consumer..................          23,504           33,010           2,960          59,474
                                   -------          -------         -------        --------
 Total....................         $60,098          $85,153         $35,796        $181,047
                                   =======          =======         =======        ========
</TABLE>

     The following table sets forth at December 31, 1999 the dollar amount of
all loans due after December 31, 2000 which have predetermined interest rates
and have floating or adjustable interest rates.

                                  Predetermined      Floating or
                                      Rate       Adjustable Rates (1)
                                  -------------  ----------------

      Real estate mortgage......    $ 39,312           $16,780
      Real estate construction..           0                 0
      Agricultural..............      12,441             1,455
      Commercial business.......      13,573             1,418
      Consumer..................      35,970                 0
                                    --------           -------
          Total.................    $101,296           $19,653
                                    ========           =======

___________________________
(1)  Includes fixed-rate loans that are callable at the election of the Company.
     See " -- Single-Family Residential Real Estate Lending."


     Scheduled contractual principal repayments of loans do not reflect the
actual life of such assets.  The average life of loans is substantially less
than their contractual terms because of prepayments.  In addition, due-on-sale
clauses on loans generally give the lending bank the right to declare a loan
immediately due and payable in the event, among other things, that the borrower
sells the real property subject to the mortgage and the loan is not repaid.  The
average life of mortgage loans tends to increase, when current mortgage loan
market rates are substantially higher than rates on existing mortgage loans and,
conversely, decreases when current mortgage loan market rates are substantially
lower than rates on existing mortgage loans.

                                       6
<PAGE>

     Originations, Purchases and Sales of Loans.  Loan originations are derived
from a number of sources, including referrals by realtors, depositors and
borrowers, as well as walk-in customers.  In addition, the Bank Subsidiaries
originate a portion of their automobile loans on an indirect basis through
various automobile dealerships located in their market areas.  Solicitation
programs consist of advertisements in local media, in addition to occasional
participation in various community organizations and events.  Real estate loans
are originated by loan officers.  All loan officers are salaried, and the
Company does not compensate loan officers on a commission basis for loans
originated.  With the exception of applications which are originated on an
indirect basis through various approved automobile dealerships, loan
applications are accepted at branch offices.  In all cases, however, the
originating bank has final approval of any loan application.

     CB&T participates in an informal program with other banks pursuant to which
such participating banks will make loans to assist in community development or
the expansion of local business.  Under this program, the other banks purchase
participation interests, without recourse, in any loans originated.  CB&T will
not originate a loan or purchase a participation interest in any loan originated
pursuant to this program unless the loan meets CB&T's standard underwriting
criteria.  CB&T retains the servicing on loans where it sells participation
interests to other lenders.  At December 31, 1999, CB&T had $4.8 million of
participation loans originated or purchased pursuant to this program.

     Between 1980 and 1990, CB&T originated long-term, residential mortgage
loans that are callable, at the option of CB&T, at any time after a one-, three-
or five-year period.  In the event CB&T calls the loan, the borrowers may elect
to renew the loan at the rate offered by CB&T or repay the loan in full.
Management estimates that approximately 4.2% of the Company's single-family
mortgage loan portfolio consists of callable loans originated prior to 1990.
Though these loans have fixed rates, because they are callable, the Company
considers these loans to be adjustable-rate loans.

     Loan Fees and Servicing.  In addition to interest earned on loans, the
Company receives fees in connection with late payments and for miscellaneous
services related to its loans.  Due to competition from other lenders in its
market area, fees generally are not charged in connection with loan
originations, modifications or extensions.  The Company generally does not
service loans for others and earns minimal income from this activity.

     Nonperforming Loans and Other Problem Assets.  It is management's policy to
continually monitor its loan portfolio to anticipate and address potential and
actual delinquencies.  When a borrower fails to make a payment on a loan, the
Bank takes immediate steps to have the delinquency cured and the loan restored
to current status.

     Loans are placed on nonaccrual when collection of principal or interest is
considered doubtful (generally loans past due 90 days or more).  Any unpaid
interest previously accrued on those loans is reversed from income.  Interest
income generally is not recognized on nonaccrual loans unless the likelihood of
further loss is remote. Income is subsequently recognized only to the extent
that cash payments are received until, in management's judgment, the borrower's
ability to make periodic interest and principal payments is back to normal, in
which case the loan is returned to accrual status.  See Note 4 of Notes to
Consolidated Financial Statements.

                                       7
<PAGE>

     The following table sets forth information with respect to the
nonperforming assets at the dates indicated.

<TABLE>
<CAPTION>
                                                                 At December 31,
                                                   ------------------------------------------
                                                     1999     1998     1997     1996    1995
                                                   --------  -------  -------  ------  ------
                                                              (Dollars in thousands)
<S>                                                <C>       <C>      <C>      <C>     <C>
Loans accounted for on a non-accrual basis: (1)
 Real estate:
  Residential....................................   $  344   $  647   $  469   $ 253   $ 195
  Commercial.....................................      104       --       --      --      --
 Agricultural....................................      110       --       --      --      --
 Commercial business.............................       87      477    1,137      --      --
 Consumer........................................      151       77       70      65     103
                                                    ------   ------   ------   -----   -----
   Total.........................................   $  796   $1,201   $1,676   $ 318   $ 298
                                                    ======   ======   ======   =====   =====

Accruing loans which are contractually
 past due 90 days or more:
 Real estate:
   Residential...................................   $  515   $  742   $  186   $ 130   $  98
   Commercial....................................      210       --       --      --      --
 Agricultural....................................       --       --       --      --      --
 Commercial business.............................       16      282      153      --      --
 Consumer........................................       90      434       99      --      --
                                                    ------   ------   ------   -----   -----
   Total.........................................      831    1,458      438     130      98
                                                    ------   ------   ------   -----   -----

   Total nonperforming loans.....................   $1,627    2,659   $2,114   $ 448   $ 398
                                                    ======   ======   ======   =====   =====

Percentage of total loans........................      .90%    1.67%    1.29%    .36%    .34%
                                                    ======   ======   ======   =====   =====

Other nonperforming assets (2)...................   $  257   $  436   $  126   $  53   $ 137
                                                    ======   ======   ======   =====   =====

Loans modified in troubled debt
  restructurings.................................   $   28   $   32   $   --   $  --   $  --
                                                    ======   ======   ======   =====   =====
</TABLE>

-------------------------
(1)  Nonaccrual status denotes loans on which, in the opinion of management, the
     collection of additional interest is unlikely.  Payments received on a
     nonaccrual loan are applied to the outstanding principal balance.
(2)  "Other nonperforming assets" represents property acquired by the Bank
     through foreclosure or repossession and real estate held for sale.  This
     property is carried at the lower of its fair value less estimated selling
     costs or the principal balance of the related loan, whichever is lower.


     During the year ended December 31, 1999, gross interest income of $63,000
would have been recorded on loans accounted for on a nonaccrual basis if the
loans had been current throughout the year.  Interest on such loans included in
income during the year ended December 31, 1999 amounted to $27,000.

     At December 31, 1999, nonaccrual loans consisted of 9 single-family
residential real estate loans aggregating $344,000, 2 commercial real estate
loans aggregating $104,000, 3 agricultural loans aggregating $110,000 and 20
consumer and commercial loans aggregating $238,000.

                                       8
<PAGE>

     Real estate acquired through foreclosure is initially recorded at the lower
of cost (net loan receivable balance at date of foreclosure) or fair value less
estimated selling costs.  Fair value is defined as the amount in cash or cash-
equivalent value of other consideration that a real estate parcel would yield in
a current sale between a willing buyer and a willing seller, as measured by
market transactions.  If a market does not exist, fair value of the item is
estimated based on selling prices of similar items in active markets or, if
there are no active markets for similar items, by discounting a forecast of
expected cash flows at a rate commensurate with the risk involved. Fair value is
generally determined through an appraisal at the time of foreclosure.  The
Company records a valuation allowance for estimated selling costs of the
property immediately after foreclosure.  Subsequent to foreclosure, real estate
acquired through foreclosure is periodically evaluated by management and an
allowance for loss is established if the estimated fair value of the property,
less estimated cost to sell, declines.  See Note 1 of Consolidated Financial
Statements.  At December 31, 1999, the Company had $257,000 in real estate
owned, which consisted of 5 single-family residences.

     Loans which are not currently classified as non-accrual, 90 days past due
or restructured but where known information about possible credit problems of
borrowers causes management to have serious concerns as to the ability of the
borrowers to comply with present loan repayment terms and may result in
disclosure as non-accrual, 90 days past due or restructured amounted to $831,000
at December 31, 1999.  Such amount included 16 single-family residential
mortgage loans totaling $725,000, 1 commercial business loan totaling $16,000
and 13 consumer and other loans totaling $90,000.  The Company takes such loans
into consideration in establishing the allowance for loan losses.

     Banks classify their assets on the basis of quality on a regular basis.  An
asset is classified as substandard if it is determined to be inadequately
protected by the current retained earnings and paying capacity of the obligor or
of the collateral pledged, if any.  An asset is classified as doubtful if full
collection is highly questionable or improbable.  An asset is classified as loss
if it is considered uncollectible, even if a partial recovery could be expected
in the future.  The regulations also provide for a special mention designation,
described as assets which do not currently expose a bank to a sufficient degree
of risk to warrant classification but do possess credit deficiencies or
potential weaknesses deserving management's close attention.  Assets classified
as substandard or doubtful require a bank to establish general allowances for
loan losses.  If an asset or portion thereof is classified loss, a bank must
either establish a specific allowance for loss in the amount of the portion of
the asset classified loss, or charge off such amount.  The Company regularly
reviews its assets to determine whether any assets require classification or re-
classification.  At December 31, 1999, the Company had $1.6 million in
classified assets, which consisted of $1.4 million in assets classified as
substandard, $130,000 in assets classified as doubtful and $41,000 in assets
classified as loss.

     Allowance for Loan Losses.  In originating loans, the Company recognizes
that credit losses will be experienced and that the risk of loss will vary with,
among other things, the type of loan being made, the creditworthiness of the
borrower over the term of the loan, general economic conditions and, in the case
of a secured loan, the quality of the security for the loan.  It is management's
policy to maintain an adequate allowance for loan losses based on, among other
things, the Company's and the industry's historical loan loss experience,
evaluation of economic conditions, regular reviews of delinquencies, loan
portfolio quality and evolving standards imposed by bank examiners.  The Company
increases its allowance for loan losses by charging provisions for possible loan
losses against the Company's income.

     Management will continue to actively monitor the Company's asset quality
and allowance for loan losses.  Management will charge off loans and properties
acquired in settlement of loans against the allowance for losses on such loans
and such properties when appropriate and will provide specific loss allowances
when necessary.  Although management believes it uses the best information
available to make determinations with respect to the allowance for losses and
believes such allowances are adequate, future adjustments may be necessary if
economic conditions differ substantially from the economic conditions in the
assumptions used in making the initial determinations.

                                       9
<PAGE>

     The Company's methodology for establishing the allowance for loan losses
takes into consideration probable losses that have been identified in connection
with specific assets as well as losses that have not been identified but can be
expected to occur.  Management conducts regular reviews of the Company's assets
and evaluates the need to establish allowances on the basis of this review.
Assets reviewed include nonaccrual loans, accruing loans 90 days or more
delinquent, loans modified in troubled debt restructurings and real estate
owned, as well as any additional classified loans or loans not falling within
any of the above categories but where known information about possible credit
problems of borrowers causes management to have serious concerns as to the
ability of the borrowers to comply with loan repayment terms and may result in
disclosure of the loans as nonaccrual, 90 days past due or restructured.
Allowances are established by the Board of Directors on a quarterly basis based
on an assessment of risk in the Company's assets, taking into consideration the
composition and quality of the portfolio, delinquency trends, current charge-off
and loss experience, loan concentrations, the state of the real estate market,
regulatory reviews conducted in the regulatory examination process and general
economic conditions.  Additional provisions for losses on loans are made in
order to bring the allowance to a level deemed adequate.  At the date of
foreclosure or other repossession, the Company would transfer the property to
real estate acquired in settlement of loans at the lower of cost or fair value
less estimated selling costs.  Any portion of the outstanding loan balance in
excess of fair value less estimated selling costs would be charged off against
the allowance for loan losses.  If, upon ultimate disposition of the property,
net sales proceeds exceed the net carrying value of the property, a gain on sale
of real estate would be recorded.

     The following table sets forth an analysis of the Bank's allowance for loan
losses for the periods indicated.

<TABLE>
<CAPTION>
                                                        Year Ended December 31,
                                              --------------------------------------------
                                                1999     1998     1997     1996     1995
                                              --------  -------  -------  -------  -------
                                                          (Dollars in thousands)
<S>                                           <C>       <C>      <C>      <C>      <C>
Balance at beginning of period..............   $1,979   $1,934   $1,520   $1,514   $1,641
                                               ------   ------   ------   ------   ------
Loans charged off:
 Real estate mortgage:
  Single-family residential.................      309       91       43        1       34
  Multi-family residential and commercial...       --       --       --       --       --
  Construction..............................       --       --       --       --       --
 Agricultural...............................        2       --       --       --       --
 Commercial business........................      466       61       48       --        8
 Consumer...................................      701      524      419      400      510
                                               ------   ------   ------   ------   ------
Total charge-offs...........................    1,478      676      510      401      552
                                               ------   ------   ------   ------   ------

Recoveries:
 Real estate mortgage:
  Single-family residential.................       31       20        9       39        1
  Multi-family residential and commercial...       --       --       --       --       --
  Construction..............................       --       --       --       --       --
 Agricultural...............................       --       --       --       --       --
 Commercial business........................       98       33       --        3       36
 Consumer...................................      243      227      229      355      275
                                               ------   ------   ------   ------   ------
Total recoveries............................      372      280      238      397      312
                                               ------   ------   ------   ------   ------

Net loans charged-off.......................    1,106      396      272        4      240
                                               ------   ------   ------   ------   ------
Provision for losses on loans...............      707      441      236       10      113
                                               ------   ------   ------   ------   ------
Adjustment for changes incident to mergers..       --       --      450       --       --
Balance at end of period....................   $1,580   $1,979   $1,934   $1,520   $1,514
                                               ======   ======   ======   ======   ======
Ratio of net charge-offs to average
 loans outstanding during the period........      .65%     .25%     .19%       0%     .21%
                                               ======   ======   ======   ======   ======
</TABLE>

                                       10
<PAGE>

     The following table allocates the allowance for loan losses by loan
category at the dates indicated.  The allocation of the allowance to each
category is not necessarily indicative of future losses and does not restrict
the use of the allowance to absorb losses in any category.

<TABLE>
<CAPTION>
                                                                        At December 31,
                             -------------------------------------------------------------------------------------------------------
                                      1999                  1998                   1997              1996               1995
                             ---------------------    -------------------   -------------------  ----------------  ----------------
                                          Percent                Percent                Percent          Percent            Percent
                                             of                     of                    of               of                 of
                                          Loans in               Loans in              Loans in          Loans in          Loans in
                                          Category               Category              Category          Category          Category
                                             to                     to                    to                to                to
                                           Total                  Total                  Total             Total             Total
                               Amount      Loans      Amount      Loans      Amount      Loans   Amount    Loans   Amount    Loans
                               ------     --------    ------    ---------   -------    --------  ------  --------  ------  --------
                                                                      (Dollars in thousands)
<S>                            <C>        <C>         <C>       <C>         <C>        <C>       <C>     <C>       <C>     <C>
Real estate - mortgage:
  Single-family residential    $  316      20.00%     $  398      20.11%     $  612    20.00%  $  330    37.52%  $  340    40.40%
  Multi-family residential
   and commercial..........       300      18.99         374      18.90          37    19.00      125     2.01      141     2.57
  Construction.............        16       1.01          20       1.01          14     1.00        5      .62        5      .50
Agricultural...............        95       6.01         120       6.07         211     6.00      315     9.87      308     7.54
Commercial business........       284      17.97         360      18.19         527    18.00      345    16.24      308    10.60
Consumer...................       569      36.02         707      35.72         533    36.00      400    33.74      412    38.39
                               ------     ------      ------     ------      ------   ------   ------   ------   ------   ------
    Total allowance for
     loan losses...........    $1,580     100.00%     $1,979     100.00%     $1,934   100.00%  $1,520   100.00%  $1,514   100.00%
                               ======     ======      ======     ======      ======   ======   ======   ======   ======   ======
</TABLE>

                                       11
<PAGE>

Mortgage-Backed and Related Securities

     Mortgage-backed securities represent a participation interest in a pool of
single-family or multi-family mortgages, the principal and interest payments on
which are passed from the mortgage originators through intermediaries that pool
and repackage the participation interest in the form of securities to investors
such as the Company.  Such intermediaries may include quasi-governmental
agencies such as FHLMC, FNMA and GNMA which guarantee the payment of principal
and interest to investors.  Mortgage-backed securities generally increase the
quality of the Company's assets by virtue of the guarantees that back them, are
more liquid than individual mortgage loans and may be used to collateralize
borrowings or other obligations of the Company.

     Mortgage-backed securities typically are issued with stated principal
amounts and the securities are backed by pools of mortgages that have loans with
interest rates that are within a range and have similar maturities.  The
underlying pool of mortgages can be composed of either fixed-rate or adjustable-
rate mortgage loans.  Mortgage-backed securities generally are referred to as
mortgage participation certificates or pass-through certificates.  As a result,
the interest rate risk characteristics of the underlying pool of mortgages,
i.e., fixed-rate or adjustable-rate, as well as prepayment risk, are passed on
to the certificate holder.  The life of a mortgage-backed pass-through security
is equal to the life of the underlying mortgages.

     The actual maturity of a mortgage-backed security varies, depending on when
the mortgagors prepay or repay the underlying mortgages.  Prepayments of the
underlying mortgages may shorten the life of the investment, thereby adversely
affecting its yield to maturity and the related market value of the mortgage-
backed security.  The yield is based upon the interest income and the
amortization of the premium or accretion of the discount related to the
mortgage-backed security.  Premiums and discounts on mortgage-backed securities
are amortized or accredited over the estimated term of the securities using a
level yield method.  The prepayment assumptions used to determine the
amortization period for premiums and discounts can significantly affect the
yield of the mortgage-backed security, and these assumptions are reviewed
periodically to reflect the actual prepayment.  The actual prepayments of the
underlying mortgages depend on many factors, including the type of mortgage, the
coupon rate, the age of the mortgages, the geographical location of the
underlying real estate collateralizing the mortgages and general levels of
market interest rates.  The difference between the interest rates on the
underlying mortgages and the prevailing mortgage interest rates is an important
determinant in the rate of prepayments.  During periods of falling mortgage
interest rates, prepayments generally increase, and, conversely, during periods
of rising mortgage interest rates, prepayments generally decrease.  If the
coupon rate of the underlying mortgage significantly exceeds the prevailing
market interest rates offered for mortgage loans, refinancing generally
increases and accelerates the prepayment of the underlying mortgages.
Prepayment experience is more difficult to estimate for adjustable-rate
mortgage-backed securities.

     Mortgage-related securities, which consist of collateralized mortgage
obligations ("CMOs"), are typically issued by a special purpose entity, which
may be organized in a variety of legal forms, such as a trust, a corporation or
a partnership.  The entity aggregates pools of pass-through securities, which
are used to collateralize the mortgage-related securities.  Once combined, the
cash flows can be divided into "tranches" or "classes" of individual securities,
thereby creating more predictable average lives for each security than the
underlying pass-through pools.  Accordingly, under this security structure, all
principal paydowns from the various mortgage pools are allocated to a mortgage-
related securities' class or classes structured to have priority until it has
been paid off.  These securities generally have fixed interest rates, and, as a
result, changes in interest rates generally would affect the market value and
possibly the prepayment rates of such securities.  The Company's CMOs are not
considered to be derivative financial instruments for reporting purposes of SFAS
No. 119.

     Some mortgage-related securities instruments are like traditional debt
instruments due to their stated principal amounts and traditionally defined
interest rate terms.  Purchasers of certain other mortgage-related securities
instruments are entitled to the excess, if any, of the issuer's cash flows.
These mortgage-related securities instruments may include instruments designated
as residual interest and are riskier in that they could result in the loss of a
portion of the original investment.  Cash flows from residual interests are very
sensitive to prepayments and, thus, contain a high degree of interest rate risk.
The Company does not purchase residual interests in mortgage-related securities.

     At December 31, 1999, the Company had CMOs with an amortized cost of $10.8
million, representing 3.47% of total assets.  The Company's CMOs had a weighted
average yield of 6.01% at December 31, 1999.  The Company's

                                       12
<PAGE>

investment policy permits investments in individual issues of CMOs or REMICs up
to one percent (per issue) of the Company's assets so long as the issue is rated
AA or better at the time of purchase by nationally recognized rating services or
issued by U.S. government agencies.

     At December 31, 1999, the Company's mortgage-backed and related securities
held as available for sale had an amortized cost of $36.2 million, an
approximate market value of $34.3 million and a weighted average yield of 6.52%.

     At December 31, 1999, the Company's mortgage-backed and related securities
held to maturity had an amortized cost of $338,000 and a market value of
$352,000.

Investment Activities

     The Company's investment policy currently allows for investment in various
types of liquid assets, including United States Government and Agency
securities, time deposits at the Federal Home Loan Bank ("FHLB") of Chicago,
certificates of deposit or bankers' acceptances at other federally insured
depository institutions and obligations of states and political subdivisions.
Generally, the objectives of the Company's investment policy are to: (i)
maximize returns; (ii) provide and maintain liquidity within the guidelines of
regulations; (iii) maintain a balance of high-quality, diversified investments
to minimize risk; (iv) provide collateral for pledging requirements; (v) serve
as a counter-cyclical balance to the loan portfolio; (vi) manage interest rate
risk; and (vii) insure compliance with all regulatory requirements. In
accordance with the investment policy, at December 31, 1999, the Company had
investments in U.S. Government and agency notes, obligations of state and
political subdivisions, interest-earning deposits and certificates of deposit,
FHLB of Chicago stock and FRB stock.

     At December 31, 1999, certain securities with a total amortized cost of
$45.4 million and a market value of $43.8 million were classified as available
for sale.  Investments classified as available for sale are recorded in the
consolidated financial statements at market value with unrealized gains and
losses, net of tax, recognized in stockholders' equity.  At December 31, 1999,
the effect of the investments available for sale was $1.6 million reduction to
stockholders' equity.  The Company intends to hold these investments for an
indefinite period of time, but not necessarily to maturity.  Any decision to
sell an investment would be based on various factors, including significant
movements in interest rates, liquidity needs, regulatory capital considerations,
acquisitions, and other factors.  The Company had classified state and municipal
obligations with an amortized cost of $18.4 million and market value of $18.2
million as held to maturity.  Investments classified as held to maturity are
recorded in the consolidated financial statements at amortized cost.  The
Company has the intent and ability to hold these investments to maturity.  The
Company currently has no investments classified as trading securities.

     The following table sets forth the carrying value of the Company's
investments at the dates indicated.

<TABLE>
<CAPTION>
                                                        At December 31,
                                                    ------------------------
                                                    1999     1998       1997
                                                    ----     ----       ----
                                                         (In thousands)
<S>                                                <C>      <C>       <C>
Securities available for sale (1)
 U.S. government and agency securities...          $40,675  $48,769   $53,925
 State and municipal obligations.........              105      672     1,000
 Other...................................               --       --         2
Securities held to maturity:
  U.S. government and agency securities..           14,198   11,450    14,464
  State and municipal obligations........            4,209    5,471     3,854
  Equities and mutual funds..............               --       --        --
                                                   -------  -------   -------
   Total investment securities...........           59,187   66,362    73,245
Interest-bearing deposits................            6,714   14,768    18,117
FRB stock................................              381      381       381
FHLB stock...............................            2,610    2,280     1,975
                                                   -------  -------   -------
   Total investments.....................          $68,892  $83,791   $93,718
                                                   =======  =======   =======
</TABLE>

-------------------------
(1)  The carrying value of securities available for sale is the market value.

                                       13
<PAGE>

     The following table sets forth information in the scheduled maturities,
amortized cost, market values and average yields for the Company's investment
portfolio at December 31, 1999.

<TABLE>
<CAPTION>
                                                     One Year or Less       One to Five Years       Five to Ten Years
                                                   --------------------   --------------------     -------------------
                                                   Amortized    Average    Amortized  Average      Amortized  Average
                                                     Cost        Yield       Cost      Yield         Cost      Yield
                                                   ---------   --------   ----------  -------      -------    --------
                                                                              (Dollars in thousands)
<S>                                                <C>         <C>        <C>         <C>          <C>        <C>
Securities available for sale:
   U.S. government and agency securities.....        $ 3,641       6.45%     $15,245     5.88%     $23,416       6.28%
   State and municipal
      obligations............................            105       4.25            0     0.00            0       0.00
                                                     -------                 -------               -------     ------
      Total..................................          3,746       6.38       15,245     5.88       23,416       6.28

Securities held to maturity:
   U.S. government and agency
      securities.............................          3,500       5.38       10,698     5.49            0       0.00
   State and municipal
      obligations............................            539       5.06        2,598     5.00        1,072       4.85
                                                     -------                 -------               -------
      Total..................................          4,039       5.32       13,296     5.39        1,072       4.85

Interest-bearing deposits
  and time deposits..........................          6,714       5.07            0     0.00            0       0.00
FRB stock....................................              0       0.00            0     0.00            0       0.00
FHLB stock...................................              0       0.00            0     0.00            0       0.00
                                                     -------                 -------               -------
      Total..................................        $14,499       5.07      $28,541     0.00      $24,488       0.00
                                                     =======                 =======               =======

<CAPTION>
                                                               More than Ten Years     Total Investment Portfolio
                                                              ---------------------   ----------------------------
                                                             Amortized    Average    Amortized   Market    Average
                                                               Cost        Yield      Cost        Value     Yield
                                                             ---------   --------    ---------  ---------  -------
                                                                              (Dollars in thousands)
<S>                                                          <C>         <C>         <C>        <C>        <C>
Securities available for  sale:
   U.S. government and agency securities.........            $       0       0.00%   $ 42,302   $  40,675     6.15%
   State and municipal
      obligations................................                    0       0.00         105         105     4.25
                                                             ---------               --------   ---------
      Total......................................                    0       0.00      42,407      40,780     6.15

Securities held to maturity:
   U.S. government and agency
      securities.................................                    0       0.00      14,198      14,014     5.46
   State and municipal
      obligations................................                    0       0.00       4,209       4,235     4.96
                                                             ---------               --------   ---------
      Total......................................                    0       0.00      18,407      18,249     5.35

Interest-bearing deposits
  and time deposits..............................                    0       0.00       6,714       6,714     5.07
FRB stock........................................                  381       6.00         381         381     6.00
FHLB stock.......................................                2,610       6.60       2,610       2,610     6.60
                                                             ---------               --------   ---------
      Total......................................            $   2,991       6.52    $ 70,519   $  68,734     5.85
                                                             =========               ========   =========
</TABLE>

                                       14
<PAGE>

Deposit Activity and Other Sources of Funds

     Deposits are the primary source of funds for lending, investment activities
and general operational purposes. In addition to deposits, the Company derives
funds from loan principal and interest repayments, maturities of investment
securities and mortgage-backed and related securities and interest payments
thereon. Although loan repayments are a relatively stable source of funds,
deposit inflows and outflows are significantly influenced by general interest
rates and money market conditions. Borrowings may be used on a short-term basis
to compensate for reductions in the availability of funds, or on a longer term
basis for general operational purposes. CB&T, ABI, and Egyptian have access to
borrow from the FHLB of Chicago.

     The following table sets forth the average month-end balances and interest
rates for interest-bearing demand deposits and time deposits for the periods
indicated.

<TABLE>
<CAPTION>
                                                                   At December 31,
                                            --------------------------------------------------------------
                                                   1999                 1998                    1997
                                            ------------------   ------------------     ------------------
                                            Average    Average   Average    Average     Average    Average
                                            Balance     Rate     Balance      Rate      Balance     Rate
                                            -------    -------   -------    -------     -------    -------
                                                               (Dollars in thousands)
<S>                                        <C>         <C>       <C>        <C>         <C>        <C>
Interest-bearing demand deposits..         $ 43,401     1.64%    $41,279      1.72%     $19,902     2.49%
Savings deposits..................           48,208     3.37      49,348      3.39       39,480     3.16
Time deposits.....................          132,175     5.38     132,459      5.66       99,272     5.48
</TABLE>

     The following table indicates the amount of the Company's certificates of
deposit of $100,000 or more by time remaining until maturity as of December 31,
1999 and at such date represented 13.0% of total deposits with a weighted
average rate of 5.36%. A significant portion of such deposits were
collateralized with mortgage-backed and related securities pledged by the
Company with a carrying value of $15.6 million at December 31, 1999. The
Company's certificates of deposit in excess of $100,000 primarily consist of
deposits from schools, municipalities and other local entities. As these
deposits mature, the Company bids against other financial institutions to retain
those deposits. As a result, these funds are less likely to remain on deposit at
the Company upon maturity than smaller certificates of deposit maintained by the
Company's retail customers. Management believes that it will be able to retain a
significant amount of these deposits because many of the schools, municipalities
and other entities are longstanding customers of the Company with numerous other
deposit and loan relationships with the Company. To the extent the Company is
unable to replace maturing deposits, it may sell investment securities
classified as available for sale.

                                                        Certificates
                       Maturity Period                   of Deposit
                       ---------------                   ----------
                                                       (In thousands)

                       Three months or less...........     $10,259
                       Over three through six months..       6,381
                       Over six through 12 months.....       7,442
                       Over 12 months.................       5,123
                                                           -------
                        Total.........................     $29,205
                                                           =======

     Borrowings.  Savings deposits historically have been the primary source of
funds for lending, investments and general operating activities. CB&T, ABI and
Egyptian are authorized, however, to use advances from the FHLB of Chicago to
supplement its supply of lendable funds and to meet deposit withdrawal
requirements. The FHLB of Chicago functions as a central reserve bank providing
credit for member financial institutions. Advances are pursuant to several
different programs, each of which has its own interest rate and range of
maturities. CB&T, ABI and Egyptian

                                       15
<PAGE>

each have a Blanket Agreement for advances with the FHLB under which CB&T, ABI
and Egyptian each may borrow up to 25% of assets subject to normal collateral
and underwriting requirements. Advances from the FHLB of Chicago would be
secured by CB&T's, ABI's and Egyptian's ownership of stock in the FHLB of
Chicago and other eligible assets. At December 31, 1999, the Company had $42.0
million of FHLB advances. The Bank Subsidiaries, in addition, also obtain short-
term borrowings consisting of repurchase agreements with deposit customers
totaling $6.9 million of short-term borrowings at December 31, 1999. CB&T is
authorized to borrow from the Federal Reserve Bank of St. Louis but has not done
so.

     The following table sets forth certain information regarding short-term
borrowings by the Company at the dates and for the periods indicated.

<TABLE>
<CAPTION>
                                                              At December 31,
                                                   -----------------------------------
                                                    1999           1998          1997
                                                    ----           ----         ------
                                                              (In thousands)
<S>                                                <C>           <C>           <C>
Amounts outstanding at end of period:
 FHLB advances..................................   $38,900       $44,100       $    --
 Short-term notes & Lines of credit.............     3,100            --         5,600
 Other short-term borrowings....................     6,891         4,296         5,323

Rate paid on:
 FHLB advances..................................      5.61%         5.37%           --%
 Short-term notes & Lines of credit.............      4.74            --          8.50
 Other short-term borrowings....................      5.54          4.92          5.45
</TABLE>


<TABLE>
<CAPTION>
                                                        Year Ended December 31,
                                                    -------------------------------
                                                     1999         1998        1997
                                                    -----         ----        -----
                                                             (In thousands)
<S>                                                <C>           <C>        <C>
Maximum amount of borrowings outstanding
 at any month end:
 FHLB advances..................................   $44,100       $44,100    $19,500
 Short-term notes & Lines of credit.............    16,115         5,600      5,600
 Other short-term borrowings....................     8,635         5,874      5,627

Approximate average short-term borrowings
 outstanding with respect to:
 FHLB advances..................................   $43,223       $43,742    $ 9,264
 Short-term notes & Lines of credit.............     3,767         3,554        568
 Other short-term borrowings....................     6,248         4,963      4,340

Approximate weighted average rate paid on: (1)
 FHLB advances..................................      5.49%         5.45%      6.13%
 Short-term notes & Lines of credit.............      5.31          8.50       8.50
 Other short-term borrowings....................      4.75          5.26       5.58
</TABLE>

-------------------------
(1)  Based on month-end balances.

                                       16
<PAGE>

Competition

     The Company faces strong competition both in originating real estate,
agriculture, automobile, consumer and other loans and in attracting deposits.
The Company competes for real estate and other loans principally on the basis of
interest rates, the types of loans it originates and the quality of services it
provides to borrowers. Its competition in originating real estate loans comes
primarily from savings institutions, commercial banks and mortgage bankers
making loans secured by real estate located in the Company's market area.
Commercial banks, credit unions and finance companies provide vigorous
competition in consumer lending. Competition may increase as a result of the
continuing reduction of restrictions on the interstate operations of financial
institutions.

     The Bank Subsidiaries attract all their deposits through their branch
offices primarily from the communities in which those branch offices are
located. Consequently, competition for deposits is principally from other
savings institutions, commercial banks, credit unions and brokers in these
communities. The Bank Subsidiaries compete for deposits and loans by offering a
variety of deposit accounts at competitive rates, a wide array of loan products,
convenient business hours and branch locations, a commitment to outstanding
customer service and a well-trained staff. In addition, the Company believes
that its banking subsidiaries have developed strong relationships with local
businesses, realtors and the public in general.

Employees

     As of December 31, 1999, the Company and its subsidiaries had 113 full-time
and 23 part-time employees, none of whom were represented by a collective
bargaining agreement, and management considers relationships with employees to
be good.

Regulation, Supervision and Governmental Policy

     The following is a brief summary of certain statutes, rules and regulations
affecting the Company and the Bank Subsidiaries. A number of other statutes and
regulations have an impact on their operations. The following summary of
applicable statutes and regulations does not purport to be complete and is
qualified in its entirety by reference to such statutes and regulations.

     Bank Holding Company Regulation. The Company is registered as a bank
holding company under the Bank Holding Company Act of 1956, as amended (the
"Holding Company Act") and, as such, is subject to supervision and regulation by
the Board of Governors of the Federal Reserve Board ("FRB"). As a bank holding
company, the Company is required to furnish to the FRB annual and quarterly
reports of its operations at the end of each period and to furnish such
additional information as the FRB may require pursuant to the Holding Company
Act. The Company is also subject to regular examination by the FRB.

     Under the Holding Company Act, a bank holding company must obtain the prior
approval of the FRB before (1) acquiring direct or indirect ownership or control
of any voting shares of any bank or bank holding company if, after such
acquisition, the bank holding company would directly or indirectly own or
control more than 5% of such shares; (2) acquiring all or substantially all of
the assets of another bank or bank holding company; or (3) merging or
consolidating with another bank holding company.

     Historically, the Holding Company Act prohibited the FRB from approving an
application by a bank holding company to acquire voting shares of a bank located
outside the state in which the operations of the holding company's bank
subsidiaries are principally conducted, unless such an acquisition is
specifically authorized by state law. The Riegle-Neal Interstate Banking and
Branching Efficiency Act of 1994 (the "Act") was enacted to ease restrictions on
interstate banking. Effective September 29, 1995, the Act allows the FRB to
approve an application of an adequately capitalized and adequately managed bank
holding company to acquire control of, or acquire all or substantially all of
the assets of, a bank located in a state other than such holding company's home
state, without regard to whether the transaction is prohibited by the laws of
any state. The FRB may not approve the acquisition of a bank that has not been
in existence for the minimum time period (not exceeding five years) specified by
the statutory law of the host state.

                                       17
<PAGE>

The Act also prohibits the FRB from approving an application if the applicant
(and its depository institution affiliates) controls or would control more than
10% of the insured deposits in the United States or 30% or more of the deposits
in the target bank's home state or in any state in which the target bank
maintains a branch.  The Act does not affect the authority of states to limit
the percentage of total insured deposits in the state which may be held or
controlled by a bank or bank holding company to the extent such limitation does
not discriminate against out-of-state banks or bank holding companies.
Individual states may also waive the 30% state-wide concentration limit
contained in the Act.

     Under the Holding Company Act, any company must obtain approval of the FRB
prior to acquiring control of the Company or any of the Bank Subsidiaries. For
purposes of the Holding Company Act, "control" is defined as ownership of more
than 25% of any class of voting securities of the Company or any of the Bank
Subsidiaries, the ability to control the election of a majority of the
directors, or the exercise of a controlling influence over management or
policies of the Company or any of the Bank Subsidiaries.

     The Change in Bank Control Act and the regulations of the FRB thereunder
require any person or persons acting in concert (except for companies required
to make application under the Holding Company Act), to file a written notice
with the FRB before such person or persons may acquire control of the Company or
any of the Bank Subsidiaries. The Change in Bank Control Act defines "control"
as the power, directly or indirectly, to vote 25% or more of any voting
securities or to direct the management or policies of a bank holding company or
an insured bank.

     The Holding Company Act also prohibits, with certain exceptions, a bank
holding company from acquiring direct or indirect ownership or control of more
than 5% of the voting shares of a company that is not a bank or a bank holding
company, or from engaging directly or indirectly in activities other than those
of banking, managing or controlling banks, or providing services for its
subsidiaries. The principal exceptions to these prohibitions involve certain
non-bank activities which, by statute or by FRB regulation or order, have been
identified as activities closely related to the business of banking or managing
or controlling banks. The activities of the Company are subject to these legal
and regulatory limitations under the Holding Company Act and the FRB's
regulations thereunder. Notwithstanding the FRB's prior approval of specific
nonbanking activities, the FRB has the power to order a holding company or its
subsidiaries to terminate any activity, or to terminate its ownership or control
of any subsidiary, when it has reasonable cause to believe that the continuation
of such activity or such ownership or control constitutes a serious risk to the
financial safety, soundness or stability of any bank subsidiary of that holding
company.

     The FRB has adopted guidelines regarding the capital adequacy of bank
holding companies, which require bank holding companies to maintain specified
minimum ratios of capital to total assets and capital to risk-weighted assets.
See " -- Regulatory Capital Requirements."

     The FRB has the power to prohibit dividends by bank holding companies if
their actions constitute unsafe or unsound practices. The FRB has issued a
policy statement on the payment of cash dividends by bank holding companies,
which expresses the FRB's view that a bank holding company should pay cash
dividends only to the extent that the company's net income for the past year is
sufficient to cover both the cash dividends and a rate of earning retention that
is consistent with the company's capital needs, asset quality, and overall
financial condition.

     As a bank holding company, the Company is required to give the FRB notice
of any purchase or redemption of its outstanding equity securities if the gross
consideration for the purchase or redemption, when combined with the net
consideration paid for all such purchases or redemptions during the preceding 12
months, is equal to 10% or more of the Company's consolidated net worth. The FRB
may disapprove such a purchase or redemption if it determines that the proposal
would violate any law, regulation, FRB order, directive, or any condition
imposed by, or written agreement with, the FRB.

     Recently Enacted Legislative and Regulatory Changes. On November 12, 1999,
President Clinton signed legislation which could have a far-reaching impact on
the financial services industry. The Gramm-Leach-Bliley ("G-L-B") Act authorizes
affiliations between banking, securities and insurance firms and authorizes bank
holding companies and national banks to engage in a variety of new financial
activities. Among the new activities that will be permitted to bank holding
companies are securities and insurance brokerage, securities underwriting,
insurance underwriting and merchant banking. The Federal Reserve Board, in
consultation with the Department of Treasury, may approve additional financial
activities. National bank subsidiaries will be permitted to engage in similar
financial

                                       18
<PAGE>

activities but only on an agency basis unless they are one of the 50 largest
banks in the country. National bank subsidiaries will be prohibited from
insurance underwriting, real estate development and merchant banking. The G-L-B
Act prohibits future acquisitions of existing unitary savings and loan holding
companies by firms that are engaged in commercial activities and prohibits the
formation of new unitary holding companies.

     The G-L-B Act imposes new requirements on financial institutions with
respect to customer privacy.  The G-L-B Act generally prohibits disclosure of
customer information to non-affiliated third parties unless the customer has
been given the opportunity to object and has not objected to such disclosure.
Financial institutions are further required to disclose their privacy policies
to customers annually. Financial institutions, however, will be required to
comply with state law if it is more protective of customer privacy than the G-L-
B Act. The G-L-B Act directs the federal banking agencies, the National Credit
Union Administration, the Secretary of the Treasury, the Securities and Exchange
Commission and the Federal Trade Commission, after consultation with the
National Association of Insurance Commissioners, to promulgate implementing
regulations within six months of enactment.  The privacy provisions will become
effective six months thereafter.

     The G-L-B Act contains significant revisions to the Federal Home Loan Bank
System.  The G-L-B Act imposes new capital requirements on the Federal Home Loan
Banks and authorizes them to issue two classes of stock with differing dividend
rates and redemption requirements.  The G-L-B Act expands the permissible uses
of Federal Home Loan Bank advances by community financial institutions (under
$500 million in assets) to include funding loans to small businesses, small
farms and small agri-businesses.  The G-L-B Act makes membership in the Federal
Home Loan Bank System voluntary for federal savings associations.

     The G-L-B Act contains a variety of other provisions including a
prohibition against ATM surcharges unless the customer has first been provided
notice of the imposition and amount of the fee. The G-L-B Act reduces the
frequency of Community Reinvestment Act examinations for smaller institutions
and imposes certain reporting requirements on depository institutions that make
payments to non-governmental entities in connection with the Community
Reinvestment Act.  The G-L-B Act eliminates the SAIF special reserve and
authorizes a federal savings association that converts to a national or state
bank charter to continue to use the term "federal" in its name and to retain any
interstate branches.

     The Company is unable to predict the impact of the G-L-B Act on its
operations at this time. Although the G-L-B Act reduces the range of companies
with which the Company may affiliate, it may facilitate affiliations with
companies in the financial services industry.

     Bank Regulation.  CB&T, as a national bank, is subject to the primary
supervision of the OCC under the National Bank Act.  ABI, Egyptian, Saline and
MidAmerica are subject to the primary supervision of the OBRE and FDIC.  The
prior approval of the banking regulators is required for a bank to establish or
relocate an additional branch office or to engage in any merger, consolidation
or significant purchase or sale of assets.

     The OCC regularly examines the operations of CB&T, and the OBRE and FDIC
regularly examine the remaining Bank Subsidiaries.  These exams include but are
not limited to capital adequacy, reserves, loans, investments and management
practices.  These examinations are for the protection of the Bank's
Subsidiaries' depositors and not their shareholders.  In addition, the Bank
Subsidiaries are required to furnish quarterly and annual reports to the banking
regulators.  The banking agencies' enforcement authority includes the power to
remove officers and directors and the authority to issue cease-and-desist orders
to prevent a bank from engaging in unsafe or unsound practices or violating laws
or regulations governing its business.

     Pursuant to the National Bank Act, no national bank may pay dividends from
its paid-in capital.  All dividends must be paid out of current or retained net
profits, after deducting reserves for losses and bad debts.  The National Bank
Act further restricts the payment of dividends out of net profits by prohibiting
a national bank from declaring a dividend on its shares of common stock until
the surplus fund equals the amount of capital stock or, if the surplus fund does
not equal the amount of capital stock, until one-tenth of a bank's net profits
for the preceding half year in the case of quarterly or semi-annual dividends,
or the preceding two half-year periods in the case of annual dividends, are
transferred to the surplus fund.

                                       19
<PAGE>

     The approval of the OCC is required prior to the payment of a dividend if
the total of all dividends declared by a national bank in any calendar year
would exceed the total of its net profits for that year combined with its net
profits for the two preceding years, less any required transfers to surplus or a
fund for the retirement of any preferred stock.  In addition, CB&T is prohibited
by federal statute from paying dividends or making any other capital
distribution that would cause CB&T to fail to meet its regulatory capital
requirements.  Further, the OCC also has authority to prohibit the payment of
dividends by a national bank when it determines such payment to be an unsafe and
unsound banking practice.

     CB&T is a member of the Federal Reserve System and its deposits are insured
by the SAIF administered by the FDIC to the legal maximum of $100,000 for each
insured depositor.  The deposits of ABI, Egyptian, Saline and MidAmerica are
insured by the BIF administered by the FDIC to the legal maximum of $100,000 for
each insured depositor.  Some of the aspects of the lending and deposit business
of the Bank Subsidiaries that are subject to regulation include reserve
requirements and disclosure requirements in connection with personal and
mortgage loans and savings deposit accounts. In addition, the Bank Subsidiaries
are subject to numerous federal and state laws and regulations which set forth
specific restrictions and procedural requirements with respect to the
establishment of branches, investments, interest rates on loans, credit
practices, the disclosure of credit terms and discrimination in credit
transactions.

     The Bank Subsidiaries are subject to restrictions imposed by federal law on
extensions of credit to, and certain other transactions with, the Company and
other affiliates, and on investments in the stock or other securities thereof.
Such restrictions prevent the Company and such other affiliates from borrowing
from the Bank Subsidiaries unless the loans are secured by specified collateral,
and require such transactions to have terms comparable to terms of arms-length
transactions with third persons.  Further, such secured loans and other
transactions and investments by the Bank Subsidiaries are generally limited in
amount as to the Company and as to any other affiliate to 10% of the Bank
Subsidiaries' capital and surplus and as to the Company and all other affiliates
to an aggregate of 20% of the Bank Subsidiaries' capital and surplus. These
regulations and restrictions may limit the Company's ability to obtain funds
from the Bank for its cash needs, including funds for acquisitions and for
payment of dividends, interest and operating expenses.

     Under federal banking regulations, banks must adopt and maintain written
policies that establish appropriate limits and standards for extensions of
credit that are secured by liens or interests in real estate or are made for the
purpose of financing permanent improvements to real estate.  These policies must
establish loan portfolio diversification standards, prudent underwriting
standards, including loan-to-value limits, that are clear and measurable, loan
administration procedures and documentation, approval and reporting
requirements.  A bank's real estate lending policy must reflect consideration of
the Interagency Guidelines for Real Estate Lending Policies (the "Interagency
Guidelines") that have been adopted by the federal bank regulators.  The
Interagency Guidelines, among other things, call upon depository institutions to
establish internal loan-to-value limits for real estate loans that are not in
excess of the loan-to-value limits specified in the Guidelines for the various
types of real estate loans.  The Interagency Guidelines state, however, that it
may be appropriate in individual cases to originate or purchase loans with loan-
to-value ratios in excess of the supervisory loan-to-value limits.

     The Bank Subsidiaries are required to pay assessments based on a percent of
its insured deposits to the FDIC for insurance of its deposits by the SAIF or
the BIF.  Under the Federal Deposit Insurance Act, the FDIC is required to set
semi-annual assessments for insured institutions to maintain the designated
reserve ratio of the insurance funds at 1.25% of estimated insured deposits or
at a higher percentage of estimated insured deposits that the FDIC determines to
be justified for that year by circumstances raising a significant risk of
substantial future losses to the SAIF or BIF.

     The assessment rate for an insured depository institution is determined by
the assessment risk classification assigned to the institution by the FDIC based
on the institution's capital level and supervisory evaluations.  Based on the
data reported to regulators for date closest to the last day of the seventh
month preceding the semi-annual assessment period, institutions are assigned to
one of three capital groups -- well capitalized, adequately capitalized or
undercapitalized -- using the same percentage criteria as in the prompt
corrective action regulations.  See "-- Prompt Corrective Regulatory Action."
Within each capital group, institutions are assigned to one of three subgroups
on the basis of supervisory evaluations by the institution's primary supervisory
authority and such other information as the FDIC determines to be relevant to
the institution's financial condition and the risk posed to the deposit
insurance fund.

                                       20
<PAGE>

     Until December 31, 1999, all SAIF-insured institutions paid additional
assessments to the FDIC at the rate of 6.5 basis points to help fund interest
payments on certain bonds issued by the Financing Corporation ("FICO"), an
agency of the federal government established to finance takeovers of insolvent
thrifts.  During this period, BIF members were assessed for these obligations at
the rate of 1.3 basis points.  After December 31, 1999, both BIF and SAIF
members will be assessed at the same rate for FICO payments.

     Prompt Corrective Regulatory Action.  Under the Federal Deposit Insurance
Corporation Improvement Act ("FDICIA"), the federal banking regulators are
required to take prompt corrective action if an insured depository institution
fails to satisfy certain minimum capital requirements.  All institutions,
regardless of their capital levels, are restricted from making any capital
distribution or paying any management fees if the institution would thereafter
fail to satisfy the minimum levels for any of its capital requirements.  An
institution that fails to meet the minimum level for any relevant capital
measure (an "undercapitalized institution") may be: (i) subject to increased
monitoring by the appropriate federal banking regulator; (ii) required to submit
an acceptable capital restoration plan within 45 days; (iii) subject to asset
growth limits; and (iv) required to obtain prior regulatory approval for
acquisitions, branching and new lines of businesses.  The capital restoration
plan must include a guarantee by the institution's holding company that the
institution will comply with the plan until it has been adequately capitalized
on average for four consecutive quarters, under which the holding company would
be liable up to the lesser of 5% of the institution's total assets or the amount
necessary to bring the institution into capital compliance as of the date it
failed to comply with its capital restoration plan.  A "significantly
undercapitalized" institution, as well as any undercapitalized institution that
did not submit an acceptable capital restoration plan, may be subject to
regulatory demands for recapitalization, broader application of restrictions on
transactions with affiliates, limitations on interest rates paid on deposits,
asset growth and other activities, possible replacement of directors and
officers, and restrictions on capital distributions by any bank holding company
controlling the institution.  Any company controlling the institution could also
be required to divest the institution or the institution could be required to
divest subsidiaries.  The senior executive officers of a significantly
undercapitalized institution may not receive bonuses or increases in
compensation without prior approval and the institution is prohibited from
making payments of principal or interest on its subordinated debt. In their
discretion, the federal banking regulators may also impose the foregoing
sanctions on an undercapitalized institution if the regulators determine that
such actions are necessary to carry out the purposes of the prompt corrective
action provisions.  If an institution's ratio of tangible capital to total
assets falls below a "critical capital level," the institution will be subject
to conservatorship or receivership within 90 days unless periodic determinations
are made that forbearance from such action would better protect the deposit
insurance fund.  Unless appropriate findings and certifications are made by the
appropriate federal bank regulatory agencies, a critically undercapitalized
institution must be placed in receivership if it remains critically
undercapitalized on average during the calendar quarter beginning 270 days after
the date it became critically undercapitalized.   If an institution is in
compliance with an approved capital plan on the date of enactment of FDICIA,
however, it will not be required to submit a capital restoration plan if it is
undercapitalized or become subject to the statutory prompt corrective action
provisions applicable to significantly and critically undercapitalized
institutions prior to July 1, 1994.

     Under regulations jointly adopted by the federal banking regulators, a
depository institution's capital adequacy for purposes of the FDICIA prompt
corrective action rules is determined on the basis of the institution's total
risk-based capital ratio (the ratio of its total capital to risk-weighted
assets), Tier 1 risk-based capital ratio (the ratio of its core capital to risk-
weighted assets) and leverage ratio (the ratio of its core capital to adjusted
total assets).  Under the regulations, an institution that is not subject to an
order or written directive to meet or maintain a specific capital level will be
deemed "well capitalized" if it also has: (i) a total risk-based capital ratio
of 10% or greater; (ii) a Tier 1 risk-based capital ratio of 6.0% or greater;
and (iii) a leverage ratio of 5.0% or greater.  An "adequately capitalized"
institution is an institution that does not meet the definition of well
capitalized and has: (i) a total risk-based capital ratio of 8.0% or greater;
(ii) a Tier 1 capital risk-based ratio of 4.0% or greater; and (iii) a leverage
ratio of 4.0% or greater (or 3.0% or greater if the institution has a composite
1 CAMELS rating).  An "undercapitalized institution" is an institution that has
(i) a total risk-based capital ratio less than 8.0%; or (ii) a Tier 1 risk-based
capital ratio of less than 4.0%; or (iii) a leverage ratio of less than 4.0% (or
3.0% if the association has a composite 1 CAMELS rating).  A "significantly
undercapitalized" institution is defined as an institution that has: (i) a total
risk-based capital ratio of less than 6.0%; or (ii) a Tier 1 risk-based capital
ratio of less than 3.0%; or (iii) a leverage ratio of less than 3.0%.  A
"critically undercapitalized" institution  is defined as an institution that has
a ratio of "tangible equity" to total assets of less than 2.0%.  Tangible equity
is defined as core capital plus cumulative perpetual preferred stock (and
related surplus) less all intangibles other than qualifying supervisory goodwill
and certain purchased mortgage servicing rights.  An

                                       21
<PAGE>

institution's federal banking regulator may reclassify a well capitalized
institution as adequately capitalized and may require an adequately capitalized
or undercapitalized association to comply with the supervisory actions
applicable to associations in the next lower capital category if the regulator
determines, after notice and an opportunity for a hearing, that the institution
is in an unsafe or unsound condition or that the institution has received and
not corrected a less-than-satisfactory rating for any CAMELS rating category.
The Bank Subsidiaries are classified as "well-capitalized" under the
regulations.

     Regulatory Capital Requirements.  The federal banking regulators have
established guidelines with respect to the maintenance of appropriate levels of
capital by bank holding companies and banks.  The regulations impose two sets of
capital adequacy requirements: minimum leverage rules, which require bank
holding companies and banks to maintain a specified minimum ratio of capital to
total assets, and risk-based capital rules, which require the maintenance of
specified minimum ratios of capital to "risk-weighted" assets.

     The federal banking agency regulations require bank holding companies and
banks to maintain a minimum leverage ratio of "Tier 1 capital" (as defined in
the risk-based capital guidelines discussed in the following paragraphs) to
total assets of 3.0%.  Although setting a minimum 3.0% leverage ratio, the
capital regulations state that only the strongest bank holding companies and
banks, with composite examination ratings of 1 under the rating system used by
the federal bank regulators, would be permitted to operate at or near such
minimum level of capital.  All other bank holding companies and banks are
expected to maintain a leverage ratio of at least 4.0%.  Any bank or bank
holding company experiencing or anticipating significant growth would be
expected to maintain capital well above the minimum levels.  In addition, the
FRB has indicated that whenever appropriate, and in particular when a bank
holding company is undertaking expansion, seeking to engage in new activities or
otherwise facing unusual or abnormal risks, it will consider, on a case-by-case
basis, the level of an organization's ratio of tangible Tier 1 capital (after
deducting all intangibles) to total assets in making an overall assessment of
capital.

     The risk-based capital rules of the federal banking agencies require bank
holding companies and banks to maintain minimum regulatory capital levels based
upon a weighting of their assets and off-balance sheet obligations according to
risk. The risk-based capital rules have two basic components: a core capital
(Tier 1) requirement and a supplementary capital (Tier 2) requirement.  Core
capital consists primarily of common stockholders' equity, certain perpetual
preferred stock (which must be noncumulative with respect to banks), and
minority interests in the equity accounts of consolidated subsidiaries; less all
intangible assets, except for certain purchased mortgage servicing rights and
purchased credit card relationships.  Supplementary capital elements include,
subject to certain limitations, the allowance for losses on loans and leases;
perpetual preferred stock that does not qualify as Tier 1 capital and long-term
preferred stock with an original maturity of at least 20 years from issuance;
hybrid capital instruments, including perpetual debt and mandatory convertible
securities; subordinated debt and intermediate-term preferred stock; and up to
45.0% of unrealized gains of equity securities.

     The risk-based capital regulations assign balance sheet assets and credit
equivalent amounts of off-balance sheet obligations to one of four broad risk
categories based principally on the degree of credit risk associated with the
obligor. The assets and off-balance sheet items in the four risk categories are
weighted at 0%, 20%, 50% and 100%. These computations result in the total risk-
weighted assets.

     The risk-based capital regulations require all banks and bank holding
companies to maintain a minimum ratio of total capital to total risk-weighted
assets of 8%, with at least 4% as core capital.  For the purpose of calculating
these ratios: (i) supplementary capital will be limited to no more than 100% of
core capital; and (ii) the aggregate amount of certain types of supplementary
capital will be limited.  In addition, the risk-based capital regulations limit
the allowance for loan losses includable as capital to 1.25% of total risk-
weighted assets.

     Federal banking regulations classify banks by capital levels and which
provide for the federal banking agencies to take various prompt corrective
actions to resolve the problems of any bank that fails to satisfy the capital
standards. Under such regulations, a well-capitalized bank is one that is not
subject to any regulatory order or directive to meet any specific capital level
and that has or exceeds the following capital levels: a total risk-based capital
ratio of 10%, a Tier 1 risk-based capital ratio of 6%, and a leverage ratio of
5%.  An adequately capitalized bank is one that does not qualify as well-
capitalized but meets or exceeds the following capital requirements: a total
risk-based capital ratio of 8%, a Tier 1 risk-based capital ratio of 4%, and a
leverage ratio of either (i) 4% or (ii) 3% if the bank has the highest

                                       22
<PAGE>

composite examination rating. A bank not meeting these criteria is treated as
undercapitalized, significantly undercapitalized, or critically undercapitalized
depending on the extent to which the bank's capital levels are below these
standards. A bank that falls within any of the three undercapitalized categories
established by the prompt corrective action regulation will be subject to severe
regulatory sanctions. As of December 31, 1999 the Bank Subsidiaries all were
well-capitalized as defined by the federal banking regulations.

Taxation

     The Company's federal income tax returns have not been audited in the past
six years.  For additional information regarding taxation, see Note 11 of Notes
to Consolidated Financial Statements.

                                       23
<PAGE>

Item 2. Properties
-------------------

        The following table sets forth the location and certain additional
information regarding the Company's offices at December 31, 1999. The Company
owns all of its offices with the exception of CB&T's branch at 1110 S. West St.,
with the land and building under a lease contract.

<TABLE>
<CAPTION>
                                                                          Net Book Value
                                               Year          Total         at December        Approximate
                                              Opened       Investment         31, 1999       Square Footage
                                              ------       ----------     --------------     --------------
                                                      (Dollars in thousands)
<S>                                           <C>          <C>            <C>                <C>
Community Financial Corp.
240 E. Chestnut
P.O. Box 700
Olney, IL 62450                                 1994           $1,084          $     796                 --

Community Bank & Trust, N.A.
----------------------------

Main Office:

240 E. Chestnut
P.O. Box 700
Olney, IL 62450                                 1883  (1)       2,293                988              9,200

Branch Offices:

Olney Branch
1110 S. West St.
Olney, IL 62450                                 1998              150                121              2,700

Lawrenceville Branch
1601 State
P.O. Box 477
Lawrenceville, IL 62439                         1983  (1)         648                251              2,800

Fairfield Branch
303 W. Delaware
Fairfield, IL 62837                             1983  (1)         543                229              2,400

Newton Branch
601 W. Jourdan
P.O. Box 361
Newton, IL 62448                                1990  (1)         647                382              3,114

Charleston Branch
820 W. Lincoln
Charleston, IL 61920                            1989  (1)       1,253              1,020              4,912

American Bank of Illinois in Highland
-------------------------------------

Main Office:
 12616 Route 143
 Highland, IL 62249                                             1,715              1,571              8,000

Branch Office:
 P.O. Box 158
 Pocahontas, IL 62275                                             452                193              2,200
</TABLE>

                                       24
<PAGE>

<TABLE>
<CAPTION>
                                                                       Net Book Value
                                          Year          Total           at December         Approximate
                                         Opened       Investment             31, 1999      Square Footage
                                         ------       ----------       --------------      --------------
                                                  (Dollars in thousands)
<S>                                      <C>          <C>              <C>                 <C>
The Egyptian State Bank
-----------------------

2 South Main Street
Carrier Mills, IL 62917                    1951           $  564            $     220               3,500

Saline County State Bank
------------------------

Main Office:
 1115 Wilson Street
 P.O. Box 99
 Stonefort, IL 62987                       1904              108                    4               4,000

Branch Office:
 Route 166 & Blue Avenue
 Creal Springs, IL 62922                   1984              608                  438               3,200

MidAmerica Bank of St. Clair County
-----------------------------------

350 Hartman Lane
P.O. Box 850
O'Fallon, IL 62269                         1996            1,888                1,488               7,200
</TABLE>
---------------
(1)  Date of acquisition.

     The net book value of the Company's investment in premises and equipment
totaled approximately $7.7 million at December 31, 1999. For a discussion of
premises and equipment, see Note 6 of Notes to Consolidated Financial
Statements.

Item 3. Legal Proceedings.
-------------------------

     On October 18, 1996, a former depositor and borrower of CB&T filed a
complaint in the Circuit Court for the Second Judicial Circuit of Illinois,
naming CB&T's then President and Chief Executive Officer and CB&T itself as
defendants. The complaint seeks total damages of $200,000 (including $50,000
against the former President in her individual capacity) plus costs. The
complaint alleges the following actions on the part of CB&T: unilaterally
lowering the credit line on the individual's credit card; wrongfully dishonoring
the individual's check; and wrongfully debiting money from the individual's
account. Management believes that the claims brought against it in this
proceeding are without merit. There are no pending regulatory proceedings to
which the Company, CB&T or its subsidiaries is a party or to which any of their
properties is subject which are currently expected to result in a material loss.
From time to time, the Bank is a party to various legal proceedings incident to
its business.

     On March 8, 2000, Mr. Barrett Rochman, a holder of in excess of 5% of the
Company's outstanding common stock, filed a Complaint for Mandamus Judgment
against the Company in the Circuit Court of the Second Judicial Circuit of
Illinois, Richland County, seeking to examine and make extracts from the minutes
of the meetings of the Company's Board of Directors and of the meetings of the
management recognition plan and compensation committees of the Board of
Directors from and after January 1, 1999. By order dated March 27, 2000, the
court ordered the Company to turn over to Mr. Rochman the material he requested,
with all such material to be under a protective order with application to lift
such order to be sought for specific information after review. The court further
found that the Company did not act in bad faith and denied Mr. Rochman's motion
for fees.

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

     Not applicable.

                                       25
<PAGE>

                                    PART II

Item 5. Market for the Registrant's Common Equity and Related Stockholders'
----------------------------------------------------------------------------
Matters
-------

     The information contained under the sections captioned "Market Information"
in the Company's Annual Report to Stockholders for the Fiscal Year Ended
December 31, 1999 (the "Annual Report") filed as Exhibit 13 hereto is
incorporated herein by reference.

Item 6.  Selected Financial Data
--------------------------------

     The information contained in the table captioned "Selected Consolidated
Financial and Other Data" on page 3 in the Annual Report is incorporated herein
by reference.

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

     The information contained in the section captioned "Management's Discussion
and Analysis of Financial Condition and Results of Operations" on pages 5
through 14 in the Annual Report is incorporated herein by reference.

Item 7A.  Quantitative and Qualitative Disclosures About Market Risk
--------------------------------------------------------------------

     The information contained in the section captioned "Management's Discussion
and Analysis of Financial Condition and Results of Operations" on pages 5
through 14 in the Annual Report is incorporated herein by reference.

Item 8.  Financial Statements and Supplementary Data
----------------------------------------------------

     The Consolidated Financial Statements, Notes to Consolidated Financial
Statements, Independent Auditors' Report and Selected Financial Data contained
on pages 15 through 51 in the Annual Report, which are listed under Item 14
herein, are incorporated herein by reference.

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

     Not applicable.

                                   PART III

Item 10.  Directors and Executive Officers of the Registrant
------------------------------------------------------------

     For information concerning the Board of Directors and executive officers of
the Company, the information contained under the section captioned "Proposal I -
- Election of Directors" in the Company's definitive proxy statement for the
Company's 2000 Annual Meeting of Stockholders (the "Proxy Statement") is
incorporated herein by reference.

                                       26
<PAGE>

Item 11.  Management Remuneration
---------------------------------

     The information contained under the sections captioned "Proposal I --
Election of Directors -- Executive Compensation" " -- Director Compensation," "
-- Employment Agreements" and " -- Supplemental Executive Retirement Agreements"
in the Proxy Statement is incorporated herein by reference.

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

     (a)  Security Ownership of Certain Beneficial Owners

          Information required by this item is incorporated herein by reference
          to the section captioned "Voting Securities and Security Ownership" in
          the Proxy Statement.

     (b)  Security Ownership of Management

          Information required by this item is incorporated herein by reference
          to the sections captioned "Voting Securities and Security Ownership"
          and "Proposal I -- Election of Directors" in the Proxy Statement.

     (c)  Changes in Control

          Management of the Company knows of no arrangements, including any
          pledge by any person of securities of the Company, the operation of
          which may at a subsequent date result in a change in control of the
          registrant.

Item 13.  Certain Relationships and Related Transactions
--------------------------------------------------------

     The information required by this item is incorporated herein by reference
to the section captioned "Proposal I -- Election of Directors -- Transactions
with Management" in the Proxy Statement.

                                    PART IV

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

     (a)  List of Documents Filed as Part of this Report
          ----------------------------------------------

     (1)  Financial Statements. The following consolidated financial statements
are incorporated by reference from Item 8 hereof (see Exhibit 13):

               Independent Auditors' Report
               Consolidated Balance Sheets - December 31, 1999 and 1998
               Consolidated Statements of Income - Years ended December 31,
               1999 and 1998
               Consolidated Statements of Stockholders' Equity - Years ended
               December 31, 1999 and 1998
               Consolidated Statements of Cash Flows - Years ended December 31,
               1999 and 1998
               Notes to Consolidated Financial Statements

     (2)  Financial Statement Schedules. All schedules for which provision is
made in the applicable accounting regulations of the Securities and Exchange
Commission are omitted because of the absence of conditions under which

                                       27
<PAGE>

they are required or because the required information is included in the
consolidated financial statements and related notes thereto.

     (3)  Exhibits. The following is a list of exhibits filed as part of this
Annual Report on Form 10-K and is also the Exhibit Index.

  No.          Description
  --           -----------

   3.1         Articles of Incorporation *
   3.2         Bylaws ***
     4         Form of Common Stock Certificate of Community Financial Corp. **
  10.1         Community Financial Corp. Stock Option and Incentive Plan *
  10.2         Community Financial Corp. Management Recognition Plan *
  10.3(a)      Employment Agreements between Community Financial Corp.
               and Wayne H. Benson and Douglas W. Tompson *
  10.3(b)      Employment Agreements between Community Bank & Trust, N.A.
               and Wayne H. Benson and Douglas W. Tompson *
  10.4         Severance Agreements between each of Community Financial Corp.
               and Community Bank & Trust, N.A. and Shirley B. Kessler *
  10.5         Community Bank & Trust, N.A. Deferred Compensation Plan *
  10.6         Community Bank & Trust, N.A. Supplemental Executive
               Retirement Agreements with Shirley B. Kessler,
               Wayne H. Benson and Douglas W. Tompson *
  13           Annual Report to Stockholders
  21           Subsidiaries of the Registrant
  23           Consent of Larsson, Woodyard & Henson, CPAs
  27           Financial Data Schedule

____________
*    Incorporated herein by reference from the Company's Registration Statement
     on Form S-1 filed December 30, 1994 (File No. 33-88102).
**   Incorporated herein by reference from the Company's Registration Statement
     on Form 8-A (File No. 0-26292).
***  Incorporated herein by reference from the Company's current report on Form
     8-K filed March 6, 2000.

     (b)  Reports on Form 8-K.  The Registrant did not file any Current Reports
          -------------------
on Form 8-K during the last quarter of the fiscal year ending December 31, 1999.

     (c)  Exhibits.  The exhibits required by Item 601 of Regulation S-K are
          --------
either filed as part of this Annual Report on Form 10-K or incorporated by
reference herein.

     (d)  Financial Statements and Schedules Excluded from Annual Report.  There
          --------------------------------------------------------------
are no other financial statements and financial statement schedules which were
excluded from the Annual Report to Stockholders pursuant to Rule 14a-3(b) which
are required to be included herein.

                                       28
<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.

                                     COMMUNITY FINANCIAL CORP.

March 20, 2000
                                     By: /s/ Wayne H. Benson
                                         -------------------
                                         Wayne H. Benson
                                         President, Chief Executive Officer

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


/s/ Wayne H. Benson                             March 20, 2000
------------------------------
Wayne H. Benson
President, Chief Executive Officer
 and Director
(Principal Executive Officer)

/s/ Douglas W. Tompson                          March 20, 2000
------------------------------
Douglas W. Tompson
Chief Financial Officer
(Principal Financial and Accounting Officer)

/s/ Roger A. Charleston                         March 20, 2000
-----------------------------
Roger A. Charleston
Chairman of the Board

/s/ Shirley B. Kessler                          March 20, 2000
-----------------------------
Shirley B. Kessler
Director

/s/ Michael F. Bauman                           March 20, 2000
-----------------------------
Michael F. Bauman
Director

/s/ Roger L. Haberer                            March 20, 2000
-----------------------------
Roger L. Haberer
Director

/s/ Gary L. Graham                              March 20, 2000
-----------------------------
Gary L. Graham
Director

/s/ Brad A. Jones                               March 20, 2000
-----------------------------
Brad A. Jones
Director

/s/ Clyde R. King                               March 20, 2000
-----------------------------
Clyde R. King
Director

                                       29