<PAGE>

COMMUNITY FINANCIAL CORP.






  [LOGO]



                                                              1997 ANNUAL REPORT
<PAGE>

TABLE OF CONTENTS
--------------------------------------------------------------------------------


Community Financial Corp.................................................. (i)

Market Information........................................................ (i)

Letter to Stockholders...................................................... 1

Selected Consolidated Financial and Other Data.............................. 2

Management's Discussion and Analysis of Financial
Condition and Results of Operations ........................................ 4

Consolidated Financial Statements.......................................... 16

Corporate Information........................................Inside Back Cover
<PAGE>

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 Company's principal
business is overseeing the business of its wholly owned bank subsidiaries and
investing its assets.

         Community Bank & Trust, N.A. ("CB&T") is a national bank operating
through five offices serving Richland, Coles, Jasper, Lawrence and Wayne
Counties 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, 1997, CB&T had total assets of
$210.5 million and total deposits of $147.2 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, 1997,
ABI had total assets of $20.6 million and total deposits of $19.0 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, 1997, Egyptian had total
assets of $26.3 million and total deposits of $21.1 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,
1997, Saline had total assets of $17.6 million and total deposits of $14.8
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, 1997,
MidAmerica had total assets of $22.7 million and total deposits of $17.0
million.

MARKET INFORMATION
--------------------------------------------------------------------------------

         The Company's common stock began trading under the symbol "CFIC" on the
Nasdaq National Market System on June 30, 1995. There are currently 2,360,612
shares of the common stock outstanding and approximately 641 holders of record
of the common stock. Since issuance of the common stock, on January 15, 1998 the
Company paid a cash dividend of $.25 per share to stockholders of record as of
December 30, 1997, and on January 15, 1997 the Company paid a cash dividend of
$.25 per share to stockholders of record as of December 30, 1996. No other
dividends have been paid on the common stock. Following are the high and low
closing sale prices, by fiscal quarter, as reported by Nasdaq during the periods
indicated.

<TABLE>
<CAPTION>
                                   High        Low                                           High          Low
                                   ----        ---                                           ----          ---
1996                                                        1997
----                                                        ----
<S>                            <C>          <C>             <C>                         <C>            <C>
First Quarter................  $  11.750    $  10.750       First Quarter.............  $   16.625     $  12.750
Second Quarter...............     13.000       12.500       Second Quarter............      15.688        14.000
Third Quarter................     13.375       13.000       Third Quarter.............      20.250        14.500
Fourth Quarter...............     13.500       12.625       Fourth Quarter............      19.750        16.250

</TABLE>

                                      (i)
<PAGE>

Dear Shareholder:

         Your company enters 1998 riding the wave of momentum from 1997's
dramatic growth. With a starting point of a one-bank holding company, we
acquired American Bancshares, owner of American Bank of Illinois in Highland,
with a branch in Pocahontas, in May. Combined assets of $17.5 million and the
location, 25 miles East of St. Louis, Missouri, will allow us to make an impact
in this area. In October, the acquisition of Egyptian Bancshares, owner of
Egyptian State Bank, Carrier Mills and Saline County State Bank, Stonefort with
a branch in Creal Springs, added another $40.9 million in combined assets and
provides a strong foundation for long-term generation of income. In November, we
acquired the newly-chartered MidAmerica Bank in O'Fallon with assets of $19.3
million increasing our penetration into the metro-East area and one of the
fastest growing communities in the state.

         These acquisitions move us closer to our goals of expanding our market
share and contributing to the profitability of your company. As each of these
institutions will continue to operate as independent community banks, an
additional benefit is the quality of the management and associates already in
place. With this individual diversity and strength at the community level and
the integration of support services at the holding corporation level, Community
Financial Corp. will be a dominant force in community banking in Illinois.

         Assets at the end of 1997 were $304 million with stockholders' equity
of $35.7 million, 11.7% of total assets. Average stockholders' equity to average
assets is 15.33%. The average return on assets was .62% and the average return
on equity was 4.02%. The earnings per share of $0.62 was the result of the
implementation of several steps taken this year to allow accelerated growth in
the future, specifically, the implementation and closing of an early retirement
package. Our higher than average ratio of non-performing assets to performing
assets was a result of a non-performing loan to one commercial borrower in the
aggregate amount of $1.1 million dollars. However, through the diligent efforts
of our staff, the bulk of the collateral on this loan has been liquidated and it
appears there will be minimal loss to the Bank.

         Community Financial Corp. stock price performance reflected our efforts
toward acceleration of earnings and expansion of market share by soaring 42% in
value in 1997. This recognition of our value by the market is validating our
ability to build strong assets and increase earnings in order to continue the
recognition in the market.

         We are consistently working toward the vision expressed in our Mission
Statement: COMMUNITY FINANCIAL CORP. WILL FULFILL THE FINANCIAL NEEDS OF THE
COMMUNITIES IN WHICH IT SERVES WHILE ENHANCING THE RETURN AND INCREASING THE
VALUE OF SHAREHOLDER INVESTMENT.

         Our charge is to enhance shareholder value by improving earnings to
peer bank levels at all affiliates, standardizing procedures, and eliminating
duplication. Our dual plan is to strengthen our services to community bank
customers and to continue seeking potential acquisition candidates.

         We are extremely proud and excited about the progress made this past
year and deeply appreciate the support and loyalty of our shareholders. We look
forward to the opportunity to serve you in the coming year.

Sincerely,



Shirley B. Kessler
President and Chief
Executive Officer
<PAGE>

SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA
--------------------------------------------------------------------------------

Selected Financial Condition Data

<TABLE>
<CAPTION>

                                                                       At December 31,
                                               ----------------------------------------------------------------
                                                  1997           1996         1995         1994         1993
                                                 ------         ------       ------       ------       ------
                                                                         (In thousands)
<S>                                            <C>            <C>          <C>          <C>          <C>
Assets......................................   $ 304,265      $ 185,799    $ 186,513    $ 164,633    $ 163,226
Loans receivable, net.......................     162,318        122,307      114,494      111,369       99,641
Investment securities (1):
   Available for sale.......................      57,283         13,990       19,347        7,716           --
   Held to maturity.........................      18,318          3,362        3,113        2,255       10,289
Cash and cash equivalents and time deposits.      26,724         12,618        9,877        5,638        5,065
Mortgage-backed and related securities
  available for sale (1)....................      23,895         28,319       35,520       32,310       44,260
Mortgage-backed and related securities
  held-to-maturity..........................         891             --           --           --           --
Deposits....................................     218,915        139,100      144,277      151,078      150,290
FHLB advances...............................      37,000          7,500        3,000        1,050           --
Other borrowings............................      10,923          3,121           --           --           --
Stockholders' equity........................      35,727         34,082       38,106       11,254       12,228

</TABLE>

------------------
(1)    In connection with its adoption of SFAS No. 115, "Accounting for Certain
       Investments in Debt and Equity Securities," on January 1, 1994, the Bank
       classified certain investment securities and all mortgage-backed and
       related securities as available for sale.

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

Selected Operations Data

<TABLE>
<CAPTION>

                                                                      At December 31,
                                               ------------------------------------------------------------------
                                                   1997           1996         1995         1994         1993
                                                 --------       --------     --------     --------     --------
                                                             (In thousands, except per share data)
<S>                                            <C>            <C>          <C>          <C>          <C>
Interest income.............................   $  17,008      $  13,875    $  13,267    $  11,776    $  12,225
Interest expense............................      (8,670)        (6,728)      (6,747)      (5,576)      (6,224)
                                               ---------     ----------   ----------   ----------    ---------
Net interest income.........................       8,338          7,147        6,520        6,200        6,001
Provision for loan losses...................        (236)           (10)        (113)        (212)        (144)
                                               ---------     ----------   ----------   ----------    ---------
Net interest income after
  provision for loan losses.................       8,102          7,137        6,407        5,988        5,857
Noninterest income..........................       1,129            777        1,033          953          703
Noninterest expense.........................      (7,152)        (6,798)      (4,437)      (4,691)      (3,747)
Gain (loss) on sale of assets...............          (2)            --          137          (26)          10
                                               ---------     ----------   ----------   ----------    ---------
Income before provision for income tax......       2,077          1,116        3,140        2,224        2,823
Provision for income tax....................        (675)          (343)      (1,107)        (813)      (1,073)
                                               ---------     ----------   ----------   ----------    ---------
Income before extraordinary item and
  cumulative effect of change in
  accounting principle......................       1,402            773        2,033        1,411        1,750
Extraordinary items.........................          --             --           --         (701) (1)      --
Cumulative effect of change in
  accounting principle (2)..................          --             --           --           --          (25)
                                               ---------     ----------   ----------   ----------    ---------
Net income..................................   $   1,402     $      773   $    2,033   $      710    $   1,725
                                               =========     ==========   ==========   ==========    =========
Net income per share........................   $     .62     $      .35   $      .42      N/A          N/A
                                               =========     ==========   ==========   ==========    =========
Cash dividends declared per share...........   $     .25     $      .25   $       --      N/A          N/A
                                               =========     ==========   ==========   ==========    =========

</TABLE>

----------------
(1)    Consists of a $701,000 expense representing the recapture of the Bank's
       tax bad debt reserve taken in the quarter ended December 31, 1994 in
       connection with the Board of Directors' determination to effectuate the
       conversion to a national bank.
(2)    For additional information, see "Management's Discussion and Analysis
       of Financial Condition and Results of Operations -- Impact of New
       Accounting Standards -- Accounting for Income Taxes."

                                        2
<PAGE>

Key Operating Ratios:
<TABLE>
<CAPTION>
                                                                            At or for the
                                                                         Year Ended December 31,
                                                                ---------------------------------------
                                                               1997               1996             1995
                                                               ----               ----             ----

<S>                                                         <C>                <C>               <C>
Performance Ratios:
  Return on average assets (net income
    divided by average total assets)......................     .62%               .42%  (1)        1.15%
  Return on average equity (net income
    divided by average stockholders' equity (2)...........    4.02               2.15   (1)        8.09
  Interest rate spread (combined weighted
    average interest rate earned less
    combined weighted average interest
    rate cost)............................................    3.05               3.17              3.17
  Net yield on interest-earning assets....................    3.80               4.03              3.79
  Ratio of average interest-earning assets
    to average interest-bearing liabilities...............  119.04             122.58            115.59
  Ratio of noninterest expense to average
    total assets..........................................    3.15               3.66              2.51

Asset Quality Ratios:
  Nonperforming assets to total assets
    at end of period......................................     .81   (3)          .27              .28
  Nonperforming loans to total loans (4)..................    1.29                .36              .34
  Allowance for loan losses to total
    loans at end of period................................    1.18               1.23             1.31
  Allowance for loan losses to nonperforming
     loans at end of period...............................     .91   (5)       339.29           382.32
  Provision for loan losses to total loans
     at end of period.....................................     .15                .01              .10
  Net charge-offs to average loans........................     .19                 --              .21

Capital Ratios:
  Stockholders' equity to total assets at end of period...   11.74              18.34            20.43
  Average stockholders' equity to average assets..........   15.33              19.19            14.21
</TABLE>

-----------
(1)      Ratios are based on net income, which includes a one-time special
         assessment of $703,000, net of taxes, paid to recapitalize the Savings
         Association Insurance Fund ("SAIF") of the Federal Deposit Insurance
         Corporation ("FDIC"). After restating to eliminate this expense, return
         on average assets and return on average equity would have been .80% and
         4.11%, respectively.
(2)      Average stockholders' equity reflects average unrealized losses on
         securities available for sale for the years ended December 31, 1996 and
         1995 and average unrealized gains on securities available for sale for
         the year ended December 31, 1997.
(3)      Nonperforming assets include a $1.1 million nonperforming loan on which
         minimal losses are expected. The ratio for nonperforming assets to
         total assets would be .46% restated to exclude this loan.
(4)      Nonperforming loans consist of nonaccrual loans and accruing loans
         which are contractually past due 90 days or more. Nonperforming loans
         at December 31, 1997 included a $1.1 million nonperforming loan on
         which minimal losses are expected. The ratio of nonperforming loans to
         total loans would be .64% restated to exclude this loan.
(5)      Nonperforming assets included a $1.1 million nonperforming loan on
         which minimal losses are expected. The ratio of the allowance for loan
         losses to nonperforming loans at December 31, 1997 would be 184.18%
         restated to exclude this loan.

                                       3
<PAGE>

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

         The Company's net income is dependent primarily on its net interest
income, which is the difference between interest income earned on its loan and
mortgage-backed and related securities portfolio and interest paid on
interest-bearing liabilities. Net interest income is determined by (i) the
difference between yields earned on interest-earning assets and rates paid on
interest-bearing liabilities ("interest rate spread") and (ii) the relative
amounts of interest-earning assets and interest-bearing liabilities. The
Company's interest rate spread is affected by regulatory, economic and
competitive factors that influence interest rates, loan demand and deposit
flows. To a lesser extent, the Company's net income also is affected by the
level of general and administrative expenses and the level of other income,
which primarily consists of service charges and other fees.

         The operations of the Company are significantly affected by prevailing
economic conditions, competition and the monetary, fiscal and regulatory
policies of governmental agencies. Lending activities are influenced by the
demand for and supply of housing, competition among lenders, the level of
interest rates and the availability of funds. Deposit flows and costs of funds
are influenced by prevailing market rates of interest, primarily on competing
investments, account maturities and the levels of personal income and savings in
the Company's market area.

Forward-Looking Statements

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

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

Possible Year 2000 Computer Program Problems

         A great deal of information has been disseminated about the global
computer crash that may occur in the year 2000. Many computer programs that can
only distinguish the final two digits of the year entered (a common programming
practice in earlier years) are expected to read entries for the year 2000 as the
year 1900 and compute payment, interest or delinquency based on the wrong date
or are expected to be unable to compute payment, interest or delinquency. Rapid
and accurate data processing is essential to the operations of the Company. Data
processing is also essential to most other financial institutions and many other
companies.

         All of the material data processing of the Company that could be
affected by this problem is provided by third party suppliers. Management
closely monitors the progress of the suppliers in resolving this potential
problem and reports the status of their progress to the Board of Directors on a
quarterly basis. The suppliers have advised the

                                       4
<PAGE>

Company that they expect to resolve this potential problem before the year 2000
by completing all implementation procedures by December 31, 1998 to allow for
testing to occur in 1999. However, if any of the suppliers is unable to resolve
this potential problem in time and the Company is unable to find an alternative
supplier, the Company would likely experience significant data processing
delays, mistakes or failures. These delays, mistakes or failures could have a
significant adverse impact on the financial condition and results of operations
of the Company.

Comparison of Financial Condition at December 31, 1997, 1996 and 1995

         The Company's financial condition remained fairly unchanged for the
periods 1995 to 1996 as reflected by the decrease in total assets of $714,000,
or .4%, from $186.5 million at December 31, 1995 to $185.8 million at December
31, 1996. The Company's financial condition began to change in 1997 as assets
increased by $118.5 million, or 63.8%, from $185.8 million at December 31, 1996
to $304.3 million at December 31, 1997. The increase was primarily due to the
acquisitions of American Bank of Highland in May adding $20.6 million at
December 31, 1997, The Egyptian State Bank in October adding $26.2 million at
December 31, 1997, Saline County State Bank in October adding $17.6 million at
December 31, 1997 and MidAmerica Bank of St. Clair County in November adding
$22.7 million at December 31, 1997.

         The Company's net loans receivable have increased steadily in recent
years, increasing by $7.8 million, or 6.8% from $114.5 million at December 31,
1995 to $122.3 million at December 31, 1996 and by $40.0 million, or 32.7% to
$162.3 million at December 31, 1997. The increase in net loans receivable during
the year ended December 31, 1997 was due to the acquisitions of American Bank of
Highland adding $11.2 million, Egyptian State Bank adding $8.8 million, Saline
County State Bank adding $8.0 million and MidAmerica Bank of St. Clair County
adding $13.1 million.

         The Company's investment securities decreased by $5.1 million, or
22.7%, from $22.5 million at December 31, 1995 to $17.4 million at December 31,
1996. Investment securities increased by $58.2 million or 334.5%, to $75.6
million at December 31, 1997. The increase during 1997 was partly due to the
acquisitions of American Bank of Highland adding $5.9 million, Egyptian State
Bank adding $8.8 million, Saline County State Bank adding $5.8 million and
MidAmerica Bank of St. Clair County adding $2.9 million. The primary reason for
the increase was due to Community Bank & Trust investment securities increasing
$35.3 million mainly through using arbitrage.

         The Company's mortgage-backed and related securities decreased by $7.2
million, or 20.3%, from $35.5 million at December 31, 1995 to $28.3 million at
December 31, 1996. Mortgage-backed and related securities decreased by $4.4
million, or 15.5%, to $23.9 million at December 31, 1997. The decrease is the
result of principal payback, sales and maturities. The proceeds were reinvested
in other interest-earning assets.

         Deposits were $144.3 million, $139.1 million and $218.9 million at
December 31, 1995, 1996 and 1997, respectively. The increase of $79.8 million,
or 57.4% from $139.1 million at December 31, 1996 to $218.9 million at December
31, 1997 was due primarily to acquisitions. American Bank of Highland added
$19.0 million, The Egyptian State Bank added $21.3 million, Saline County State
Bank added $14.9 million and MidAmerica Bank of St. Clair County added $17.1
million. In addition, Community Bank & Trust deposits increased $7.5 million
primarily due to certain short-term jumbo certificates of deposit and money
market accounts by schools, municipalities and other local entities. As these
deposits mature, Community Bank & Trust bids against other financial
institutions to retain these deposits. As a result, these funds are less likely
to remain on deposit at maturity than smaller certificates of deposit maintained
by other customers.

         The Company's repurchase agreements increased by $2.2 million, or
71.0%, from $3.1 million at December 31, 1996 to $5.3 million at December 31,
1997. The repurchase program was introduced in 1996 to attract large depositors.
These deposits are not insured by the FDIC.

         The Company's Federal Home Loan Bank advances increased $29.5 million,
or 393.3%, from $7.5 million at December 31, 1996 to $37.0 million at December
31, 1997. The increase was used to arbitrage by acquiring

                                       5
<PAGE>

investment securities. The investments purchased have a weighted average yield
of 7.1% with the advances having a weighted average cost of 5.4%. The arbitrage
is matched as both the investments and the advances have similar call features.

         The Company entered into a line of credit agreement during 1997 which
provides the availability of a $10.0 million line of credit at the prime rate.
The Company used $5.6 million of this to acquire MidAmerica Bank of St. Clair
County in November 1997.

Comparison of Operating Results for the Years Ended December 31, 1997 and 1996

         Net Income. Net income was $1.4 million for the year ended December 31,
1997, as compared to $773,000 for the year ended December 31, 1996. This
represents an increase of $627,000, or 81.1%. The increase in net income
reflects (on a pre-tax basis) a $1.2 million, or 16.9%, increase in net interest
income, a $349,000, or 44.9%, increase in non-interest income and a $354,000, or
5.2%, increase in non-interest expense.

         Net Interest Income. Net interest income increased by $1.2 million, or
16.9%, from $7.1 million for the year ended December 31, 1996 to $8.3 million
for the year ended December 31, 1997. The increase in net interest income
reflects an increase in interest income of $3.1 million, or 22.3%, from $13.9
million for the year ended December 31, 1996 to $17.0 million for the year ended
December 31, 1997 due to an increase of 23.5% in average interest-earning assets
from $177.5 million for the year ended December 31, 1996 to $219.3 million for
the year ended December 31, 1997. The cost of interest-bearing liabilities
increased by $2.0 million, or 29.9%, from $6.7 million for the year ended
December 31, 1996 to $8.7 million for the year ended December 31, 1997 due to an
increase of $39.4 million, or 27.2%, in the average balance of interest-bearing
liabilities from $144.8 million for the year ended December 31, 1996 to $184.2
million for the year ended December 31, 1997.

         Interest Income. Interest income was $17.0 million for the year ended
December 31, 1997, as compared to $13.9 million for the year ended December 31,
1996, representing an increase of $3.1 million, or 22.3%. The increase is partly
due to interest on loans increasing by $1.6 million, or 15.2%, from $10.5
million for the year ended December 31, 1996 to $12.1 million for the year ended
December 31, 1997. This is due to an increase of $20.5 million, or 17.1%, in the
average loans receivable (net), which reflects the acquisitions of American Bank
of Illinois in Highland in May 1997, The Egyptian State Bank in October 1997,
Saline County State Bank in October 1997, and MidAmerica Bank of St. Clair
County in November 1997. The increase is also due to interest on investments and
interest-bearing deposits increasing by $1.8 million, or 128.6%, from $1.4
million for the year ended December 31, 1996 to $3.2 million for the year ended
December 31, 1997. This is due to the average balance of securities available
for sale increasing $19.9 million, or 124.4%, from $16.0 million for the year
ended December 31, 1996 to $35.9 million for the year ended December 31, 1997.
In addition, the average balance of cash and cash equivalents increased by $6.7
million, or 95.7%, from $7.0 million for the year ended December 31, 1996 to
$13.7 million for the year ended December 31, 1997 as a result of the arbitrage.

         Interest Expense. Interest expense, which consists primarily of
interest on deposits, increased by $2.0 million, or 29.9%, from $6.7 million for
the year ended December 31, 1996 to $8.7 million for the year ended December 31,
1997. Interest on deposits increased by $900,000 or 14.3%, from $6.3 million for
the year ended December 31, 1996 to $7.2 million for the year ended December 31,
1997. The increase was partly due to the increase of $21.9 million, or 16.0%, in
the average balance of deposits, which reflects the acquisitions made in 1997.
In addition, interest and other borrowed funds increased $1.1 million, or
266.5%, from $406,000 for the year ended December 31, 1996 to $1.5 million for
the year ended December 31, 1997. This increase is due to the increase of $17.4
million, or 214.8%, in the average balance of borrowings which is primarily due
to borrowings used to arbitrage.

         Provision for Loan Losses. The Company established provisions for loan
losses of $236,000 and $10,000 for the years ended December 31, 1997 and 1996,
respectively. A significant portion of the increase was related to a $1.1
million loan that became nonaccruing during the year ended December 31, 1997.

                                       6
<PAGE>

         Non-Interest Income. Non-interest income increased by $349,000, or
44.9%, from $777,000 for the year ended December 31, 1996 to $1.1 million for
the year ended December 31, 1997. The increase is primarily due to the
acquisitions of American Bank of Illinois in Highland in May 1997, The Egyptian
State Bank in October 1997, Saline County State Bank in October 1997, and
MidAmerica Bank of St. Clair County in November 1997.

         Non-Interest Expense. Non-interest expense increased by $400,000, or
5.9%, from $6.8 million for the year ended December 31, 1996 to $7.2 million for
the year ended December 31, 1997. For the year ended December 31, 1996 two
non-recurring events totaling $1.6 million (pre-tax) were included. Restating
non-interest expense by removing the one time SAIF assessment of $1.0 million
and the approximated cost to close a defined benefit plan of $622,000, would
have been $5.1 million. For the year ended December 31, 1997, non-interest
expense reflects a non-recurring charge of $506,000 for an early retirement
program offered to twelve employees of which seven accepted. Restating
non-interest expense by removing the early retirement expense of $506,000 would
have been $6.6 million. Restated non-interest expense increased by $1.5 million,
or 29.4%, from $5.1 million for the year ended December 31, 1996 to $6.6 million
for the year ended December 31, 1997. Restated compensation and benefits
increased $855,000, or 26.9%, from $3.0 million (restated $3.6 million less
$622,000) at the year ended December 31, 1996 to $3.8 million (restated $4.3
million less $506,000) at the year end December 31, 1997. This increase is
partly due to benefit expenses, that were approved by the stockholders, in total
amounting to $584,000 for the annual funding of the Management Recognition Plan
(MRP) for $372,000 and the Employee Stock Ownership Plan (ESOP) for $212,000.
The remaining portion of the increase in non-interest expense was primarily due
to the acquisitions made in 1997.

         Income Taxes. The Company's income tax was $675,000 and $343,000 for
the years ended December 31, 1997 and 1996, respectively, which resulted in
effective income tax rates of 32.5% and 30.7%, respectively.

Comparison of Operating Results for the Years Ended December 31, 1996 and 1995

         Net Income. Net income was $773,000 for the year ended December 31,
1996, as compared to $2.0 million for the year ended December 31, 1995. This
represents a decrease of $1.2 million, or 62.0%. The decrease in net income
reflects (on a pre-tax basis) a $627,000, or 9.6%, increase in net interest
income, a $393,000, or 33.6%, decrease in non-interest income and a $2.4
million, or 53.2%, increase in non-interest expense.

         Net Interest Income. Net interest income increased by $627,000, or
9.6%, from $6.5 million for the year ended December 31, 1995 to $7.1 million for
the year ended December 31, 1996. The increase in net interest income reflects
an increase in the ratio of average interest-earning assets to average
interest-bearing liabilities from 115.6% for the year ended December 31, 1995 to
122.6% for the year ending December 31, 1996. The interest received on
interest-earning assets increased by $608,000, or 4.6%, from $13.3 million for
the year ended December 31, 1995 to $13.9 million for the year ended December
31, 1996 due to a 3.1% increase in average interest-earning assets coupled with
a 12 basis point improvement in average yields from 7.70% at December 31, 1995
to 7.82% at December 31, 1996. The cost of interest-bearing liabilities
decreased by $19,000, or .3%, as the average interest-bearing liabilities
decreased by $4.1 million, or 2.8%, from $149.0 million at December 31, 1995 to
$144.8 million at December 31, 1996, while the average cost increased by 12
basis points from 4.53% at December 31, 1995 to 4.65% at December 31, 1996.

         Interest Income. Interest income was $13.9 million for the year ended
December 31, 1996, as compared to $13.3 million for the year ended December 31,
1995, representing an increase of $608,000, or 4.6%. The increase is primarily
due to a $5.3 million, or 3.1%, increase in average earning assets from $172.2
million for the year ended December 31, 1995 to $177.5 million for the year
ended December 31, 1996. The increase in the average earning assets is primarily
due to the averages reflecting a full year performance of proceeds obtained from
the sale of the Company's common stock in connection with the Bank's conversion
from mutual to stock form (the "Conversion").

         Interest on loans increased by $639,000, or 6.5%, from $9.8 million for
the year ended December 31, 1995 to $10.5 million for the year ended December
31, 1996. The increase in interest on loans was due to an increase of $5.4
million, or 4.7%, in the average balance of loans from $114.4 million for the
year ended December 31, 1995 to $119.8

                                       7
<PAGE>

million for the year ended December 31, 1996. Loans primarily increased through
the increased origination of agricultural and commercial business loans.
Interest on mortgage-backed and related securities decreased by $251,000, or
11.0%, from $2.3 million for the year ended December 31, 1995 to $2.0 million
for the year ended December 31, 1996. Such decrease was due to a decrease of
$3.4 million, or 9.9%, in the average balance of mortgage-backed and related
securities from $34.9 million for the year ended December 31, 1995 to $31.5
million for the year ended December 31, 1996. The decrease in the average
balance of mortgage-backed and related securities was the result of changes in
the portfolio mix of interest-earning assets. Interest on securities available
for sale increased $149,000, or 21.2%, from $703,000 for the year ended December
31, 1995 to $852,000 for the year ended December 31, 1996. The increase was due
to an increase in the average balance of $1.8 million, or 12.6%, from $14.2
million for the year ended December 31, 1995 to $16.0 million for the year ended
December 31, 1996. Interest on cash and cash equivalents increased by $50,000,
or 15.1%, from $331,000 for the year ended December 31, 1995 to $381,000 for the
year ended December 31, 1996. The increase was due to an increase in the average
balance of $1.1 million, or 19.3%, from $5.9 million for the year ended December
31, 1995 to $7.0 million for the year ended December 31, 1996.

         Interest Expense. Interest expense, which consists primarily of
interest on deposits, decreased by $19,000, or 0.3%, from $6.7 million for the
year ended December 31, 1995 to $6.7 million for the year ended December 31,
1996. Interest on deposits decreased $353,000, or 5.3%, from $6.7 million for
the year ended December 31, 1995 to $6.3 million for the year ended December 31,
1996. The decrease is primarily due to the decrease in the average balance of
deposit accounts. The average balance of deposit accounts decreased by $10.7
million, or 7.3%, from $147.5 million for the year ended December 31, 1995 to
$136.8 million for the year ended December 31, 1996. To offset the decrease in
average deposits, the Company used other borrowings in the form of Federal Home
Loan Bank ("FHLB") advances and repurchase agreements. This is reflected in the
increase in average borrowings of $6.6 million, or 437.7%, from $1.5 million for
the year ended December 31, 1995 to $8.1 million for the year ended December 31,
1996. The Company has used FHLB advances in the past as indicated by the average
balance increasing $4.5 million, or 300.0%, from $1.5 million for the year ended
December 31, 1995 to $6.0 million for the year ended December 31, 1996. The
average cost of the FHLB advances increased $233,000, or 323.6%, from $72,000
for the year ended December 31, 1995 to $305,000 for the year ended December 31,
1996. The increase in the average cost of FHLB advances was not only due to the
average balance increase but also due to a 28 basis point increase in the
average rate from 4.8% for the year ended December 31, 1995 to 5.1% for the year
ended December 31, 1996. The increase in the average balance of borrowings also
reflected the introduction in 1996 of repurchase agreements. Repurchase
agreements had an average balance of $2.1 million and an average cost of 4.9%
for the year ended December 31, 1996.

         Provision for Loan Losses. The Company established provisions for loan
losses of $10,000 and $113,000 for the years ended December 31, 1996 and 1995,
respectively. The Company's provisions for loan losses approximated net
charge-offs during such periods and were made to maintain the allowance for loan
losses at an adequate level during those periods.

         Non-Interest Income. Noninterest income decreased by $393,000, or
33.6%, from $1.2 million for the year ended December 31, 1995 to $777,000 for
the year ended December 31, 1996. For the year ended December 31, 1995 two
non-recurring events totaling $391,000 (pre-tax) were included. Restating
noninterest income for the year ended December 31, 1995, removing the gain from
the sale of the insurance agency of $142,000 and the recovery of the litigation
settlement of $249,000, would have been $779,000. Other than these non-recurring
events in 1995, non-interest income remained stable.

         Non-Interest Expense. Noninterest expense increased by $2.4 million, or
53.2%, from $4.4 million for the year ended December 31, 1995 to $6.8 million
for the year ended December 31, 1996. For the year ended December 31, 1996 two
non-recurring events totaling $1.6 million (pre-tax) were included. Restating
noninterest expense for the year ended December 31, 1996, removing the one time
SAIF assessment of $1.0 million and the approximated cost to close a defined
benefit plan of $622,000, would have been $5.1 million. The restated noninterest
expense reflected an increase for the year ended December 31, 1996 of $724,000,
or 16.3%. The increase after restatement of noninterest expense for the year
ended December 31, 1996 was primarily due to a full year of operation of the
Company in 1996

                                       8
<PAGE>

and the benefit expenses that were approved following the Conversion. The
Management Recognition Plan (MRP) amounted to $393,000 and the allocation of the
Employee Stock Ownership Plan (ESOP) amounted to $116,000.

         Income Taxes. The Company's income tax was $343,000 and $1.1 million
for the years ended December 31, 1996 and 1995, respectively, which resulted in
effective income tax rates of 30.7% and 35.3%, respectively.

Average Balance, Interest and Average Yields and Rates

         The following table sets forth certain information relating to the
Company's average interest-earning assets and interest-bearing liabilities and
reflects the average yield on assets and average cost of liabilities for the
periods and at the date indicated. Such yields and costs are derived by dividing
income or expense by the average monthly balance of assets or liabilities,
respectively, for the periods presented. Average balances are derived from
month-end balances. Management does not believe that the use of month-end
balances instead of daily balances has caused any material difference in the
information presented.

         The table also presents information for the periods and at the date
indicated with respect to the difference between the average yield earned on
interest-earning assets and average rate paid on interest-bearing liabilities,
or "interest rate spread," which institutions have traditionally used as an
indicator of profitability. Another indicator of an institution's net interest
income is its "net yield on interest-earning assets," which is its net interest
income divided by the average balance of interest-earning assets. Net interest
income is affected by the interest rate spread and by the relative amounts of
interest-earning assets and interest-bearing liabilities. When interest-earning
assets approximate or exceed interest-bearing liabilities, any positive interest
rate spread will generate net interest income.

                                       9
<PAGE>
<TABLE>
<CAPTION>

                                                     Year Ended December 31,
                                               --------------------------------
                                                              1997
                                               --------------------------------
                                                                         Average
                                               Average                   Yield/
                                               Balance      Interest      Cost
                                               -------      --------     -------
                                                    (Dollars in thousands)
<S>                                            <C>          <C>          <C>
Interest-earning assets:
  Loans receivable, net (1).................   $  140,306   $ 12,143       8.65%
  Investment securities:
     Securities available for sale..........       35,853      2,250       6.28
     Securities held to maturity............        3,349        166       4.95
  Mortgage-backed and related securities:
     Securities available for sale..........       25,939      1,696       6.54
     Securities held-to-maturity............          148          8       5.35
  Cash and cash equivalents.................       13,681        745       5.45
                                               ----------   --------
     Total interest-earning assets..........      219,276     17,008       7.76
Noninterest-earning assets..................        8,079
                                               ----------
     Total assets...........................   $  227,355
                                               ==========

Interest-bearing liabilities:
  Deposits..................................   $  158,654      7,182       4.53
  Borrowings................................       25,547      1,488       5.82
                                               ----------   --------
     Total interest-bearing liabilities.....      184,201      8,670       4.71
                                                            --------
Noninterest-bearing liabilities.............        8,303
                                               ----------
     Total liabilities......................      192,504
Stockholders' equity........................       35,033
Unrealized losses on securities.............         (182)
                                               ----------
Total liabilities and retained earnings.....   $  227,355
                                               ==========

Net interest income.........................                  $  8,338
                                                              ========
Interest rate spread........................                               3.05%
                                                                        =======
Net yield on interest-earning assets........                               3.80%
                                                                        =======
Ratio of average interest-earning assets
  to average interest-bearing liabilities...                             119.04%
                                                                         ======

<CAPTION>
                                                     Year Ended December 31,
                                               --------------------------------
                                                              1996
                                               --------------------------------
                                                                         Average
                                               Average                   Yield/
                                               Balance      Interest      Cost
                                               -------      --------     -------
                                                    (Dollars in thousands)
<S>                                            <C>          <C>           <C>
Interest-earning assets:
  Loans receivable, net (1).................   $  119,828   $ 10,462       8.73%
  Investment securities:
     Securities available for sale..........       16,007        852       5.32
     Securities held to maturity............        3,217        142       4.41
  Mortgage-backed and related securities:
     Securities available for sale..........       31,453      2,038       6.48
     Securities held-to-maturity............           --         --         --
  Cash and cash equivalents.................        7,029        381       5.42
                                               ----------   --------
     Total interest-earning assets..........      177,534     13,875       7.82
Noninterest-earning assets..................        7,982   --------
                                               ----------
     Total assets...........................   $  185,516
                                               ==========

Interest-bearing liabilities:
  Deposits..................................   $  136,764      6,322       4.62
  Borrowings................................        8,066        406       5.03
                                               ----------   --------
     Total interest-bearing liabilities.....      144,830      6,728       4.65
                                                            --------
Noninterest-bearing liabilities.............        5,080
                                               ----------
     Total liabilities......................      149,910
Stockholders' equity........................       35,937
Unrealized losses on securities.............         (331)
                                               ----------
Total liabilities and retained earnings.....   $  185,516
                                               ==========

Net interest income.........................                  $  7,147
                                                              ========
Interest rate spread........................                               3.17%
                                                                        =======
Net yield on interest-earning assets                                       4.03%
                                                                        =======
Ratio of average interest-earning assets
  to average interest-bearing liabilities...                             122.58%
                                                                         ======

<CAPTION>
                                                     Year Ended December 31,
                                               --------------------------------
                                                              1995
                                               --------------------------------
                                                                         Average
                                               Average                   Yield/
                                               Balance      Interest      Cost
                                               -------      --------     -------
                                                    (Dollars in thousands)
<S>                                            <C>          <C>          <C>
Interest-earning assets:
  Loans receivable, net (1).................   $  114,449   $  9,823       8.58%
  Investment securities:
     Securities available for sale..........       14,221        703       4.94
     Securities held to maturity............        2,754        122       4.43
  Mortgage-backed and related securities:
     Securities available for sale..........       34,892      2,288       6.56
     Securities held-to-maturity............           --         --         --
  Cash and cash equivalents.................        5,892        331       5.62
                                               ----------   --------
     Total interest-earning assets..........      17,2084     13,267       7.70
Noninterest-earning assets..................        4,578   --------
                                               ----------
     Total assets...........................   $  176,786
                                               ==========

Interest-bearing liabilities:
  Deposits..................................   $  147,476      6,675       4.53
  Borrowings................................        1,500         72       4.80
                                               ----------   --------
     Total interest-bearing liabilities.....      148,976      6,747       4.53
                                                            --------
Noninterest-bearing liabilities.............        2,693
                                               ----------
     Total liabilities......................      151,669
Stockholders' equity........................       25,698
Unrealized losses on securities.............         (581)
                                               ----------
Total liabilities and retained earnings.....   $  176,786
                                               ==========

Net interest income.........................                  $  6,520
                                                              ========
Interest rate spread........................                               3.17%
                                                                        =======
Net yield on interest-earning assets........                               3.79%
                                                                        =======
Ratio of average interest-earning assets
  to average interest-bearing liabilities...                             155.59%
                                                                         ======
</TABLE>

(1)      Includes nonaccrual loans.

                                       10
<PAGE>

Rate/Volume Analysis

         The following table below sets forth certain information regarding
changes in interest income and interest expense of the Company for the periods
indicated. For each category of interest-earning asset and interest-bearing
liability, information is provided on changes attributable to: (i) changes in
volume (changes in volume multiplied by old rate); (ii) changes in rate (changes
in rate multiplied by old volume); and (iii) changes in rate/volume (changes in
rate multiplied by changes in volume).

<TABLE>
<CAPTION>
                                                                         Year Ended December 31,
                                    -----------------------------------------------------------------------------------------------
                                      1997                vs.            1996       1996                   vs.               1995
                                    -------------------------------------------   -------------------------------------------------
                                                Increase (Decrease)                                Increase (Decrease)
                                                     Due to                                             Due to
                                    -------------------------------------------   -------------------------------------------------
                                                             Rate/                                          Rate/
                                      Volume     Rate       Volume     Total        Volume      Rate        Volume      Total
                                      ------     ----       ------     -----        ------      ----        ------      -----
                                                                         (In thousands)
<S>                                   <C>        <C>        <C>        <C>          <C>        <C>          <C>        <C>
Interest Income:
  Loans receivable, net............   $ 1,788    $   (91)   $   (16)   $ 1,681      $   462    $    169     $     8    $   639
  Investment securities:
    Securities available for sale..     1,056        153        189      1,398           88          54           7        149
    Securities held to maturity....         6         17          1         24           21          (1)         --         20
  Mortgage-backed and related
    securities:
    Securities available for sale..      (357)        19         (4)      (342)        (225)        (28)         3        (250)
    Securities held-to-maturity....        --         --          8          8           --          --          --         --
  Cash and cash equivalents........       361          1          2        364           64         (12)         (2)        50
                                      -------    -------    -------    -------      -------      ------     -------     ------
    Total interest-earning assets..     2,854         99        180      3,133          410         182          16        608
                                      -------    -------    -------    -------      -------      ------     -------     ------

Interest expense:
  Deposits.........................     1,012       (131)       (21)       860         (485)        142         (10)      (353)
  Borrowings.......................       880         64        138      1,082          315           4          15        334
                                      -------    -------    -------    -------      -------      ------     -------     ------
    Total interest-bearing
      liabilities..................     1,892        (67)       117      1,942         (170)        146           5        (19)
                                      -------    -------    -------    -------      -------      ------     -------     ------

Change in net interest income......   $   962    $   166    $    63    $ 1,191      $   580      $   36     $    11     $  627
                                      =======    =======    =======    =======      =======      ======     =======     ======
</TABLE>


Asset/Liability Management

     Net interest income, the primary component of the Company's net income, is
derived from the difference or "spread" between the yield on interest-earning
assets and the cost of interest-bearing liabilities. The Company has sought to
reduce its exposure to changes in interest rates by matching more closely the
effective maturities or repricing characteristics of its interest-earning assets
and interest-bearing liabilities. The matching of the Company's assets and
liabilities may be analyzed by examining the extent to which its assets and
liabilities are interest rate sensitive and by monitoring the expected effects
of interest rate changes on the Company's net portfolio value.

     An asset or liability is interest rate sensitive within a specific time
period if it will mature or reprice within that time period. If the Company's
assets mature or reprice more quickly or to a greater extent than its
liabilities, the Company's net portfolio value and net interest income would
tend to increase during periods of rising interest rates but decrease during
periods of falling interest rates. If the Company's assets mature or reprice
more slowly or to a lesser extent than its liabilities, the Company's net
portfolio value and net interest income would tend to decrease during periods of
rising interest rates but increase during periods of falling interest rates. The
Company's policy is to mitigate interest rate risk by avoidance of the
origination of long-term loans funded by short-term deposits and by pursuing

                                      11
<PAGE>

certain strategies designed to decrease the vulnerability of its earnings to
material and prolonged changes in interest rates.

         The Company has established an Asset and Liability Management Committee
which currently is comprised of four non-employee directors and senior
management of the Company. This Committee meets on a quarterly basis and reviews
the maturities of the Company's assets and liabilities and establishes policies
and strategies designed to regulate the Company's flow of funds and to
coordinate the sources, uses and pricing of such funds. The first priority in
structuring and pricing the Company's assets and liabilities is to maintain an
acceptable interest rate spread while reducing the net effects of changes in
interest rates.

         Management's principal strategy in managing interest rate risk has been
to maintain short- and intermediate- term assets in portfolio, including locally
originated one- to five-year balloon mortgage loans, as well as increased levels
of agricultural, commercial business and consumer loans, which typically are for
short or intermediate terms and carry higher interest rates than residential
mortgage loans. In addition, in managing the Company's portfolio of investment
securities and mortgage-backed and related securities, management seeks to
purchase securities that mature on a basis that approximates as closely as
possible the estimated maturities of the Company's liabilities. The Company does
not engage in hedging activities. On January 1, 1994, the Bank adopted SFAS No.
115, "Accounting for Certain Investments in Debt and Equity Securities," at
which time it transferred investment and mortgage-backed and related securities
to a portfolio of investment and mortgage-backed and related securities
available for sale. The Company is holding these investment and mortgage-backed
and related securities as available for sale because it may sell these
securities prior to maturity should it need to do so for liquidity or asset and
liability management purposes.

         In addition to shortening the average repricing period of its assets,
the Company has sought to lengthen the average maturity of its liabilities by
adopting a tiered pricing program for its certificates of deposit, which
provides higher rates of interest on its longer term certificates in order to
encourage depositors to invest in certificates with longer maturities.

         The Company's Board of Directors is responsible for reviewing the
Company's asset and liability policies. The Board meets monthly to review
interest rate risk and trends, as well as liquidity and capital ratios and
requirements. Management is responsible for administering the policies and
determinations of the Board of Directors with respect to asset and liability
goals and strategies.

Interest Rate Sensitivity Analysis

         The matching of assets and liabilities may be analyzed by examining the
extent to which such assets and liabilities are "interest rate sensitive" and by
monitoring an institution's interest rate sensitivity "gap." An asset or
liability is said to be interest rate sensitive within a specific period if it
will mature or reprice within that period. The interest rate sensitivity gap is
defined as the difference between the amount of interest-earning assets maturing
or repricing within a specific time period and the amount of interest-bearing
liabilities maturing or repricing within that time period. A gap is considered
positive when the amount of interest rate sensitive assets exceeds the amount of
interest rate sensitive liabilities, and is considered negative when the amount
of interest rate sensitive liabilities exceeds the amount of interest rate
sensitive assets. At December 31, 1997, the Company had a negative one-year
interest rate sensitivity gap of 4.2%, as a result of which its net interest
income could be adversely affected by rising interest rates and positively
affected by falling interest rates. Generally, during a period of rising
interest rates, a negative gap would adversely affect net interest income while
a positive gap would result in an increase in net interest income, while
conversely during a period of falling interest rates, a negative gap would
result in an increase in net interest income and a positive gap would adversely
affect net interest income.

                                      12
<PAGE>

         The following table sets forth the amounts of interest-earning assets
and interest-bearing liabilities outstanding at December 31, 1997 which are
expected to mature or reprice in each of the time periods shown.


<TABLE>
<CAPTION>
                                                               Over One      Over Five      Over Ten         Over
                                                One Year        Through       Through        Through        Twenty
                                                 or Less      Five Years     Ten Years    Twenty Years       Years       Total
                                                ---------     ----------     ---------    ------------      -------      -----
                                                                                    (In thousands)

<S>                                             <C>           <C>            <C>           <C>            <C>          <C>
Interest-earning assets:
  Investment securities (1)..................   $  14,328     $   20,230     $  41,043     $      --      $     --     $  75,601
  Interest-earning deposits..................      18,117             --            --            --            --        18,117
  Fixed-rate single-family mortgage loans....      46,116         20,372            --            --            --        66,488
  Mortgage-backed and related securities (1).       4,711          6,744        13,331            --            --        24,786
  Other loans................................      81,535         16,229            --            --            --        97,764
                                                ---------     ----------     ---------     ---------      --------     ---------
     Total...................................     164,807         63,575        54,374            --            --       282,756
                                                ---------     ----------     ---------     ---------      --------     ---------

Interest-bearing liabilities:
  Deposits...................................     172,211         34,921            --            --            --       207,132
  Borrowings.................................       5,323         42,600            --            --            --        47,923
                                                ---------     ----------     ---------     ---------      --------     ---------
     Total...................................     177,534         77,521            --            --            --       255,055
                                                ---------     ----------     ---------     ---------      --------     ---------

Interest sensitivity gap.....................   $ (12,727)    $  (13,946)    $  54,374     $      --      $     --     $  27,701
                                                =========     ==========     =========     =========      ========     =========
Cumulative interest sensitivity gap..........   $ (12,727)    $  (26,673)    $  27,701     $ 27,701       $ 27,701     $  27,701
                                                =========     ==========     =========     =========      ========     =========
Ratio of interest-earning assets
   to interest-bearing liabilities...........        92.8%          82.0%         N/A            N/A           N/A         11.09%
                                                =========     ==========     =========     =========      ========     =========
Ratio of cumulative gap to total assets......        (4.2)%         (8.8)%         9.1%          9.1%          9.1%          9.1%
                                                =========     ==========     =========     =========      ========     =========
</TABLE>

---------------
(1)      Investment securities and mortgage-backed and related securities are
         included at amortized cost. These securities have not been adjusted for
         any available for sale valuation reserves.


         The preceding table was prepared utilizing certain assumptions
regarding prepayment and decay rates provided by a private data processing and
research firm. While management believes that these assumptions are reasonable,
the actual interest rate sensitivity of the Company's assets and liabilities
could vary significantly from the information set forth in the table due to
market and other factors. The following assumptions were used: (i) the current
prepayment rate on fixed-rate mortgage loans is assumed to be 5%, (ii)
adjustable-rate mortgage loans are presented as of their earliest repricing
schedule, (iii) commercial and other loans are cash flowed based on their
amortization schedule with no prepayments, (iv) fixed- and adjustable-rate
mortgage-backed and related securities are analyzed at the cusip level with
prepayment assumptions dependent upon the underlying collateral mortgage rates.
In addition, it is assumed that fixed maturity deposits are not withdrawn prior
to maturity and that other deposits are withdrawn or repriced at an annual rate
of 20%.

         The interest rate-sensitivity of the Company's assets and liabilities
illustrated in the table above could vary substantially if different assumptions
were used or actual experience differs from the assumptions used. If passbook
and NOW accounts were assumed to mature in one year or less, the Company's
one-year gap would have been more negative.

         Certain shortcomings are inherent in the method of analysis presented
in the above table. Although certain assets and liabilities may have similar
maturities or periods of repricing, they may react in different degrees to
changes in market interest rates. The interest rates on certain types of assets
and liabilities may fluctuate in advance of changes in market interest rates,
while interest rates on other types of assets and liabilities may lag behind
changes in market interest rates. Certain assets, such as adjustable-rate
mortgages, have features which restrict changes in interest rates

                                      13
<PAGE>

on a short-term basis and over the life of the asset. In the event of a change
in interest rates, prepayment and early withdrawal levels would likely deviate
significantly from those assumed in calculating the table. The ability of many
borrowers to service their adjustable-rate debt may decrease in the event of an
interest rate increase.

Liquidity and Capital Resources

         The Company has no business other than that of its subsidiary banks and
investing its assets. Management believes that the Company's current assets,
earnings on such assets and principal and interest payments on the ESOP loan,
together with dividends that may be paid from the subsidiary banks to the
Company, will provide sufficient funds for its initial operations and liquidity
needs; however, no assurance can be given that the Company will not have a need
for additional funds in the future.

         The Company's primary sources of funds are deposits and borrowings, as
well as proceeds from maturing mortgage-backed and related securities and
principal and interest payments on loans and mortgage-backed and related
securities. While maturities and scheduled amortization of mortgage-backed and
related securities and loans are a predictable source of funds, deposit flows
and mortgage prepayments are greatly influenced by general interest rates,
economic conditions, competition and other factors. In addition, during the year
ended December 31, 1997, the Company obtained a $10.0 million line of credit, of
which the Company had borrowed $5.6 million at December 31, 1997. The interest
rate on such borrowings is the prime rate, which currently is 8.5%.

         The primary investing activity of the Company is the origination of
loans. Other investing activities include the purchase of investment securities
and purchases of mortgage-backed and related securities. The primary financing
activity of the Bank is accepting savings deposits and obtaining short-term
borrowings through FHLB advances.

         The Company has other sources of liquidity if there is a need for
funds. The Company has a portfolio of investment securities and mortgage-backed
and related securities with an aggregate market value of $81.2 million at
December 31, 1997 classified as available for sale. Another source of liquidity
is the ability to obtain advances from the FHLB of Chicago. In addition, the
Company maintains a portion of its investments in interest-bearing deposits that
will be available when needed.

         The Company's most liquid assets are cash and cash equivalents, which
are short-term, highly liquid investments with original maturities of less than
three months that are readily convertible to known amounts of cash, and include
interest-bearing deposits. The levels of these assets are dependent on the
Company's operating, financing and investing activities during any given period.

         The Company anticipates that it will have sufficient funds available to
meet its current commitments. At December 31, 1997, the Company had commitments
to originate loans of $15.7 million. Certificates of deposit which are scheduled
to mature in less than one year at December 31, 1997 totaled $75.1 million.
Management believes that a significant portion of such deposits will remain with
the Company.

Impact of Inflation and Changing Prices

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


                                      14
<PAGE>

Impact of New Accounting Standards

         Earnings per Share. In February 1997, the Financial Accounting
Standards Board ("FASB") issued Statement of Financial Accounting Standards
("SFAS") No. 128, which is effective for financial statements issued for periods
ending after December 15, 1997. This Statement establishes standards for
computing and presenting earnings per share ("EPS"). It replaces the
presentation of primary EPS with a presentation of basic EPS. Management
believes the adoption of this Statement will not have a significant effect on
the Company's EPS.

         Disclosure of Information About Capital Structure. In February 1997,
the FASB issued SFAS No. 129, which establishes standards for disclosing
information about capital structure. This Statement is effective for fiscal
years ending after December 15, 1997. Management believes the adoption of this
Statement will not have a material effect on the Company's financial statements.

         Reporting Comprehensive Income. In June 1997, the FASB issued SFAS No.
130, which establishes standards for the reporting and display of comprehensive
income and its components. This Statement is effective for fiscal years
beginning after December 15, 1997. Management believes the adoption of this
Statement will not have a material effect on the Company's financial statements.

         Disclosures About Segments of an Enterprise and Related Income. In June
1997, the FASB issued SFAS No. 131, which establishes standards for the way
public companies report information about operating segments in the annual and
interim financial statements. This Statement is effective for fiscal years
beginning after December 15, 1997. Management believes the adoption of this
Statement will not have a material effect on the financial statements of the
Company.



                                      15
<PAGE>

         [LETTERHEAD OF LARSSON, WOODYARD & HENSON, LLP APPEARS HERE]

                          Independent Auditors Report

To the Board of Directors
Community Financial Corp.
and Subsidiaries
Olney, Illinois

We have audited the accompanying consolidated balance sheets of Community
Financial Corp. and Subsidiaries as of December 31, 1997 and 1996, and the
related consolidated statements of income, stockholders' equity, and cash flows
for each of the years in the three-year period ended December 31, 1997. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Community Financial
Corp. and Subsidiaries as of December 31, 1997 and 1996, and the results of
their operations and their cash flows for each of the years in the three-year
period ended December 31, 1997, in conformity with generally accepted accounting
principles.

/s/ Larsson, Woodyard & Henson, LLP

January 28, 1998

                                      16

<PAGE>

                    COMMUNITY FINANCIAL CORP AND SUSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
     ASSETS                                                                 December 31,
                                                                     --------------------------
                                                                         1997          1996
                                                                     -----------   ------------
                                                                             (1,000's)
                                                                     --------------------------
<S>                                                                   <C>             <C>
Cash and Cash Equivalents
  Cash                                                               $  8,607          $  1,285
  Interest bearing deposits                                            18,117            11,333
                                                                     --------          --------

    Total Cash and Cash Equivalents                                    26,724            12,618


Securities available for sale (amortized cost of $57,282
 and $14,213 in 1997 and 1996, respectively)                           57,283            13,990
Securities held to maturity (estimated market value of
 $18,403 and $3,378 in 1997 and 1996, respectively)                    18,318             3,362
Mortgage-backed and related securities available for sale (amortized
 cost of $23,878 and $28,535 at 1997 and 1996, respectively)           23,895            28,319
Mortgage-backed and related securities held to maturity
 (estimated market value at $927 and $0 at 1997 and 1996,
 respectively)                                                            891                 0
Loans receivable, net                                                 162,318           122,307
Foreclosed real estate, net                                               126                53
Accrued interest receivable                                             2,675             1,239
Premises and equipment, net                                             5,853             2,609
Prepaid income taxes                                                        0               166
Deferred income taxes                                                     289               409
Goodwill                                                                5,109                 0
Core deposit intangible                                                   527                 0
Other assets                                                              257               727
                                                                     --------          --------

    Total Assets                                                     $304,265          $185,799
                                                                     ========          ========
</TABLE>



                                      17
<PAGE>

<TABLE>
<CAPTION>

     LIABILITIES AND STOCKHOLDERS' EQUITY                                   December 31,
                                                                      -------------------------
                                                                         1997           1996
                                                                      -----------   -----------
                                                                             (1,000's)
                                                                      -------------------------
<S>                                                                   <C>             <C>
Deposits                                                              $218,915         $139,100
Federal Home Loan Bank advances                                         37,000            7,500
Repurchase agreements                                                    5,323            3,121
Other borrowings                                                         5,600                0
Advances from borrowers for taxes and insurance                             41               40
Accrued interest payable                                                   457              160
Accrued income taxes                                                        46                0
Other liabilities                                                        1,156            1,796
                                                                      --------         --------
    Total Liabilities                                                  268,538          151,717
                                                                      --------         --------
Commitments and contingencies

Stockholders' Equity:
  Common stock $.01 par value, 7,000,000 shares authorized;
   2,360,612 and 2,387,112 shares issued at December 31, 1997
   and December 31, 1996, respectively                                      26               26
  Additional paid-in capital                                            25,754           25,397
  Treasury stock                                                      (  3,803)        (  3,411)
  Shares held for management recognition plan                         (    750)        (  1,123)
  Unearned employee stock ownership plan (ESOP) shares                (  1,428)        (  1,693)
  Unrealized gain (loss) on securities available for sale,
   net of related taxes                                                     11         (    263)
  Retained earnings                                                     15,917           15,149
                                                                      --------         --------
    Total Stockholders' Equity                                          35,727           34,082
                                                                      --------         --------
    Total Liabilities and Stockholders' Equity                        $304,265         $185,799
                                                                      ========         ========
</TABLE>

See accompanying notes to consolidated financial statements.


                                      18
<PAGE>

                  COMMUNITY FINANCIAL CORP. AND SUBSIDIARIES

                       CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
                                                                                 December 31,
                                                                      ----------------------------------
                                                                        1997         1996         1995
                                                                      --------     --------     --------
                                                                                   (1,000's)
                                                                      ----------------------------------
<S>                                                                   <C>          <C>          <C>
Interest income:
  Interest on loans                                                   $ 12,143     $ 10,462     $  9,823
  Interest on mortgage-backed and related securities                     1,651        2,038        2,289
  Interest on securities and interest-bearing deposits                   3,214        1,375        1,155
                                                                      --------     --------     --------
    Total interest income                                               17,008       13,875       13,267
                                                                      --------     --------     --------

Interest expense:
  Interest on deposits                                                   7,182        6,322        6,675
  Interest on other borrowed funds                                       1,488          406           72
                                                                      --------     --------     --------
    Total interest expense                                               8,670        6,728        6,747
                                                                      --------     --------     --------

    Net interest income                                                  8,338        7,147        6,520

Provision for loan losses                                             (    236)    (     10)    (    113)
                                                                      --------     --------     --------

    Net interest income after provision
      for loan losses                                                    8,102        7,137        6,407
                                                                      --------     --------     --------

Non-interest income                                                      1,127          777        1,170
                                                                      --------     --------     --------

Non-interest expense                                                     7,152        6,798        4,437
                                                                      --------     --------     --------

    Income before income taxes                                           2,077        1,116        3,140

Provision for income taxes                                                 675          343        1,107
                                                                      --------     --------     --------

    Net income                                                        $  1,402     $    773     $  2,033
                                                                      ========     ========     ========

Basic earnings per share                                              $    .62     $    .33     $    .42
                                                                      ========     ========     ========

Dilutive earnings per share                                           $    .60     $    .33     $    .42
                                                                      ========     ========     ========
</TABLE>
         See accompanying notes to consolidated financial statements.


                                      19
<PAGE>

                  COMMUNITY FINANCIAL CORP. AND SUBSIDIARIES

                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                                                                              Net
                                                                                                           Unrealized
                                                         Management                                        Gain (Loss)
                                                         Recognition  Unearned    Additional              on Securities
                                   Common      Treasury     Plan        ESOP        Paid-In     Retained    Available
                                    Stock       Stock       Stock       Shares      Capital     Earnings    For Sale      Total
                                   ------      --------  -----------  --------    ----------    --------  -------------  -------
                                                                            (1,000's)
                                   ---------------------------------------------------------------------------------------------

<S>                                <C>         <C>       <C>          <C>         <C>           <C>       <C>            <C>
Balance, December 31, 1994         $    0      $     0   $      0     $      0    $       0     $12,939    ($ 1,685)     $11,254
Net Income                                                                                        2,033                    2,033
Sale of common stock                   26                                            25,280                               25,306
Guarantee of ESOP indebtedness                                       (   2,116)                                           (2,116)
Change in net unrealized loss on
 securities available for sale                                                                                1,629        1,629
                                   ------      -------   --------     --------    ---------     -------     -------      -------
Balance, December 31, 1995             26            0          0    (   2,116)      25,280      14,972    (     56)      38,106

Net income                                                                                          773                      773
Dividends paid, at $0.25 per share                                                             (    596)                (    596)
Purchase of treasury stock                    (  3,411)                                                                 (  3,411)
Shares held for MRP                                     (   1,123)                                                      (  1,123)
Amortization of ESOP shares                                                423          117                                  540
Change in net unrealized loss on
 securities available for sale                                                                             (    207)    (    207)
                                   ------      -------   --------     --------    ---------     -------     -------      -------
Balance, December 31, 1996             26     (  3,411) (   1,123)   (   1,693)      25,397      15,149    (    263)      34,082

Net income                                                                                        1,402                    1,402
Income American Bank of Illinois
 at time of acquisition                                                                        (     54)                (     54)
Dividends paid, at $0.25 per
 share                                                                                         (    590)                (    590)
Purchase of treasury stock                    (    392)                                                                 (    392)
Shares held for MRP                                           373                       144                                  517
Amortization of ESOP shares                                                265          213                                  478
Change in net unrealized gain
 (loss) on securities
 available for sale                                                                                  10         274          284
                                   ------      -------   --------     --------    ---------     -------     -------      -------

Balance, December 31, 1997         $   26     ($ 3,803) ($    750)   ($  1,428)   $  25,754     $15,917     $    11      $35,727
                                   ======      =======   ========     ========    =========     =======     =======      =======
</TABLE>
         See accompanying notes to consolidated financial statements.
<PAGE>



                   COMMUNITY FINANCIAL CORP. AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>

                                                                                                      December 31,
                                                                                            ----------------------------------
                                                                                              1997         1996         1995
                                                                                            --------     --------     --------
                                                                                                         (1,000's)
                                                                                            ----------------------------------
<S>                                                                                         <C>          <C>           <C>
Operating activities:
 Net income                                                                                $   1,402    $     773    $   2,033
 Adjustments to reconcile net income to net cash
  provided by operating activities:
   Provision for depreciation                                                                    342          240          220
   Provision for loan losses                                                                     236           10          113
   Accretion for discounts on securities                                                   (      65)   (      56)   (      31)
   Amortizaiton of premiums on securities                                                         45           38           16
   Amortization of intangibles                                                                    73            0            0
   (Increase) decrease in accrued interest receivable                                      (     629)   (      21)   (     313)
   Decrease (increase) in deferred income taxes                                                  120    (     129)       1,224
   Decrease (increase) in other assets                                                           567    (     564)         122
   Increase (decrease) in accrued income taxes                                                   226    (     701)   (      38)
   Increase in accrued interest payable                                                    (     105)          46           23
   (Decrease) increase in other liabilities                                                (     871)       1,349    (      97)
   Federal Home Loan Bank stock dividends received                                                 0            0    (      11)
   (Gain) loss on sale of securities and mortgage-backed and related securities            (      34)           0            5
   Loss on sale of premises and equipment                                                          2            0            0
                                                                                            --------     --------     --------
     Net cash provided by (used in) operating activities                                       1,309          985        3,266
                                                                                            --------     --------     --------
Investing activities:
 Proceeds from sales of securities available for sale                                          1,000            0            0
 Proceeds from maturities of securities held to maturity                                       4,513          321           72
 Proceeds from maturities of securities available for sale                                    24,647        6,500        3,713
 Proceeds from maturities of mortgage-backed securities available for sale                     1,420            0            0
 Proceeds from sales of mortgage-backed and related securities available for sale                632            0          863
 Proceeds from maturing time deposits                                                              0            0          199
 Purchase of securities available for sale                                                 (  58,043)   (   1,003)   (  18,857)
 Purchase of securities held to maturity                                                   (   4,480)   (     650)   (   2,559)
 Purchase of mortgage-backed securities available for sale                                 (   1,812)           0            0
 Acquisitions net of cash and cash equivalents acquired of 14,573                          (     942)           0            0
 Purchase of loans                                                                                 0            0    (     249)
 Decrease (increase) in loans receivable                                                         134    (   7,823)   (   2,455)
 Principal collected on mortgage-backed and related securities                                 4,493        7,201        2,483
 (Increase) decrease in foreclosed real estate                                             (     203)   (      48)          25
 Decrease in real estate held for sale                                                             0          132            0
 Purchase of premises and equipment                                                        (     963)   (     485)   (      62)
 Proceeds from sale of premises and equipment                                                    114            0            0
 Purchase of Federal Reserve Bank stock                                                            0    (      49)   (     332)
 Purchase of Federal Home Loan Bank stock                                                  (   1,080)   (     200)           0
                                                                                            --------     --------     --------
   Net cash provided by (used in) investing activities                                     (  30,570)       3,896    (  17,159)
                                                                                            --------     --------     --------

</TABLE>

                                      21

<PAGE>


                    COMMUNITY FINANCIAL CORP. AND SUBSIDIARY

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>

                                                                               December 31,
                                                                     ----------------------------------
                                                                       1997         1996         1995
                                                                     --------     --------     --------
                                                                                  (1,000's)
                                                                     ----------------------------------
<S>                                                                  <C>         <C>          <C>
Financing Activities:
 Net increase (decrease) in deposits                                 $  6,055    ($  5,177)   ($ 6,801)
 Increase (decrease) in advances from borrowers
  for taxes and insurance                                           (       3)           6    (      9)
 Increase in borrowings                                                35,100        4,500       1,950
 Increase in repurchase agreements                                      2,202        3,121           0
 Proceeds from sale of stock                                                0            0      25,307
 Purchase of treasury stock                                         (     392)   (   3,411)          0
 Retirement (purchase) of MRP stock                                       373    (   1,123)          0
 Unearned employee stock ownership plan stock                             265          423    (  2,116)
 ESOP adjustment                                                          357          117           0
 Dividends paid (accrued)                                           (     590)   (     596)          0
                                                                     --------     --------    --------
  Net cash provided by (used in) financing activities                  43,367    (   2,140)     18,331
                                                                     --------     --------    --------

  Increase in cash and cash equivalents                                14,106        2,741       4,438

Cash and cash equivalents at beginning of year                         12,618        9,877       5,439
                                                                     --------     --------    --------
Cash and cash equivalents at end of year                             $ 26,724     $ 12,618    $  9,877
                                                                     ========     ========    ========
Supplemental Disclosures:
 Additional Cash Flows Information:
  Cash paid for:
  Interest on deposits, advances and other borrowings                $  8,373     $  6,682    $  6,724
  Income taxes:
   Federal                                                           $    264     $    857    $  1,171
   State                                                             $      0     $    177    $    106

Schedule of Noncash Investing Activities:
 Stock dividends were distributed by the
  Federal Home Loan Bank of Chicago                                  $      0     $      0    $     11
 Change in unrealized gain (loss) on
  securities available for sale                                      $    478    ($    348)   $  2,714
 Change in deferred income taxes
  attributed to unrealized gain (loss)
  on securities available for sale                                  ($    183)    $    141   ($  1,085)

</TABLE>

         See accompanying notes to consolidated financial statements.

                                      22

<PAGE>

                    COMMUNITY FINANCIAL CORP. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Summary of Significant Accounting Policies

 Description of the Business

     Community Financial Corp. (the Company) was incorporated in December 1994
     at the direction of the Board of Directors of Community Bank & Trust, sb,
     the predecassor of the Community Bank & Trust, N.A., to become the holding
     company for the Bank upon its conversion from mutual to stock form (the
     Conversion). In June 1995, the Company used the proceeds from its initial
     public offering to acquire all the outstanding capital stock of Community
     Bank & Trust, N.A. The Company's principal business is overseeing and
     directing the business of the banks and investing the Company's assets. The
     Company has registered with the Board of Governors of the Federal Reserve
     System as a bank holding company.

     The Community Bank & Trust, N.A. is a national bank operating through five
     offices serving Richland, Coles, Jasper, Lawrence, and Wayne Counties,
     Illinois. During 1997 the Company acquired American Bancshares, Inc., a
     single bank holding company for America Bank of Illinois, Egyptian
     Bancshares, Inc., the holding company for the Egyptian State Bank and
     Saline County State Bank, and MidAmerica Bank of St. Clair County. Egyptian
     Bancshares, Inc. was dissolved in 1997. American Bank of Illinois has two
     offices serving Bond and Clinton Counties, Illinois. The Egyptian State
     Bank and Saline County State Bank has offices serving Saline County,
     Illinois. MidAmerica Bank of St. Clair County has an office serving St.
     Clair County, Illinois.

     The principal business of the banks historically consists of attracting
     deposits from the general public and investing these desposits in loans
     secured by first mortgages on single-family residences in the banks' market
     area. To an increasing extent, the banks originate agricultural loans
     because of the economic base of the surrounding communities, and has
     recently placed more emphasis on the origination of automobile loans,
     commercial business loans and other consumer credit loans. The banks
     origination of these loans arise from management's perception of minimal
     anticipated growth in residential loan demand within the Banks' market area
     and a local demand for nonresidential loans.

 Basis of Financial Statement Presentation

     The consolidated financial statements include the accounts of the Company
     and its wholly owned subsidiaries Community Bank & Trust, N.A., American
     Bancshares, Inc., The Egyptian State Bank, Saline County State Bank and
     MidAmerica Bank of St. Clair County. All material intercompany transactions
     and accounts have been eliminated.

     The consolidated financial statements have been prepared in conformity with
     generally accepted accounting principles. In preparing the consolidated
     financial statements, management is required to make estimates and
     assumptions that affect the reported amounts of assets and liabilities as
     of the date of the consolidated balance sheet and revenues and expenses for
     the year. Actual results could differ significantly from those estimates.
     Material estimates that are particularly susceptible to significant change
     relate to the determination of the allowance for losses on loans and the
     valuation of real estate acquired in connection with foreclosures or in
     satisfaction of loans.

     Management believes the allowance for loan losses and real estate owned is
     adequate. Management uses available information to recognize losses on
     loans and foreclosed real estate. Future additions to the allowances may be
     necessary based on changes in local economic conditions. In addition,
     regulatory agencies, as an integral part of their examination process,
     periodically review the Bank's allowances for losses on loans and
     foreclosed real estate. Such agencies may require the Bank to recognize
     additions to the allowances based on their judgments about information
     available to them at the time of their examination.

                                       23
<PAGE>

                    COMMUNITY FINANCIAL CORP. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Summary of Significant Accounting Policies

 Cash Equivalents

     For purposes of the consolidated statements of cash flows, cash equivalents
     consist of daily interest bearing demand deposits, federal funds sold, and
     interest bearing deposits and securities having original maturities of
     three months or less.

 Investments and Mortgage-Backed Securities

     Investment and mortgage-based securities available for sale include
     securities that management intends to use as part of its overall
     asset/liability management strategy and that may be sold in response to
     changes in interest rates and resultant prepayment risk and other related
     factors. Securities available for sale are carried at fair value, and
     unrealized gains and losses (net of related tax effects) are excluded from
     earnings but are included in stockholders' equity. Upon realization, such
     gains and losses will be included in earnings using the specific
     identification method. Investment securities and mortgage-backed
     securities, other than those designated as available for sale or trading,
     are comprised of debt securities for which the Bank as positive intent and
     ability to hold to maturity and are carried at cost, adjusted for
     amortization of premiums and accretion of discounts using the level-yield
     method over the estimated lives of the securities. Trading account
     securities are adjusted to market value through earnings. There were no
     trading account securities during the years ended December 31, 1997 or
     1996.

     Management determines the appropriate classification of investment and
     mortgage-backed securities as either available for sale, held to maturity,
     or held for trading at the purchase date.

Loans

     Loans are considered a held-to-maturity asset and, accordingly, are carried
     at historical cost. Loans are stated at unpaid principal balances, less the
     allowance for loan losses and net deferred loan fees and unearned
     discounts. Unearned discounts on installment loans are recognized as income
     over the term of the loans using the interest method. Loan origination and
     commitment fees, as well as certain direct origination costs, are deferred
     and amortized as a yield adjustment over the lives of the related loans
     using the interest method when in excess of loan origination cost.
     Amortization of deferred loan fees is discontinued when a loan is placed on
     nonaccrual 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 make periodic interest and principal
     payments is back to normal, in which case the loan is returned to accrual
     status.

     The allowance for loan losses is maintained at a level which, in
     management's judgment, is adequate to absorb probable losses in the loan
     portfolio. The amount of the allowance is based on management's evaluation
     of the collectibility of the loan portfolio, including the nature of the
     portfolio, credit concentrations, trends in historical loss experience,
     specific impaired loans, and economic conditions. The allowance is
     increased by a provision for loan losses, which is charged to expense, and
     reduced by charge-offs, net of recoveries. Loans are charged off when
     management believes there has been permanent impairment of their carrying
     values.


                                       24
<PAGE>

                    COMMUNITY FINANCIAL CORP. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Summary of Significant Accounting Policies

 Loans

     The Bank also provides a reserve for losses on specific loans which are
     deemed to be impaired. Groups of small balance homogeneous basis loans
     (generally residential real estate and consumer loans) are evaluated for
     impairment collectively. A loan is considered impaired when, based upon
     current information and events, it is probable that the bank will be unable
     to collect, on a timely basis, all principal and interest according to the
     contractual terms of the loan's original agreement. When a specific loan is
     determined to be impaired, the reserve for possible loan losses is
     increased through a charge to expense for the amount of the impairment. For
     all non-consumer loans, impairment is measured based on value of the
     underlying collateral. The value of the underlying collateral is determined
     by reducing the collateral's estimated current value by anticipated selling
     costs. The bank's impaired loans are the same as those non-consumer loans
     currently reported as nonaccrual. The Bank recognizes interest income on
     impaired loans only to the extent that cash payments are received.

 Real Estate Held for Investment and Foreclosed Real Estate

     Direct investments in real estate properties held for investment are
     carried at the lower of cost, including cost of improvements and amenities
     subsequent to acquisition, or net realizable value. Foreclosed real estate
     held for sale is carried at the lower of cost or estimated fair market
     value, net of estimated selling costs. Costs of holding foreclosed property
     are charged to expense in the current period, except for significant
     property improvements, which are capitalized to the extent that carrying
     value does not exceed estimated fair market value, net of estimated selling
     cost.

 Premises and Equipment

     Land is carried at cost. Buildings and furniture, fixtures, and equipment
     are carried at cost, less accumulated depreciation and amortization.
     Buildings and furniture, fixtures, and equipment are depreciated using the
     straight-line method over the estimated useful lives of the assets. The
     estimated useful lives are ten to fifty years for buildings and
     improvements and five to fifteen years for equipment.

 Goodwill

     Goodwill reflects the excess of cost over fair value of net assets which
     were acquired during 1997. Note 22 more fully describes the purchase
     transaction. Goodwill is amortized over 15 years which approximates the
     periods estimated to be benefited from the assets acquired and liabilities
     assumed. Accumulated amortization at December 31, 1997 was $50,000.

 Core Deposit Intangible

     Core deposit intangible represents the intangible value of deposit
     relationships resulting from deposit liabilities assumed in the 1997
     acquisitions and is amortized using an accelerated method based on an
     estimated runoff of the related deposits, not exceeding 7 years.
     Accumulated amortization at December 31, 1997 was $23,000.

                                       25
<PAGE>

                    COMMUNITY FINANCIAL CORP. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Summary of Significant Accounting Policies

 Income Taxes

     Deferred income tax assets and liabilities are computed annually for
     differences between the consolidated financial statements and tax basis of
     assets and liabilities that will result in taxable or deductible amounts in
     the future based on enacted tax laws and rates applicable to the periods in
     which the differences are expected to affect taxable income. Deferred tax
     assets are reduced by a valuation allowance when, in the opinion of
     management, it is more likely than not that some portion or all of the
     deferred tax assets will not be realized. Deferred tax assets and
     liabilities are adjusted for the effects of changes in tax laws and rates
     on the date of enactment. Income tax expense is the tax payable or
     refundable for the period plus or minus the change during the period in
     deferred tax assets and liabilities.

 Earnings Per Share

     Earnings per share is computed based on the weighted average common shares
     outstanding during the period. Unallocated shares held for the ESOP are not
     considered common shares outstanding for this calculation. Earnings per
     share for 1995 have been computed by dividing net earnings ($1,022,000),
     from the date of conversion, June 29, 1995, by the weighted average number
     of common stock shares (2,433,400) outstanding.

 Off-Balance-Sheet Financial Instruments

     In the ordinary course of business, the Company's subsidiaries have entered
     into off-balance-sheet financial instruments consisting of commitments to
     extend credit, commitments under credit card arrangements, commercial
     letters of credit and standby letters of credit. Such instruments are
     recorded in the consolidated financial statements when they become payable.

 Trust Assets

     Assets held by the Company's subsidiaries in fiduciary or agency capacity
     for customers are not included in the consolidated financial statements as
     such items are not assets of the Company or its subsidiaries.

 New Accounting Standards

     If February of 1997, the FASB issued SFAS No. 129, "Disclosure of
     Information about Capital Structure," that specifies standards for
     disclosing information about an entity's capital structure. SFAS is
     effective for financial statements ending after December 15, 1997.
     Implementation of SFAS No. 129 had no disclosure effect of its financial
     statements.

     In June of 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
     Income," which establishes standards for reporting and display of
     comprehensive income and its components in a full set of general purpose
     financial statements. This statement requires classification of items of
     other comprehensive income by their nature in the financial statements and
     display of the accumulated balance of other comprehensive income separately
     from retained earnings and additional paid in capital in the equity section
     of the statement of financial position. This statement is effective for
     fiscal years beginning after December 15, 1997 and the Company will
     implement this for its year ended December 31, 1998.

                                       26
<PAGE>

                    COMMUNITY FINANCIAL CORP. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Summary of Significant Accounting Policies

 New Accounting Standards

     In June of 1997, the FASB issued SFAS No. 131, "Disclosures about Segments
     of an Enterprise and Related Information" which establishes standards for
     reporting information about operating segments in annual financial
     statements and requires that the businesses report selective information
     about operating segments an interim financial reports to shareholders. It
     also establishes standards for related disclosures about products and
     services, geographic areas, and major customers. This statement is
     effective for fiscal years beginning after December 31, 1997. This
     statement requires disclosure in information in the financial statements
     and the Company will implement this for their year ended December 31, 1998.

     In February of 1998, the FASB issued SFAS No. 132, "Employers' Disclosures
     about Pensions and Other Postretirement Benefits". SFAS No. 132
     standardizes the disclosure requirements for pensions and other
     postretirement benefits. This statement is effective for financial
     statements for periods beginning after December 15, 1997. The management of
     the Company plans to adopt the appropriate provisions of the statements at
     January 1, 1998, and does not currently believe that the future adoption of
     this statement will have a material effect on the Company's financial
     position or operating results.

 Reclassifications

     Certain reclassifications have been made to the balances as of December 31,
     1996 and 1995, with no effect on net income, to be consistent with the
     classifications adopted for December 31, 1997.

Note 2. Securities

 Securities available for sale are summarized as follows:

<TABLE>
<CAPTION>
                                                                     December 31, 1997
                                          -------------------------------------------------------------------
                                                                 Gross             Gross         Approximate
                                          Amortized            Unrealized        Unrealized        Market
                                             Cost                Gains             Losses          Value
                                          ---------            ----------        ----------      -----------
                                                                        (1,000's)
                                          -------------------------------------------------------------------
<S>                                        <C>                   <C>               <C>           <C>
U. S. Government and agency securities     $ 53,924            $      115        $      114      $   53,925
State and municipal                           1,000                     2                 2           1,000
FRB stock                                       381                     0                 0             381
FHLB stock                                    1,975                     0                 0           1,975
Other securities                                  2                     0                 0               2
                                          ---------            ----------        ----------      ----------

                                          $  57,282            $      117        $      116      $   57,283
                                          =========            ==========        ==========      ==========
</TABLE>
<TABLE>
<CAPTION>
                                                                     December 31, 1996
                                          -------------------------------------------------------------------
                                                                 Gross             Gross         Approximate
                                          Amortized            Unrealized        Unrealized        Market
                                             Cost                Gains             Losses          Value
                                          ---------            ----------        ----------      -----------
                                                                        (1,000's)
                                          -------------------------------------------------------------------
<S>                                        <C>                   <C>               <C>             <C>
U. S. Government and agency securities     $12,101               $      5          $    220        $   11,886
State and municipal                            836                      0                 8               828
FRB stock                                      381                      0                 0               381
FHLB stock                                     895                      0                 0               895
                                           -------               --------          --------        ----------
                                           $14,213               $      5          $    228        $   13,990
                                          ========               ========          ========        ==========
</TABLE>

                                      27
<PAGE>

                    COMMUNITY FINANCIAL CORP. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 2. Securities

     The amortized cost and approximate market value of securities available
     for sale, by contractual maturity, are shown below. Expected maturities
     will differ from contractual maturities from call options.

<TABLE>
<CAPTION>
                                                            December 31,
                                        ----------------------------------------------------
                                                 1997                       1996
                                        ----------------------------------------------------
                                                    Approximate                 Approximate
                                        Amortized      Market      Amortized       Market
                                          Cost         Value         Cost          Value
                                        ---------   -----------    ---------    ------------
                                                             (1,000)
                                        ----------------------------------------------------
<S>                                     <C>           <C>           <C>         <C>
Due in one year or less                 $ 11,443      $ 11,441      $ 2,687       $ 2,670
Due after one year through five years     12,038        12,041        8,017         7,913
Due after five years through ten years    31,442        31,442        2,233         2,131
Due after ten years                        2,359         2,359        1,276         1,276
                                        ----------------------------------------------------
                                        $ 57,282      $ 57,283      $14,213       $13,990
                                        ====================================================
</TABLE>

<TABLE>
<CAPTION>
Securities held to maturity are summarized as follows:

                                                              December 31, 1997
                                           --------------------------------------------------------
                                                                   (1,000's)
                                           --------------------------------------------------------
                                                             Gross          Gross       Approximate
                                             Amortized     Unrealized     Unrealized       Market
                                               Cost           Gains         Losses          Value
                                           -----------     ----------     ----------    -----------
U.S. Government and agency securities      $    11,695     $       23     $       12    $    11,706
State and municipal obligations                  6,623             96             22          6,697
                                           -----------     ----------     ----------    -----------
                                           $    18,318            119     $       34    $    18,403
                                           ===========     ==========     ==========    ===========

<CAPTION>
                                                               December 31, 1996
                                           --------------------------------------------------------
                                                             Gross          Gross       Approximate
                                             Amortized     Unrealized     Unrealized       Market
                                               Cost          Gains          Losses         Value
                                           --------------------------------------------------------
                                                                    (1,000's)
                                           --------------------------------------------------------
<S>                                        <C>             <C>            <C>           <C>
State and municipal obligations            $     3,362     $       33     $       17    $     3,378
                                           ===========     ==========     ==========    ===========
</TABLE>

                                      28
<PAGE>

                    COMMUNITY FINANCIAL CORP. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 2. Securities

     The amortized cost and approximate market value of securities held to
     maturity, by contractual maturity, are shown below. Expected maturities
     will differ from contractual maturities from call and prepayment options

<TABLE>
<CAPTION>
                                                                  December 31,
                                            ------------------------------------------------------
                                                      1997                        1996
                                            --------------------------   -------------------------
                                                           Approximate                 Approximate
                                            Amortized        Market       Amortized       Market
                                              Cost           Value           Cost         Value
                                            ---------      -----------    ---------    -----------
                                                                   (1,000's)
                                            ------------------------------------------------------
<S>                                         <C>            <C>            <C>          <C>
Due in one year or less                     $   7,021      $     7,018    $     330    $       330
Due after one year through five years           8,879            8,929        1,636          1,636
Due after five years through ten years          2,418            2,456        1,396          1,412
Due after ten years                                 0                0            0              0
                                            ---------      -----------    ---------    -----------
                                            $  18,318      $    18,403    $   3,362    $     3,378
                                            =========      ===========    =========    ===========
</TABLE>

     Securities with a carrying amount of $29,681,000 and $0 at December 31,
     1997 and 1996 were pledged to secure public deposits and for other purposes
     as required or permitted by law.

     Proceeds from sales of securities, gross gains and gross losses from such
     sales were as follows:

<TABLE>
<CAPTION>
                                   Year Ended December 31,
                                -----------------------------
                                  1997       1996      1995
                                --------   --------  --------
                                          (1,000's)
                                -----------------------------
<S>                             <C>        <C>       <C>
Proceeds from sales             $  1,000   $      0  $      0
                                ========   ========  ========
Gross gains                     $      0   $      0  $      0
Gross losses                           0          0         0
                                --------   --------  --------
                                $      0   $      0  $      0
                                ========   ========  ========
</TABLE>

Note 3. Mortgage-Backed and Related Securities

     Mortgage-backed and related securities available for sale are summarized
     as follows:

<TABLE>
<CAPTION>
                                        December 31, 1997
                         --------------------------------------------------
                                        Gross         Gross     Approximate
                         Amortized    Unrealized    Unrealized     Market
                            Cost         Gains       Losses        Value
                         ---------    ----------    ----------  -----------
                                               1,000's
                         --------------------------------------------------
<S>                      <C>          <C>           <C>         <C>
GNMA certificates        $  2,454     $      130    $        0  $     2,584
GNMA collateralized
 mortgage obligations       1,121              8            29        1,100
FNMA certificates           2,158             55            18        2,195
FNMA collateralized
 mortgage obligations       3,077              2            67        3,012
FHLMC certificates          5,358             99            80        5,377
FHLMC collateralized
 mortgage obligations       9,710             40           123        9,627
                         --------     ----------    ----------  -----------
                         $ 23,878     $      334    $      317  $    23,895
                         ========     ==========    ==========  ===========
</TABLE>

                                      29
<PAGE>

                   COMMUNITY FINANCIAL CORP. AND SUBSIDIARYS

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 3. Mortgage-Backed and Related Securities

 Mortgage-backed and related securities available for sale are summarized as
 follows:

<TABLE>
<CAPTION>
                                         December 31, 1996
                         -------------------------------------------------
                                        Gross        Gross     Approximate
                         Amortized    Unrealized   Unrealized    Market
                            Cost        Gains        Losses       Value
                         ---------    ----------   ----------  -----------
                                               1,000's
                         -------------------------------------------------
<S>                      <C>          <C>          <C>         <C>
GNMA certificates        $   3,072    $      129   $        0  $     3,201
GNMA collateralized
 mortgage obligations        1,469             0           17        1,452
FNMA certificates            2,397            21            5        2,413
FNMA collateralized
 mortgage obligations        4,135             1          111        4,025
FHLMC certificates           7,883           135          115        7,903
FHLMC collateralized
 mortgage obligations        9,579             1          255        9,325
                         ---------    ----------   ----------  -----------
                         $  28,535    $      287   $      503  $    28,319
                         =========    ==========   ==========  ===========

</TABLE>

 Mortgage-backed and related securities held to maturity are summarized as
 follows:

<TABLE>
<CAPTION>
                                        December 31, 1997
                         -------------------------------------------------
                                        Gross        Gross    Approximate
                         Amortized    Unrealized   Unrealized   Market
                           Cost         Gains        Losses      Value
                         ---------    ----------   ----------  -----------
                                             1,000's
                         -------------------------------------------------
<S>                      <C>          <C>          <C>         <C>
GNMA certificates        $     475    $       30   $        0  $       505
FNMA collateralized
 mortgage obligations          314             2            0          316
FHLMC certificates             102             4            0          106
                         ---------    ----------   ----------  -----------

                         $     891    $       36   $        0  $       927
                         =========    ==========   ==========  ===========
</TABLE>

Mortgage-backed and related securities with a carrying amount of $15,233,000
and $24,562,000 at December 31, 1997 and 1996, respectively, were pledged to
secure public deposits and for other purposes as required or permitted by law.

The weighted average interest rate on mortgage-backed and related securities is
6.59% and 6.46% at December 31, 1997 and 1996, respectively.

The Bank had gross realized gains of $36,000 and gross realized losses of
$2,000 on $632,000 of sales proceeds on mortgage-backed and related
securities for the year ended December 31, 1997. The Bank had gross realized
losses of $5,000 on $863,000 of sales proceeds on mortgage-backed and related
securities for the year ended December 31, 1995. There were no sales for the
year ended December 31, 1996.


                                      30
<PAGE>

                    COMMUNITY FINANCIAL CORP. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 4. Loans Receivable

 Loans receivable consisted of the following:

<TABLE>
<CAPTION>
                                               December 31,
                                             -----------------
                                               1997      1996
                                             -------   -------
                                                 (1,000's)
                                             -----------------
<S>                                          <C>       <C>
Real estate loans:
 Single-family residential                   $64,893   $46,501
 Construction                                  3,174       770
 Multi-family residential and commercial       9,682     2,494
 Agricultural                                 17,865    12,226
 Commercial                                   26,511    20,129
                                            --------  --------
                                             122,125    82,120

Consumer loans:
 Automobile                                   27,104    30,360
 Credit Card                                   2,107     1,879
 Mobile Home                                     905       850
 Educational                                      25        29
 Deposit accounts                              1,552       807
 Home Improvement                                560       694
 Other                                        10,743     7,184
                                            --------  --------
                                             165,121   123,923

Less:
 Loans in process                                869        96
 Allowance for losses                          1,934     1,520
                                            --------  --------

                                            $162,318  $122,307
                                            ========  ========
</TABLE>

Certain consumer loans are shown net of add on interest at December 31, 1997
and 1996. The add on interest amounted to $1,097,000 and $1,621,000,
respectively.

Changes in allowance for loan losses are as follows:

<TABLE>
<CAPTION>
                                                             December 31,
                                                   ----------------------------------
                                                      1997       1996         1995
                                                   ---------   ---------    ---------
                                                                (1,000's)
                                                   ----------------------------------
<S>                                                <C>        <C>          <C>
Balance at January 1                               $   1,520   $   1,514    $   1,641

  Provision for loan losses                              236          10          113
  Recoveries                                             238         397          312
  Loans charged off                                (     510)  (     401)   (     552)
  Adjustments: charges incident to acquisitions          450           0            0
                                                   ---------   ---------    ---------
Balance at December 31                             $   1,934   $   1,520    $   1,514
                                                   =========   =========    =========
</TABLE>

                                      31
<PAGE>

                    COMMUNITY FINANCIAL CORP. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 4. Loans Receivable

Principal balance of non-accrual loans totaled approximately $1,676,000 and
$318,000 at December 31, 1997 and 1996, respectively. The interest discontinues
accruing when the loan becomes more than ninety days past due and in manage-
ment's judgment the collection of interest is impaired. The amount of interest
not recognized was $71,000, $21,000, and $20,000 for the years ended December
31, 1997, 1996, and 1995, respectively. Interest income recognized on nonaccrual
loans during the years ended December 31, 1997, 1996, and 1995 was insignifi-
cant. The Bank has sold a 95% participation interest in single-family mortgage
loans to FHLMC in prior years. The participation amounted to $183,000 and
$257,000 at December 31, 1997 and 1996, respectively.

Weighted average interest rate on loans consisted of the following:

<TABLE>
<CAPTION>
                                       December 31,
                                 ------------------------
                                   1997           1996
                                 ------------------------
     <S>                           <C>            <C>
     Mortgage loans                8.50%          8.51%
     Nonmortgage loans             9.09%          8.78%
       Total loans                 8.81%          8.68%
</TABLE>

Note 5. Accrued Interest Receivable

 Accrued interest receivable consisted of the following:

<TABLE>
<CAPTION>
                                                     December 31,
                                                  -------------------
                                                    1997        1996
                                                  --------     ------
                                                        (1,000's)
                                                  -------------------
     <S>                                          <C>            <C>
     Loans                                        $  1,547    $   845
     Mortgage-backed and related securities            149        181
     Securities                                        979        213
                                                  --------    -------
                                                  $  2,675    $ 1,239
                                                  ========    =======
</TABLE>

Note 6. Premises and Equipment

 Premises and equipment are summarized by major classifications as presented
 below.

<TABLE>
<CAPTION>
                                       December 31,
                                -----------------------
                                  1997          1996
                                ---------     ---------
                                       (1,000's)
                                -----------------------
<S>                             <C>           <C>
Land                            $     890     $     690
Building                            5,291         2,291
Furniture and equipment             2,779         1,540
                                ---------     ---------
                                    8,960         1,540
Accumulated depreciation        (   3,107)    (   1,830)
                                ---------     ---------

                                $   5,853     $   4,439
                                =========     =========
</TABLE>

Depreciation included in the consolidated statements of income amounted to
$342,000, $240,000, and $220,000 for the years ended December 31, 1997, 1996
and 1995, respectively.


                                      32
<PAGE>

                    COMMUNITY FINANCIAL CORP. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Notes 7. Deposit Analysis

 Deposits and weighted average interest rates are summarized as follows
 (amounts in thousands)

<TABLE>
<CAPTION>
                                                                  December 31,
                                          --------------------------------------------------------
                                                      1997                          1996
                                          ---------------------------     ------------------------
                                                            Weighted                     Weighted
                                                             Average                      Average
                                            Amount            Rate          Amount         Rate
                                          ----------       ----------     ---------      ---------
<S>                                       <C>              <C>            <C>            <C>
Demand deposits, non-interest bearing     $   13,530          0.00%       $   6,172        0.00%
Demand deposits, interest bearing             25,733          3.19%          12,395        2.82%
Passbook                                      25,999          2.89%          14,045        2.75%
Money market                                  23,499          3.70%          19,272        3.26%
Certificates                                 130,154          5.66%          87,216        5.58%
                                          ----------                      ---------
                                          $  218,915          4.48%       $ 139,100        4.48%
                                          ==========                      =========
</TABLE>

Certificates had the following remaining maturities (amounts in thousands):

<TABLE>
<CAPTION>
                                       December 31, 1997
               --------------------------------------------------------------------
                                                Two
               Less Than      One to Two      to Three       After Three
   Rate        One Year         Years          Years           Years           Total
   ----        --------       ----------      --------       -----------     ---------
<S>            <C>            <C>             <C>            <C>             <C>
 2 - 3.99%     $    73        $        0      $      0       $         0     $      73
 4 - 5.99%      66,100            28,028         4,310             2,498       100,936
 6 - 7.99%       8,226             9,001         9,250             1,469        27,946
 8 - 9.99%         691                 0           508                 0         1,199
               -------        ----------      --------       -----------     ---------

               $75,090        $   37,029      $ 14,068       $     3,967     $ 130,154
               =======        ==========      ========       ===========     =========
</TABLE>

<TABLE>
<CAPTION>
                                       December 31, 1997
               --------------------------------------------------------------------
                                                Two
               Less Than      One to Two      to Three       After Three
   Rate        One Year         Years          Years            Years          Total
   ----        --------       ----------      --------       -----------     ---------
 <S>           <C>            <C>            <C>            <C>               <C>
 2 - 3.99%     $    638       $        0      $      0       $         0      $    638
 4 - 5.99%       40,095           13,268         6,401             2,410        62,174
 6 - 7.99%        4,437            3,284         6,511             8,995        23,227
 8 - 9.99%          676                5             0               496         1,177
               --------       ----------      --------       -----------      --------
               $ 45,846       $   16,557      $ 12,912       $    11,901      $ 87,216
               ========       ==========      ========       ===========      ========
</TABLE>

                                      33
<PAGE>

                   COMMUNITY FINANCIAL CORP. AND SUBSIDIARY

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 7. Deposit Analysis

 Interest expense on deposits is summarized as follows:

<TABLE>
<CAPTION>
                                              December 31,
                                 --------------------------------------
                                    1997          1996          1995
                                 ---------      ---------     ---------
                                               (1,000's)
                                 --------------------------------------
<S>                              <C>            <C>           <C>
Passbook                         $     577      $     406     $     438
Demand deposits                        487            351           351
Money market                           679            662           752
Certificates                         5,439          4,903         5,134
                                 ---------      ---------     ---------
                                 $   7,182      $   6,322     $   6,675
                                 =========      =========     =========
</TABLE>

     At December 31, 1997 and 1996, the Bank had $33,758,000 and $15,540,000,
     respectively, of deposit accounts with balances in excess of $100,000. The
     Bank did not have brokered deposits at December 31, 1997 and 1996. Deposits
     in excess of $100,000 are not federally insured.

     The Bank has pledged mortgage-based and related securities, when requested
     by depositors, for deposits of $100,000 or more. Deposits which had
     securities pledged amounted to $31,837,000 and $11,240,000 at December 31,
     1997 and 1996, respectively.

Note 8. Other Borrowed Funds

     Advances from the FHLB consisted of fixed rate callable notes as of
     December 31, 1997. The advances all have a call date at one year with
     quarterly calls after that. Advances at December 31, 1996 consisted of an
     open line of credit of $7,500,000 at 5.41% interest rate. Advances are
     secured for both years by FHLB stock and a blanket assignment of Community
     Bank & Trust N.A.'s unpledged qualifying mortgage loans. Interest expense
     for advances amounted to $1,196,000, $305,000, and $72,000 for the years
     ended December 31, 1997, 1996, and 1995, respectively. The advances at
     december 31, 1997 consisted of the following (amounts in thousands);

<TABLE>
<CAPTION>
          Issue                  Maturity                             Interest
          Date                     Date                Amount           Rate
     ----------------         -----------------      ----------      ----------
     <S>                      <C>                    <C>             <C>
     June 17, 1997            June 18, 2002          $    5,000         5.71%
     July 28, 1997            July 31, 2000               5,000         5.71%
     August 6, 1997           August 8, 2002             15,000         5.40%
     December 8, 1997         December 11, 2002           6,000         5.19%
     December 8, 1997         December 11, 2002           6,000         5.19%
                                                     ----------

                                                     $   37,000
                                                     ==========
</TABLE>

Scheduled principal reduction of these advances at December 31, 1997 is as
follows: 1998 - $0, 1999 - $0; 2000 - $5,000,000; 2001 - $0;
and 2002 - $32,000,000.


                                      34
<PAGE>

                   COMMUNITY FINANCIAL CORP. AND SUBSIDIARY

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Note 8. Other Borrowed Funds

  The subsidiary banks have entered into repurchase agreements with customers at
  various interest rates and average maturities of less than three months.
  Interest expense amounted to $242,000, $101,000, and $0 for years ended
  December 31, 1997, 1996, and 1995, respectively. These agreements are not
  insured by FDIC.

  The Company entered into a loan agreement with UMB Bank of St. Louis during
  1997 which provides the availability of $10,000,000 at prime interest rate
  payable quarterly. The Company borrowed $5,600,000 during 1997. At maturity of
  this loan on October 31, 1998, the loan will be converted to a one year note,
  at prime rate of interest, with a ten year amortization period and renewed on
  an annual basis subject to approval of UMB Bank. This loan is secured by 100%
  of the outstanding stock of Community Bank & Trust, N.A., The Egyptian State
  Bank, Saline County State Bank, and MidAmerica Bank of St. Clair County.
  Interest expense amounted to $50,000 for the year ended December 31, 1997.
<TABLE>
<CAPTION>
                                                       FHLB Advances
                                                   ---------------------
                                                   Open Line     Item       Repurchase     Short Term
                       1997                        of Credit     Notes      Agreements        Notes
    --------------------------------------------   ---------   ---------    -----------    ----------
    <S>                                            <C>         <C>          <C>            <C>
    Balance at December 31                         $       0   $  37,000    $     5,323    $    5,600
    Average amount outstanding during the year         9,264      11,375          4,340           568
    Maximum amount outstanding at any month end       19,500      37,000          5,627         5,600
    Weighted average interest rate:
       During the year                                  6.13%       5.53%          5.58%         8.50%
       End of year                                      0.00%       5.45%          5.37%         8.50%

    <CAPTION>
                                                     FHLB
                                                   Open Line   Repurchase
                       1996                        of Credit   Agreements
    --------------------------------------------   ---------   ----------
    <S>                                            <C>         <C>
    Balance at December 31                         $   7,500   $    3,121
    Average amount outstanding during the year         6,000        2,066
    Maximum amount outstanding at any month end        9,000        3,213
    Weighted average interest rate:
       During the year                                  5.08%        4.88%
       End of year                                      5.41%        4.90%
</TABLE>

Note 9. Stockholders' Equity

  Regulatory Restrictions and Capital Requirements

    The principal source of income and funds for the Company is dividends from
    its banking subsidiaries. During 1997, the amount of dividends that the
    banking subsidiaries could pay to the Company without prior regulatory
    approval was exceeded. The Company received $6,500,000 in dividends from
    banking subsidiaries to fund acquisitions in 1997 with prior regulatory
    approval. As a practical matter, the banks may restrict dividends to a
    lesser amount because of the need to maintain adequate capital structures.

                                      35
<PAGE>

                   COMMUNITY FINANCIAL CORP. AND SUBSIDIARY

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 9. Stockholders' Equity

     The Company and its banking subsidiaries are subject to various regulatory
     capital requirements administered by the regulatory banking agencies.
     Failure to meet minimum capital requirements can initiate certain
     mandatory, and probably additional discretionary, actions by regulators
     that, if undertaken, could have a direct material effect on the Company's
     consolidated financial statements. Under capital adequacy guidelines and
     the regulatory framework for prompt corrective action, the Company and its
     banking subsidiaries must meet specific capital guidelines that involve
     quantitative measures of their respective assets, liabilities and certain
     off-balance-sheet items as calculated under regulatory accounting
     practices. The Company and its banking subsidiaries' capital amounts and
     classification are also subject to qualitative judgments by the regulators
     about components, risk weightings and other factors. Quantitative measures
     established by regulation to ensure capital adequacy require the Company
     and its banking subsidiaries to maintain minimum amounts and ratios.
     Management believes, that as of December 31, 1997, the Company and its
     banking subsidiaries meet all capital adequacy requirements to which it is
     subject.

     The subsidiary banks' actual and minimum required capital amounts and
     ratios as mandated by the Federal Reserve Board at December 31, 1997, were
     as follows:

<TABLE>
<CAPTION>
                                                                                                        Requirements
                                                                                 Minimum              To be Classified
                                                          Actual              Requirements          as "Well Capitalized"
     Risk-Based Capital to                          ------------------      -----------------      -----------------------
       risk weighted assets                         Amount       Ratio      Amount      Ratio      Amount            Ratio
                                                    ------       -----      ------      -----      ------            -----

     <S>                                           <C>           <C>        <C>         <C>        <C>               <C>
     Community Financial Corp.                     $32,267       20.35%     $12,681     8.00%      $15,851           10.00%
     Community Bank and Trust N.A.                  21,958       11.37%      15,453     8.00%       19,317           10.00%
     American Bank of Illinois                       1,438       13.02%         883     8.00%        1,104           10.00%
     Egyptian State Bank                             5,081       29.77%       1,366     8.00%        1,707           10.00%
     Saline County State Bank                        2,016       15.46%       1,043     8.00%        1,304           10.00%
     MidAmerica Bank of St. Clair County             5,735       25.80%       1,778     8.00%        2,223           10.00%

     Tier 1 Capital to risk weighted assets

     Community Financial Corp.                      30,333       19.14%       6,341     4.00%        9,511            6.00%
     Community Bank and Trust N.A.                  20,451       10.59%       7,727     4.00%       11,590            6.00%
     American Bank of Illinois                       1,322       11.97%         442     4.00%          662            6.00%
     Egyptian State Bank                             4,991       29.24%         683     4.00%        1,024            6.00%
     Saline County State Bank                        1,947       14.93%         522     4.00%          782            6.00%
     MidAmerica Bank of St. Clair County             5,584       25.12%         889     4.00%        1,334            6.00%

     Tier 1 Capital to average assets

     Community Financial Corp.                      30,333       10.52%      11,528     4.00%       14,410            5.00%
     Community Bank and Trust N.A.                  20,451       10.43%       7,845     4.00%        9,806            5.00%
     American Bank of Illinois                       1,322        6.72%         787     4.00%          983            5.00%
     Egyptian State Bank                             4,991       19.62%       1,018     4.00%        1,272            5.00%
     Saline County State Bank                        1,947       11.92%         653     4.00%          817            5.00%
     MidAmerica Bank of St. Clair County             5,584       27.74%         805     4.00%        1,006            5.00%
</TABLE>

                                      36
<PAGE>

                   COMMUNITY FINANCIAL CORP. AND SUBSIDIARY

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 9. Stockholders' Equity

     At the time of the conversion of Community Bank & Trust, N.A. to a stock
     organization, a special liquidation account was established for the benefit
     of eligible account holders and the supplemental eligible account holders
     in an amount equal to the net worth of the Bank. The special liquidation
     account will be maintained for the benefit of eligible account holders and
     the supplemental eligible accounts holders who continue to maintain their
     accounts in the Bank after the conversion in June of 1995. In the event of
     a complete liquidation, each eligible and the supplemental eligible
     accounts holders will be entitled to receive a liquidation distribution
     from the liquidation account in an amount proportionate to the current
     adjusted qualifying balances for account then held. Community Bank & Trust
     N.A. may not declare or pay cash dividends on or repurchase any of its
     common stock if stockholders' equity would be reduced below applicable
     regulatory capital requirements or below the special liquidation account.

Treasury Stock

     During 1997, the Company authorized purchasing 5% of the outstanding shares
     of stock as of December 31, 1996. The Company purchased 26,500 shares, or
     1.11% of outstanding shares, for $392,000 with an average cost per share of
     $14.80.

     During 1996, the Company authorized the purchase of up to 257,888 shares of
     the Company's stock which represented approximately 9.75% of the
     outstanding stock at December 31, 1995. These shares were purchased in 1996
     at a cost of $3,411,000 with an average cost per share of $13.23.

Note 10. Non-Interest Income and Expense

   Non-interest income and expense is summarized as follows:

<TABLE>
<CAPTION>
                                                    Year Ended December 31,
                                                 ------------------------------
                                                  1997        1996        1995
                                                 ------      ------      ------
                                                            (1,000's)
                                                 ------------------------------
     <S>                                         <C>         <C>         <C>
     Non-interest income
      Service fees                               $  830      $  505      $  432
      Insurance and annuity commissions             214         210         282
      Net gain (loss) on sale of securities          34           0           0
      Net loss on sale of mortgage-backed
        and related securities                        0           0      (    5)
      Net gain (loss) on sale of assets         (     2)          0           0
      Recovery of litigation fees                     0           0         249
      Other                                          51          62         212
                                                -------      ------      ------
                                                $ 1,127      $  777      $1,170
                                                =======      ======      ======

      Non-interest expense
        Salaries and employee benefits          $ 4,319      $3,580      $2,323
        Occupancy expense                           328         221         216
        Equipment and furnishing expense            484         383         353
        Data processing expense                     497         412         461
        Federal insurance premium                    89       1,275         378
        Other                                     1,435         927         706
                                                -------      ------      ------
                                                $ 7,152      $6,798      $4,437
                                                =======      ======      ======

</TABLE>

                                      37
<PAGE>

                   COMMUNITY FINANCIAL CORP. AND SUBSIDIARY

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 11. Income Tax

     The components of the provision for income taxes are summarized as follows:
<TABLE>
<CAPTION>
                                                      Year Ended December 31,
                                                    ---------------------------
                                                      1997     1996     1995
                                                    -------- -------- ---------
                                                             (1,000's)
                                                    ---------------------------
<S>                                                 <C>      <C>      <C>
Currently payable:   Federal                        $   662  $   281  $   950
                     State                               17       52      184
Deferred:  Federal                                 (      3)       8 (     22)
           State                                   (      1)       2 (      5)
                                                    -------  -------  -------

                                                    $   675  $   343  $ 1,107
                                                    =======  =======  =======
</TABLE>

Income tax expense for the years ended December 31, 1997, 1996 and 1995 has been
provided at an effective rate of approximately 32.50%, 30.74% and 35.25%,
respectively. An analysis of such expense for the three years setting forth the
reasons for the variations from the federal statutory rates is as follows:
<TABLE>
<CAPTION>
                                                      Year Ended December 31,
                                                    ---------------------------
                                                      1997     1996     1995
                                                    -------- -------- ---------
                                                             (1,000's)
                                                    ---------------------------
<S>                                                  <C>      <C>      <C>
Computed tax at statutory rates                      $  706   $  383   $ 1,067
Increase (decrease) in tax expense resulting from:
  State income tax, net                                  12       36       130
  Other                                                   1  (    28)       20
  Tax exempt income - net                           (    44) (    48) (     47)
  Nontaxable gains                                        0        0  (     63)
                                                     ------   ------   -------
Income tax expense                                   $  675   $  343   $ 1,107
                                                     ======   ======   =======
</TABLE>

The tax effects of temporary differences that give rise to the deferred tax
assets and deferred tax liabilities are as follows:
<TABLE>
<CAPTION>
                                                             December 31,
                                                    ----------------------------
                                                       1997              1996
                                                    ----------        ----------
<S>                                                 <C>               <C>
Deferred tax assets:
  Allowance for unrealized losses on
    securities available for sale                   $        0        $      176
  Allowance for loan losses                                331               496
  NOL carryover                                            173                 0
  Acquisition adjustments                                  182                 0
  Other                                                     21                 8
                                                    ----------        ----------
                                                           707               680
                                                    ----------        ----------
Deferred tax liabilities:
  Allowance for unrealized gains on
    securities available for sale                            7                 0
  Federal Home Loan Bank stock                              39                39
  Premises and equipment                                   227               214
  Core deposit intangible                                  100                 0
  Other                                                     45                18
                                                    ----------        ----------
                                                           418               271
                                                    ----------        ----------

    Net deferred tax asset                          $      289        $      409
                                                    ==========        ==========
</TABLE>
                                      38
<PAGE>

                   COMMUNITY FINANCIAL CORP. AND SUBSIDIARY

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 11. Income Tax

     In assessing the realizability of deferred tax assets, management considers
     whether it is more likely than not that some portion or all of the deferred
     tax assets will not be realized. The ultimate realization of deferred tax
     assets is dependent upon the existence of, or generation of, taxable income
     in the periods which those temporary differences are deductible. Management
     considers the scheduled reversal of deferred tax liabilities, taxes paid in
     carryback years, projected future taxable income, and tax planning
     strategies in making this assessment. Based upon the level of historical
     taxable income and projection for future taxable income over the periods
     which the deferred tax assets are deductible, at December 31, 1997 and
     1996, management believes it is more likely than not that the Bank will
     realize the benefits of these deductible differences.

     During 1995, the Community Bank & Trust N.A. sold the insurance agency of
     the service corporation at a gain of $187,000. This gain, for tax purposes,
     has been offset against the capital loss carryover. The capital loss
     carryover, as of December 31, 1996, amounts to $329,000 and will start to
     expire in 2006. No deferred taxes have been recorded for this carryover.

Note 12. Employee Benefit Plans

     The Olney Savings and Loan Association Defined Benefit Pension Plan was
     terminated and benefits were frozen as of May 31, 1996. Olney Savings and
     Loan Association was predecessor of Community Bank & Trust N.A. The plan
     termination date was tentatively set at April 30, 1997. The actuary for the
     plan, performed a preliminary calculation and has determined that the plan
     assets are underfunded by approximately $622,000. This liability was
     accrued and is included in other liabilities, for the year ended December
     31, 1996. This plan was not terminated in 1997 as originally planned.
     Additional expense will be incurred from the delay in termination which has
     not been determined.

     The Olney Savings and Loan Association Defined Benefit Pension Plan was a
     noncontributory plan which covered all employees who qualify as to age and
     length of service.

     The following table sets forth the plan's funded status:
<TABLE>
<CAPTION>
                                                                        December 31,
                                                                            1995
                                                                        ------------
                                                                          (1,000's)
                                                                        ------------
     <S>                                                                <C>
     Actuarial present value of benefit obligations:
       Acccumulated benefit obligation, including vested benefits of
        $546,000 (1995)                                                 $        785
       Effect of projected future compensation                                   353
                                                                        ------------
       Projected benefit obligation for service rendered to date               1,138
       Plan assets at fair value                                                 831
                                                                        ------------
       Plan assets in excess of projected benefit obligation           (         307)
       Unrecognized net gain                                                     138
       Unrecognized net transition obligation (asset)                  (          77)
                                                                        ------------

       Accrued pension cost                                            ($        246)
                                                                        ============
</TABLE>

                                      39
<PAGE>

                   COMMUNITY FINANCIAL CORP. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Note 12. Employee Benefit Plans

 The components of net pension expense for the years ended December 31, 1995
are:

                                                                 Year Ended
                                                                 December 31,
                                                                 ------------
                                                                     1995
                                                                 ------------
                                                                   (1,000's)
                                                                 ------------
     Service cost-benefits earned during the period              $         99
     Interest cost on projected benefit obligation                         74
     Actual return on plan assets                                (         19)
     Amortization and deferral                                   (         55)
                                                                 ------------

            Net pension expense                                  $         99
                                                                 ============
                                                                     1995
                                                                 ------------
     Assumptions used to develop the net periodic
      pension cost were:
        Discount rate                                                7.5%
        Expected long-term rate of return on assets                  7.0%
        Rate of increase in compensation levels                      6.0%


 The Company participates in the Manulife 401K Plan. Under the plan voluntary
 contributions made by eligible employees are matched 100% by contributions up
 to a specific percent of their compensation. The cost of the plan was $66,000,
 $72,000 and $64,000 for the years ended December 31, 1997, 1996 and 1995,
 respectively, and is included in compensation and employee benefits in the
 consolidated statements of income.

Note 13. Commitments and Contingencies

 In the ordinary course of business, the Banks have various outstanding
 commitments and contingent liabilities that are not reflected in the
 accompanying consolidated financial statements. In addition, the Banks are
 defendants in various matters of litigation generally incidental to their
 business. In the opinion of management, after consultation with legal counsel,
 the ultimate disposition of these matters is not expected to have a material
 adverse effect on the consolidated financial position, liquidity, and operating
 results of the Banks.

                                      40

<PAGE>


                   COMMUNITY FINANCIAL CORP. AND SUBSIDIARY

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Note 13. Commitments and Contingencies

 The subsidiary banks had outstanding firm commitments to originate loans as
follows:
                                                 December 31,
                                          -------------------------
                                               1997         1996
                                          ----------    -----------
                                                   (1,000's)
                                          -------------------------

  Real estate                             $       869   $        96
  Other loans                                       0             0
  Credit card loans                             6,342         5,889
                                          -----------   -----------

  Commitments to originate loans          $     7,211   $     5,985
                                          ===========   ===========

  Unused lines of credit                  $     8,453   $     6,973
                                          ===========   ===========


Interest rates on the above commitments ranged from 7.25% to 16.90% and 6.00% to
13.90% at December 31, 1997 and 1996, respectively.

There were no outstanding commitments to purchase or sell securities at December
31, 1997 and 1996, respectively.

The subsidiary banks are a party to financial instruments with off-balance-sheet
risk in the normal course of business to meet the financing needs of its
customers. These financial instruments include commitments to extend credit and
standby letters of credit. These instruments involve, to varying degrees,
elements of credit and interest rate risk in excess of the amounts recognized in
the consolidated balance sheets.

The subsidiary bank's exposure to credit loss in the event of nonperformance by
the other party to the financial instruments for commitments to extend credit
and standby letters of credit is represented by the contractual notional amount
of these instruments. The same credit policies are used in making commitments
and conditional obligations as for on-balance-sheet instruments.

Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the contract. Commitments
generally have fixed expiration dates or other termination clauses and may
require payment of a fee. Since many of the commitments are expected to expire
without being drawn upon, the total commitment amounts do not necessarily
represent future cash requirements. Each customer's creditworthiness is
evaluated on a case-by-case basis. The amount and type of collateral obtained,
if deemed necessary upon extension of credit, varies and is based on
management's credit evaluation of the counterparty.

Standby letters of credit are conditional commitments issued to guarantee the
performance of a customer to a third party. Standby letters of credit generally
have fixed expiration dates or other termination clauses and may require payment
of a fee. The credit risk involved in issuing letters of credit is essentially
the same as that involved in extending loan facilities to customers. Policy for
obtaining collateral, and the nature of such collateral, is essentially the same
as that involved in making commitments to extend credit. Generally, signed notes
are required to be executed when a letter of credit is exercised.


                                      41

<PAGE>

                   COMMUNITY FINANCIAL CORP. AND SUBSIDIARY

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 14. Related Parties

   The Banks have entered into transactions with its directors, key management
and their affiliates (Related Parties). Such transactions were made in the
ordinary course of business on substantially the same terms and conditions,
including interest rates and collateral, as those prevailing at the same time
for comparable transactions with other customers, and did not, in the opinion of
management, involve more than normal credit risk or present other unfavorable
features. A summary of loans to such related parties is as follows:

                                                            December 31,
                                                    ----------------------------
                                                       1997              1996
                                                    ----------        ----------
                                                              (1,000's)
                                                    ----------------------------

Balance December 31                                 $    552          $    426
Loans incident to acquisitions                           404                 0
New loans                                                283               293
Repayments                                          (    272)         (    167)
                                                    --------          --------

Balance December 31                                 $    967          $    552
                                                    ========          ========

Note 15. Carrying Amounts and Fair Value of Financial Instruments

   In December 1991, the Financial Accounting Standards Board issued Standard
No.107, "Disclosures about Fair Value of Financial Instruments," which requires
disclosing information about the fair value of all financial instruments, both
assets and liabilities on and off balance sheet, for which it is practicable to
estimate their values and pertinent descriptions of those instruments for which
such values are not readily available. Accordingly, the following information is
set forth below.

                                         1997                     1996
                                 ----------------------   ----------------------
                                 Carrying    Estimated    Carrying    Estimated
                                 Amount      Fair Value   Amount      Fair Value
                                 --------    ----------   --------    ----------
                                       (1,000's)                (1,000's)
                                 ----------------------   ----------------------
Financial Assets
   Cash and cash equivalents     $  26,724   $   26,724   $  12,618   $  12,618
   Securities                       75,601       75,686      17,352      17,368
   Mortgage-backed and related
    securities                      24,786       24,822      28,319      28,319
   Loans receivable                162,318      162,876     122,307     118,707
   Accrued interest receivable       2,675        2,675       1,239       1,239

Financial Liabilities
   Deposits                        218,915      215,738     139,100     139,894
   FHLB advances                    37,000       35,695       7,500       7,497
   Repurchase agreements             5,323        5,323       3,121       3,121
   Other borrowings                  5,600        5,600           0           0
   Accrued interest payable            457          457         160         160

The fair value of cash and interest bearing deposit, including federal funds
sold, are considered short term investments and carrying value was considered to
be a reasonable estimate of fair value.

                                      42
<PAGE>

                   COMMUNITY FINANCIAL CORP. AND SUBSIDIARY

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Note 15. Carrying Amounts and Fair Value of Financial Instruments

  The fair value of securities and mortgage-backed securities is based on quoted
  market prices or dealer quotes. The fair value of certain of these financial
  instruments represent the estimated amount the Company would receive or pay to
  terminate the contracts or agreements, taking into account current interest
  rates and, when appropriate, the current creditworthiness of the
  counterparties. If a quoted market price is not available, fair value is
  estimated using quoted market prices for similar securities.

  Fair values are estimated for loans with similar financial characteristics.
  These loans are segregated by type of loan, considering credit risk and
  prepayment characteristics. Each loan category is further segmented into fixed
  and adjustable rate categories. The fair values of performing loans for all
  portfolios, except residential mortgage loans, are calculated by discounting
  scheduled cash flows through estimated maturity dates. Expected cash flows are
  discounted using estimated market yields that reflect the credit and interest
  rate risks inherent in each category of loans. Estimated market yields also
  reflect a component for the estimated cost of servicing the portfolio. For
  performing residential mortgage loans, fair values are estimated by segmenting
  the loan portfolio into homogeneous pools based on loan types, coupon rates,
  maturities, prepayment assumptions and credit risk, and comparing the values
  of the individual pools to mortgage-backed securities with similar
  characteristics. It is not considered practicable to calculate a fair value
  for nonperforming loans less than $1,000,000. Accordingly, they are included
  in fair value disclosures at net cost.

  The fair value for Federal Home Loan Bank advances was based upon the
  discounted value of the cash flows. The discount rates utilized were based on
  rates currently available with similar terms and maturities.

  The fair value of repurchase agreements and other borrowings are considered
  short term liabilities and the carrying value was considered to be a
  reasonable estimate of fair value.

  The fair value of noninterest bearing deposits, savings and NOW accounts, and
  money market accounts is the amount payable on demand at December 31, 1997 and
  1996. The fair value of fixed-maturity certificates of deposit is estimated
  based on the discounted value of contractual cash flows using the rates
  currently offered for deposits of similar remaining maturities. The fair value
  estimates above do not include the benefit that results from the low-cost
  funding provided by deposit liabilities compared to the cost of borrowing
  funds in the market. This value, which includes such cost assumptions related
  to interest rates, deposit run-off, maintenance costs and float opportunity
  costs, is presented on a discounted cash flow basis. The value related to the
  recorded cost of acquired deposits is also included therein.

  The foregoing fair value estimates are made at a specific point in time, based
  on pertinent market data and relevant information on the financial instrument.
  These estimates do not include any premium or discount that could result from
  an offer to sell, at one time, an entire holdings of a particular financial
  instrument or category thereof. Since no market exists for a substantial
  portion of the financial instruments, fair value estimates were necessarily
  based on judgements with respect to future expected loss experience, current
  economic conditions, risk assessments of various financial instruments
  involving a myriad of individual borrowers, and other factors. Given the
  innately subjective nature of these estimates, the uncertainties surrounding
  them and the matters of significant judgement that must be applied, these fair
  value estimations cannot be calculated with precision. Modifications in such
  assumptions could meaningfully alter these estimates.

  Since these fair value approximations were made solely for on- and off-balance
  sheet financial instruments, no attempt was made to estimate the value of
  anticipated future business and the value of nonfinancial statement assets and
  liabilities. Other important elements which are not deemed to be financial
  assets or liabilities include the value of the retail branch delivery system,
  its existing core deposit base, premises and equipment and goodwill. Further,
  certain tax implications related to the realization of the unrealized gains
  and losses could have a substantial impact on these fair value estimates and
  have not been incorporated into any of the estimates.

                                      43



<PAGE>

               COMMUNITY FINANCIAL CORP. AND SUMMARY INFORMATION

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 16. Service Corporation Activities

   Olney Savings Corporation (OSSC) was involved in partnership to conduct
   business agency. In 1993 this partnership was dissolved with OSSC acquiring
   the insurance agency. As part of this transaction, OSSC recorded goodwill and
   non competition agreement as an asset in the amount of $120,000. The Company
   sold the insurance agency on May 9, 1995. The Gain on sale is recorded in
   non-interest income for the year ended December 31, 1995. OSSC was dissolved
   in 1996. The Company recognized no gain or loss on the dissolution.

Note 17. Employee Stock Ownership Plan (ESOP)

   In June 1995 the Company established an Employee Stock Ownership Plan (the
   ESOP) in connection with the stock conversion in which employees meeting age
   and service requirements are eligible to participate. A participant is 100%
   vested after three years of credit service. The ESOP borrowed $2,116,000 from
   the Company and purchased 211,600 shares of common stock of the Company at
   the date of the conversion. This debt carries an interest rate at prime, as
   stated in the Wall Street Journal on January 1, and requires annual principal
   and interest payments. The Company has committed to make annual contributions
   to the ESOP necessary to repay the loan included interest.

   As the debt is repaid, ESOP shares which were initially pledged as collateral
   for its debt, are released from collateral and allocated to active employees,
   based on the proportion of debt service paid in the year. The Company
   accounts for its ESOP in accordance with Statement of Position 93-6,
   "Employers' Accounting for Employee Stock Ownership Plans." Accordingly, the
   shares pledged as collateral are reported as unearned ESOP shared in the
   consolidated balance sheets. As shares are determined to be ratably released
   from collateral, the Company reports compensation expense equal to the
   current market price of the shares, and the shares become outstanding for
   earning per share computations. Dividends on allocated ESOP shares are
   recorded as a reduction of stockholders' equity and dividends on unallocated
   ESOP shares are used to release additional shares. The trustees' of the plan
   may direct payments of cash dividends be paid to the participants or to be
   credited to participant accounts and invested. Compensation expense for the
   ESOP was $422,00, $270,000 and $275,000 for December 31, 1997,1996, and 1995.
   The ESOP shares were as follows:
<TABLE>
<CAPTION>

                                                      1997              1996
                                                   ----------        -----------
<S>                                                <C>               <C>
Allocated shares                                       47,610             21,160
Shares ratable released for allocation                 21,160             21,160
Unallocated shares                                    142,830            169,280
                                                   ----------        -----------

Total ESOP shares                                     211,600            211,600
                                                   ==========        ===========

Pair value of unreleased shares at December 31     $2,589,000         $2,158,000
                                                   ==========        ===========
</TABLE>

Note 18. Management Recognition Plans

   The Company adopted a Management Recognition Plan (the MRP) on January 12,
   1996 in connection with the stock conversion. The plan provides for the
   granting of shares of stock to eligible directors and officers in the form of
   stock, which vest over a five-year period at the rate of 20% per year, unless
   disabled or retired, then immediately. Under the plan, 105,800 shares of
   stock were granted.

   During 1996, the Company purchased shares of fund the MRP plan on the open
   market. The cost of these shares amounted to $1,403,000 or at a average cost
   of $13.26 per share. In addition to the MRP plan, the Company approved the
   tax bonus plan for the recipients of the MRP shares in the amount of 40% of
   the MRP amount.

                                       44
<PAGE>

               COMMUNITY FINANCIAL CORP. AND SUMMARY INFORMATION

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 26. Acquisitions

   During 1997, Community Financial Corp. completed acquisitions of two bank
   holding companies and one bank accounted as purchase transactions. The
   consolidated statement for 1997 includes the results of operations from the a
   acquisition dates. Under this method of accounting, assets and liabilities of
   the acquired are adjusted to their estimated fair value and combined with the
   historical recorded book values of the assets and liabilities of Community
   Financial Corp. The actual recalculation of the acquired net assets is
   subject to the completion of studies and evaluations by management. Community
   Financial Corp. purchased all of the outstanding shares of the businesses
   acquired for cash of $15,515,000. Community Financial Corp. borrowed
   $5,600,000 from UMB Bank of St. Louis to fund these acquisitions. For
   additional information please see note 8, Other Borrowed Money. Egyptian
   Bancshares, Inc. was acquired as of October 31, 1997 and was dissolved as of
   November 1, 1997. Egyptian Bancshares, Inc. was the holding company for
   Egyptian State Bank and Saline County State Bank. For presentation in the
   following schedules, Egyptian State Bank and Saline County State Bank have
   been presented as if their parent had not existed at the time of acquisition.
   The premiums paid and estimated fair value adjustments have been pushed down
   to the acquired banks. The preliminary allocations of the purchase price are
   subject to the change as the fair values are finalized.

<TABLE>
<CAPTION>
                                                      American         Egyptian         Saline           MidAmerica
                                                     Bancshares,       State Bank       County              Bank
                                                        Inc.          October 31,     October 31,        November 30,
                                                    May 22, 1997          1997            1997              1997
                                                    ------------     ------------     ------------     --------------
                                                                               (1,000's)
                                                    -----------------------------------------------------------------

      <S>                                           <C>             <C>                <C>             <C>
      Cash consideration paid to shareholders             $2,150           $5,000            2,764              5,601
      Historical net assets  acquired                      1,254            3,493            1,930              3,402
                                                    ------------    -------------      -----------     --------------
      Premium paid                                           896            1,507              834              2,199
                                                    ============    =============      ===========     ==============
</TABLE>

Increased (decreased) in net asset values as result of estimated fair values
adjustments are as follows:

<TABLE>
<CAPTION>

                                                     American         Egyptian         Saline           MidAmerica
                                                    Bancshares,       State Bank       County              Bank
                                                       Inc.          October 31,     October 31,        November 30,
                                                   May 22, 1997          1997            1997              1997
                                                   ------------     ------------     ------------     --------------
                                                                              (1,000's)
                                                   -----------------------------------------------------------------

      <S>                                          <C>              <C>              <C>              <C>
      Intangible assets:
           Goodwill                                $        492     $      1,303     $        567     $        2,111
           Core deposit intangible                          355              353              235                101
                                                   ------------     ------------     ------------     --------------
              Total intangible assets                       847            1,656              802              2,212
           Securities                                         0               73               42                  0
           Loans                                             80     (        317)              10                (21)
           Fixed assets                                                                                            0
           Deferred income tax                     (         31)              95     (         20)                 8
                                                   ------------     ------------     ------------     --------------
                                                   $        896     $      1,507     $        834     $        2,199
                                                   ============     ============     ============     ==============
</TABLE>

                                       45
<PAGE>

                   COMMUNITY FINANCIAL CORP. AND SUBSIDIARY

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 18.  Management Recognition Plans

  Compensation expense for the Management Recognition Plan was as follows:

                                                          December 31,
                                                -----------------------------
                                                     1997             1996
                                                --------------   ------------
                                                           (1,000's)
                                                -----------------------------
   MRP vesting                                  $          358   $        275
   MRP tax bonus                                           129            110
   Retirement MRP vesting                                   48              0
   Retirement MRP tax bonus                                 19              0
                                                --------------   ------------
                                                $          554   $        385
                                                ==============   ============

Note 19.  Stock Appreciation Rights

  The Company, at its sole discretion, may from time to time grant stock
  appreciation rights (SARs) to employees either in conjunction with, or
  independently of, any options granted. The exercise price as to any SARs shall
  not be less than the market value of the shares at the time of the grant No
  SARs had been granted.

Note 20.  Early Retirement Plan

  In December of 1996, the Board approved an early retirement plan for all
  employees age 50 or older. This plan effective date was in January of 1997 and
  was offered to twelve employees of which seven took early retirement. This
  plan includes provisions for length of employment, one month of salary per
  year of service, and immediate vesting in the MRP plan, stock option plan, and
  bonus plan on the MRP plan amount. The stock option plan had a ninety day
  period the options could be exercised. Employees exercised stock options, a
  total of 23,805 shares, in February of 1997. Total estimated cost to the
  Company for the early retirement plan was as follows:

                                                      December 31,
                                                          1997
                                                      ------------

   Stock options exercised                            $     80,000
   MRP allocation                                           91,000
   MRP tax bonus                                            36,000
   Compensation package                                    231,000
                                                      ------------

                                                      $    438,000
                                                      ============

                                      46

<PAGE>

                   COMMUNITY FINANCIAL CORP. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENT

Note 21.  Stock Option and Incentive Plan

  Also on January 12, 1996, the stockholders of the Company approved a fixed
stock option and incentive plan.  The option plan provides for the granting of
stock options and stock appreciation rights to certain employees and directors
and has a term of ten years from the effective date of the plan after which no
awards may be granted.  The plan intends to reserve 264,506 authorized, but
unissued shares (or treasury shares) of common stock for issuance upon the
future exercise of options or stock appreciation rights.  At the effective date
of the plan, certain executive officers and directors will receive a grant of an
option under the plan to purchase up to 264,506 shares of common stock at an
exercise price per share equal to its fair market value on that date.  The plan
provides for one-fifth of the options granted to be exercisable on each of the
first five anniversaries of the date the option was granted.  The Company
applies APB Opinion 25 in accounting for its fixed stock option plan.
Recognition of compensation expense for stock options is not required when
options are granted at an exercise price equal to or exceeding the fair market
value of the Company's common stock on the date the option is granted.
Therefore, no expense related to the fixed stock option plan is reflected on
the accompanying financial statements.

Had compensation cost been determined on the basis of fair value pursuant to
FASB Statement No. 123, net income and earnings per share would have been
reduced as follows:


                                                                 1997
                                                             -------------
                                                               (1,000's)
                                                             -------------
Net Income
----------
  As reported                                                $       1,402
                                                             =============
  Pro forma                                                  $       1,142
                                                             =============

Basis earnings per share
------------------------
  As reported                                                $         .62
                                                             =============
  Pro forma                                                  $         .50
                                                             =============

Diluted earnings per share
--------------------------
  As reported                                                $         .60
                                                             =============
  Pro forma                                                  $         .49
                                                             =============

The following is a summary of the status of the fixed plan during 1997:

                                                Number of        Exercise
                                                  Shares           Price
                                               -----------      ----------

Outstanding at January 1, 1997                           0      $        0
Granted                                            264,606          13.125
Exercised                                      (    23,805)         13.125
Forfeited                                                0               0
                                               -----------       ---------

Outstanding at December 31, 1997                   240,701       $  13.125
                                               ===========       =========

Options exercisable at December 31, 1997            48,146       $  13.125
                                               ===========       =========

                                      47

<PAGE>

                   COMMUNITY FINANCIAL CORP. AND SUBSIDIARY

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 21. Stock Option and Incentive Plan

  The following is a summary of the status of fixed options outstanding at
  December 31, 1997:

<TABLE>
<CAPTION>

                                     Outstanding Options              Exercisable Options
                             ----------------------------------       ---------------------
                                           Average     Weighted                    Weighted
                                          Remaining    Average                     Average
        Exercise                         Contractual   Exercise                    Exercise
      Price Range            Number         Life        Price         Number         Price
      -----------            -------     -----------   --------       ------       --------
      <S>                    <C>         <C>           <C>            <C>          <C>
        $  13.125            240,701       9 years     $ 13.125       48,146       $ 13.125
</TABLE>

Note 22. Earnings per Share

  The following data shows the amounts used in computing earnings per share and
  the effect on income and the weighted average number of shares of dilutive
  potential common stock.

<TABLE>
<CAPTION>
                                                                                    1997             1996
                                                                                 ----------      -----------
                                                                                          (1,000's)
                                                                                 ---------------------------
     <S>                                                                         <C>             <C>
     Income available to common stockholders used in basic EPS                   $    1,402      $       773
                                                                                 ==========      ===========
     Income available to common stockholders after assumed conversions
       of dilutive securities                                                    $    1,402      $       773
                                                                                 ==========      ===========
     Weighted average number of common shares used in basic EPS                    2,275,233        2,319,798

     Effect of dilutive securities:
       Stock options                                                                 48,140                0
                                                                                 ----------      -----------
     Weighted number of common shares and dilutive potential common
       stock used in diluted EPS                                                  2,323,373        2,319,798
                                                                                 ==========      ===========
</TABLE>

  Earnings per share amounts for 1996 have been restated to give effect to the
  application of SFAS No. 128 which was adopted by the Company in 1997.

Note 23. Employment Agreements

  The Company and the Banks have entered into separate employment agreements
  with certain officers of the Company. These agreements provide for salary
  terms, potential severance benefits, and potential benefits which could be due
  to these officers in the event of a change in control of the Company.

Note 24. Savings Association Insurance Fund (SAIF) Assessment

  Banking legislation enacted September 30, 1996 required Community Bank & Trust
  N.A. to pay a one-time special assessment to capitalize the SAIF, payable on
  November 27, 1996. The assessment 65.7 basis points of the assessment base
  calculated as of March 31, 1995, was approximately $1,015,000 and has been
  included in noninterest expense in the accompanying 1996 consolidated
  financial statements. In addition, this banking legislation included
  provisions for a substantial reduction in SAIF premiums paid, beginning
  January 1, 1997. Other provisions provide for the mergers of the bank and
  savings association charters, and the SAIF and the Bank Insurance Fund (BIF)
  by January 1, 1999.

                                      48

<PAGE>

                  COMMUNITY FINANCIAL CORP. AND SUBSIDIARIES

                         NOTES TO FINANCIAL STATEMENTS

Note 25. Community Financial Corp. Condensed Financial Information

     The parent company's principal assets are its investment in subsidiary
     banks investment securities and receivable from subsidiaries. The following
     are the condensed statements of financial condition for the parent company
     only as of December 31, 1997 and 1996 and its condensed statements of
     operations and cash flows for the years ended December 31, 1997, and 1996
     and for the period from July 1, 1995 to December 31, 1995.

                  CONDENSED STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
                                                                   At December 31,
                                                                ---------------------
                                                                  1997         1996
                                                                --------     --------
<S>                                                             <C>          <C>
Assets:
  Cash and cash equivalents                                     $  2,827     $  6,331
  Securities held to maturity                                      1,651        1,205
  Securities available for sale                                    1,247        2,357
  Investment in subsidiaries                                      34,237       23,264
  Receivable from subsidiaries                                     1,428        1,693
  Other assets                                                       893           49
                                                                --------     --------

                                                                $ 42,283     $ 34,899
                                                                ========     ========
Liabilities and Stockholders' Equity:
  Accrued expenses and other liabilities                        $  6,556     $    817
                                                                --------     --------
  Stockholders' equity:
    Common stock                                                      26           26
    Additional paid-in capital                                    25,754       25,397
    Unearned MRP shares                                         (    750)    (  1,123)
    Treasury stock                                              (  3,803)    (  3,411)
    Unearned ESOP shares                                        (  1,428)    (  1,693)
    Unrealized gain (loss) on securities
      available for sale, net                                         11     (    263)
    Retained earnings, subject to certain restrictions            15,917       15,149
                                                                --------     --------
      Total stockholders' equity                                  35,727       34,082
                                                                --------     --------
                                                                $ 42,283     $ 34,899
                                                                ========     ========
</TABLE>


                         CONDENSED STATEMENT OF INCOME
<TABLE>
<CAPTION>
                                                                   Year Ended
                                                              ---------------------  Period Ended
                                                              Dec. 31,     Dec. 31,     Dec. 31,
                                                              --------     --------     --------
                                                                1997         1996         1995
                                                              --------     --------     --------
<S>                                                           <C>          <C>          <C>
Dividends from subsidiaries bank                              $  6,500     $  3,000     $      0
Interest income                                                    585          592          439
Non-interest expense                                          (  1,443)    (    648)    (     83)
                                                              --------     --------     --------
  Income before income taxes                                     5,642        2,944          356
Income taxes                                                       356           46     (    127)
                                                              --------     --------     --------
  Income before undistributed earnings of subsidiaries           5,998        2,990          229
Undistributed (distributions in excess of) earnings of
  subsidiaries                                                (  4,596)    (  2,217)         793
                                                              --------     --------     --------
  Net income                                                  $  1,402     $    773     $  1,022
                                                              ========     ========     ========
</TABLE>

                                      49
<PAGE>

                   COMMUNITY FINANCIAL CORP. AND SUBSIDIARY

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 25.  Community Financial Corp. Condensed Financial Information

                       CONDENSED STATEMENTS OF CASH FLOW
<TABLE>
<CAPTION>
                                                           Year Ended
                                                   --------------------------        Period Ended
                                                     Dec. 31,        Dec. 31,          Dec. 31,
                                                   -----------      ---------        -------------
                                                       1997            1996              1995
                                                   -----------      ---------        -------------
<S>                                               <C>              <C>               <C>
Cash flows from operating activities:
  Net income                                       $     1,402      $     773        $       1,022
  Adjustments to reconcile net income to net
    cash provided by operating activities
  Equity in earnings of subsidiaries               (     1,904)     (     783)       (         793)
  Dividends received from subsidiaries                   6,500          3,000                    0
  Stock employee benefit plans                           1,016            387                    0
  Other, net                                               559            194        (          12)
                                                   -----------      ---------        -------------
    Net cash provided by operating activities            7,573          3,571                  217
                                                   -----------      ---------        -------------

Cash flows from investing activities:
  Purchase investment in subsidiaries              (    15,515)             0        (      12,692)
  Purchase of investment securities                (       515)     (  11,490)       (      11,490)
  Maturities of investment securities                       69         16,081                3,334
  Receivable from subsidiaries                             266            526        (       2,219)
                                                   -----------      ---------        -------------
    Net cash provided by (used in)
      investing activities                         (    15,695)         5,117        (      23,067)
                                                   -----------      ---------        -------------

Cash flows from financing activities:
  Proceeds from stock issuance                               0              0               25,307
  Common stock repurchased                         (       392)     (   4,814)                   0
  Proceeds from long-term debt                           5,600              0                    0
  Dividends paid on common stock                   (       590)             0                    0
                                                   -----------      ---------        -------------
    Net cash provided by (used in)
      financing activities                               4,618      (   4,814)              25,307
                                                   -----------      ---------        -------------
Net increase in cash and cash equivalents          (     3,504)         3,874                2,457
Cash and cash equivalents at beginning of period         6,331          2,457                    0
                                                   -----------      ---------        -------------
Cash and cash equivalents at end of period         $     2,827      $   6,331        $       2,457
                                                   ===========      =========        =============
</TABLE>

                                      50
<PAGE>

                   COMMUNITY FINANCIAL CORP. AND SUBSIDIARY

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Note 26. Acquisitions

Estimated fair values of net assets at the acquisition date are summarized as
follows:

<TABLE>
<CAPTION>
                                                 American            Egyptian         Saline        MidAmerica
                                                Bancshares,         State Bank        County           Bank
                                                   Inc.             October 31,     October 31,    November 30,
                                               May 22, 1997            1997            1997            1997
                                               ------------         -----------     -----------    ------------
                                                                             (1,000's)
                                               ----------------------------------------------------------------
<S>                                            <C>                   <C>             <C>            <C>
Cash and cash equivalents                       $   3,468            $   7,710       $   2,315      $   1,080
Securities, held to maturity                            0               10,814           5,221              0
Securities, available for sale                      4,602                  984             976          2,898
Loans                                              10,287                8,732           7,815         13,299
Foreclosed Real Estate                                  0                  184              92              0
Premises and equipment                                489                  167             398          1,685
Goodwill                                              492                1,303             567          2,111
Core deposit intangible                               355                  353             235            101
Other assets                                          177                  482             124            426
                                                ---------            ---------       ---------      ---------
                                                   19,870               30,729          17,743         21,600
                                                ---------            ---------       ---------      ---------

Deposits                                           17,492               25,471          14,916         15,879
Other liabilities                                     228                  258              63            120
                                                ---------            ---------       ---------      ---------
                                                   17,720               25,729          14,979         15,999
                                                ---------            ---------       ---------      ---------

   Fair value of assets acquired                $   2,150            $   5,000       $   2,764      $   5,601
                                                =========            =========       =========      =========
</TABLE>

The information below presents on a proforma basis, amounts as if the
acquisitions had been acquired as of the beginning of each year presented:


                                                        Year Ended December 31,
                                                        -----------------------
                                                           1997         1996
                                                        -----------------------

Interest income                                         $  20,647    $   18,385
Interest expense                                           10,351         8,794
                                                        ---------    ----------
  Net interest income                                      10,296         9,591
Provision for loan losses                                     390           116
                                                        ---------    ----------
  Net interest income after provision for loan losses       9,906         9,475
Security transactions                                          35             0
Noninterest income                                          1,197         1,120
Noninterest expense                                     (   9,340)   (    9,678)
                                                        ---------    ----------
  Income before income taxes                                1,798           917
Income taxes                                            (     636)   (      251)
                                                        ---------    ----------

  Pro forma net income                                      1,162           666
                                                        =========    ==========

  Pro forma net income per share of common stock        $    0.51    $     0.29
                                                        =========    ==========

Included in the pro forma information above is net amortization of approximately
$368,000 before income taxes related to acquisition-related premium, discounts
and intangible assets for the years ended December 31, 1997 and 1996.

                                      51
<PAGE>

                   COMMUNITY FINANCIAL CORP. AND SUBSIDIARY

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Note 27. Condensed Quarterly Results of Operations
<TABLE>
<CAPTION>
                                                                                1997
                                                          -------------------------------------------------
                                                             Forth       Third       Second       First
                                                            Quarter     Quarter      Quarter      Quarter
                                                          ---------   ---------     ---------    ---------
<S>                                                       <C>         <C>           <C>          <C>
Interest income                                            $  5,064    $  4,311      $  4,131     $  3,502
Interest expense                                          (   2,751)  (   2,227)    (   2,002)   (   1,690)
                                                           --------    --------      --------     --------

   Net interest income                                        2,313       2,084         2,129        1,812

Provision for loan losses                                 (     122)  (      59)    (      22)   (      33)
Noninterest income                                              319         304           282          222
Noninterest expense                                       (   2,134)  (   1,672)    (   1,409)   (   1,937)
                                                           --------    --------      --------     --------

   Income (loss) before income tax expense                      376         657           980           64

Income tax (expense) benefit                                     15   (     271)    (     397)   (      22)
                                                           --------    --------      --------     --------

Net income (loss)                                          $    391    $    386      $    583     $     42
                                                           ========    ========      ========     ========

Earnings (loss) per share                                  $   0.17    $   0.17      $   0.26     $   0.02
                                                           ========    ========      ========     ========

<CAPTION>
                                                                                1996
                                                           ------------------------------------------------
                                                             Forth       Third       Second       First
                                                            Quarter     Quarter      Quarter      Quarter
                                                           --------    --------      --------     --------
<S>                                                       <C>         <C>           <C>          <C>
Interest income                                            $  3,492    $  3,510      $  3,418     $  3,455
Interest expense                                          (   1,682)  (   1,696)    (   1,657)   (   1,693)
                                                           --------    --------      --------     --------

   Net interest income                                        1,810       1,814         1,761        1,762

Provision for loan losses                                        24   (      45)    (      40)          51
Noninterest income                                              192         192           196          197
Noninterest expense                                       (   1,386)  (   2,883)    (   1,211)   (   1,318)
                                                           --------    --------      --------     --------

   Income (loss) before income tax expense                      640   (     922)          706          692

Income tax (expense) benefit                              (     136)        351     (     310)   (     248)
                                                           --------    --------      --------     --------

Net income (loss)                                          $    504   ($    571)     $    396     $    444
                                                           ========    ========      ========     ========

Earnings (loss) per share                                 ($   0.22)  ($   0.25)     $   0.17     $   0.19
                                                           ========    ========      ========     ========
</TABLE>

                                      52
<PAGE>

                              BOARD OF DIRECTORS

Charles M. DiCiro
Chairman of the Board

Allen D. Welker
Retired

Michael F. Bauman
Retired

Shirley B. Kessler
President and Chief Executive Officer

Roger A. Charleston
Civil Engineer; Owner, Charleston
Engineering

William O. Cantwell
Retired

Clyde R. King
Retired

Brad A. Jones
Co-Owner of Rural King Supply

Roger L. Haberer*
Information Services Manager of
Western Staff Services (Midwest
Region)

* Director of Bank only

                              EXECUTIVE OFFICERS

Shirley B. Kessler
President and Chief Executive Officer

Wayne H. Benson
Executive Vice President

Douglas W. Tompson
Chief Financial Officer

                               SUBSIDIARY BANKS

Community Bank & Trust, N.A.
240 E. Chestnut
Olney, IL 62450

Saline County State Bank
1115 Wilson Street
Stonefort, IL 62987

American Bank of Illinois in Highland
12616 Route 143
Highland, IL 62249

MidAmerica Bank of St. Clair County
350 Hartford Lane
O'Fallon, IL 62269

The Egyptian State Bank
2 South Main Street
Carrier Mills, IL 62917

                             CORPORATE INFORMATION

Independent Certified Accountants
Larsson, Woodyard & Henson, CPAs
702 E. Court Street
Paris, Illinois 61944

General Counsel
Ray W. Vaughn, Attorney
308 S. Kitchell
Olney, Illinois 62450

Transfer Agent and Registrar
Registrar and Transfer Co., Cranford,
New Jersey

Special Counsel
Housley Kantarian & Bronstein, P.C.
1220 19th Street, N.W., Suite 700
Washington, D.C. 20036

Annual Meeting
The 1998 Annual Meeting of Stockholders
will be held on May 4, 1998 at 1:00 p.m. at
501 East Main Street, Olney, Illinois.

Annual Report on Form 10-K

A copy of the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1997 as filed with the Securities and Exchange Commission will be
furnished without charge to stockholders as of the record date for the 1998
Annual Meeting upon written request to Corporate Secretary, Community Financial
Corporation, 240 E. Chestnut Street, Olney, Illinois 62450-2295