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

                           BUSINESS OF THE CORPORATION
                    ----------------------------------------


         CSB Financial  Group,  Inc. (the "Company") was organized as a Delaware
corporation  on December 12, 1994 to acquire all of the capital  stock issued by
Centralia  Savings Bank (the "Bank").  The Company is engaged in the business of
directing, planning and coordinating the business activities of the Bank. In the
future,  the  Company  may acquire or  organize  other  operating  subsidiaries,
although there are no current plans or agreements to do so.

         The  Bank is an  Illinois-chartered  stock  savings  bank.  The  Bank's
deposits are insured by the Federal Deposit  Insurance  Corporation (the "FDIC")
through  the  Savings  Association  Insurance  Fund (the  "SAIF").  The Bank was
originally  chartered  in  1879  as  a  federally  chartered  savings  and  loan
association, merged with another savings association in the 1970's and converted
to a  state-chartered  savings  bank on July 1, 1993 under its  current  name of
Centralia  Savings  Bank.  The Bank  conducts  its  business  through its office
located at 200 South Poplar Street, Centralia, Illinois 62801, and its telephone
number is (618) 532-1918.

         The Bank provides its customers with a broad range of community banking
services.  The Bank is primarily engaged in the business of attracting  deposits
from the general  public and using such deposits to invest in oneto  four-family
residential mortgage loans, and, to a lesser extent,  multi-family  residential,
consumer, commercial business and commercial real estate loans. In addition, the
Bank  invests in U.S.  Government  and Agency  securities,  state and  municipal
obligations and mortgage-backed securities.






<PAGE>


                           CSB FINANCIAL GROUP, INC.
                                200 South Poplar
                            Centralia, Illinois 62801
                                 (618) 532-1918
                          ----------------------------

                               PRESIDENT'S MESSAGE
                          ----------------------------

                                December 20, 1996



Dear Stockholders:

         This past year  brought  many  changes to the Bank and new products and
services to our  customers.  In October 1995, we completed our stock offering in
connection  with the Bank's  conversion  to the stock form of ownership  and the
simultaneous  formation of a bank holding company, CSB Financial Group, Inc. The
conversion  raised $7.6  million in new equity  capital  through the issuance of
1,035,000 shares of common stock of CSB Financial Group,  Inc. In February 1996,
the Bank  announced  its plans to purchase the  full-service  office of Kankakee
Federal  Savings  Bank  located  in  Carlyle,  Illinois.  This  transaction  was
completed  on  September  13,  1996 and  provided  $4.9  million in new  assets.
Finally,  in October  1996,  CSB Financial  Group,  Inc.  announced  that it was
implementing  a repurchase  program  whereby the Company would  repurchase up to
93,150 shares, or 9%, of its outstanding  common stock. This repurchase  program
represented  an  attractive  use  of  capital   relative  to  other   investment
alternatives.

         Our focus on new products and services for the consumer included a home
equity line of credit, an  automated-teller  machine (ATM) at the main office, a
debit card,  and an approved  credit card  program.  Each of these  products and
services  helps  improve the  visibility  of the Bank and provides a service our
customers have desired from a local community bank.

         During the year, our market analysis was completed and we established a
strategy  for  the  Bank's  future  growth.  We  plan  to use a  portion  of the
conversion  proceeds to take  advantage of growth  opportunities  as they become
available.  We will  emphasize  new consumer  products  and  services  that will
improve or enhance the financial condition of the Bank.

         The Company's net income decreased from $317,000 in 1995 to $235,000 in
1996,  a 26 percent  decline.  A one-time  special  assessment  of  $188,000  to
recapitalize  the SAIF deposit  insurance fund was the key factor in the decline
in net income. The Company experienced asset growth of 12 percent to $50 million
as of September 30, 1996. It is important to note that the Company  achieved the
asset growth without impairing asset quality.

         We are optimistic about our future prospects. We believe the Company is
positioned in the Centralia and Carlyle markets to produce improved earnings. It
is our intention to continue to build on our strong base and continue to develop
the expertise necessary to improve earnings through increased market share.


         On behalf of the board of  directors,  management  and the staff of CSB
Financial Group, Inc., I thank you for your continued support.


                                           Sincerely,


                                           /s/ K. Gary Reynolds
                                           -------------------------------------
                                           K. Gary Reynolds
                                           President and Chief Executive Officer





<PAGE>


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


         Management's discussion and analysis of financial condition and results
of  operations is intended to assist the reader in  understanding  the financial
condition,  changes in  financial  condition  and results of  operation  for CSB
Financial Group, Inc. (the "Company"). The information contained in this section
should be read in conjunction with the Consolidated Financial Statements and the
other sections contained herein.

General

         On December 12, 1994, CSB Financial  Group,  Inc. was organized for the
purpose of acquiring all of the outstanding stock of Centralia Savings Bank (the
"Bank") upon  conversion of the Bank from a mutual to a stock savings bank.  The
conversion was completed on October 5, 1995.  The Company sold 1,035,000  shares
of common  stock in the  initial  stock  offering  at $8 per share.  The Company
purchased  100% of the  outstanding  common  stock of the Bank  using 50% of the
$7,584,000 in net proceeds generated from the initial offering.

         The Company  conducts no  significant  business  other than through the
Bank.  The  Bank has a wholly  owned  subsidiary,  Centralia  SLA,  Inc.,  which
provides insurance services.  All references to the Company include the Bank and
its subsidiary,  unless otherwise indicated.  References to the Company prior to
October  5, 1995 are to the Bank and  Centralia  SLA,  Inc.,  on a  consolidated
basis.

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

         General.  The operating  results of the Company depend primarily on its
net interest income,  which is the difference between the interest income earned
on  interest-earning   assets  (primarily  loans,   investment   securities  and
mortgage-backed  securities) and interest expense  incurred on  interest-bearing
liabilities  (primarily deposits).  The Company's net income also is affected by
the establishment of provision for loan losses and the level of its non-interest
income,  including loan fees,  deposit service charges,  insurance  commissions,
gains and  losses  from the sale of  assets  as well as its  other  non-interest
expenses and provisions for income taxes.

         On September 13, 1996, the Company  purchased the Carlyle branch office
from Kankakee  Federal  Savings Bank,  Kankakee,  Illinois.  The purchase of the
Carlyle  branch  was  accounted  for using the  purchase  method of  accounting.
Therefore, the operating results for the branch are included in the consolidated
financial statements for the period subsequent to the acquisition date.

         The Company's  net income for the fiscal year ended  September 30, 1996
was  $235,000 as compared to $317,000  for the fiscal year ended  September  30,
1995. This represents a $82,000, or 25.9%, decrease in net income.

         Net Interest  Income.  The Company's net interest income for the fiscal
years  ended  September  30,  1996  and 1995  were  $1,592,000  and  $1,246,000,
respectively.  This  represents a $346,000,  or 27.8%,  increase in net interest
income.  This is primarily  due to the increase in the volume of earning  assets
exceeding the increase in interest-bearing liabilities.



<PAGE>


         Interest income increased  $444,000,  or 18.1%, from $2,449,000 for the
fiscal year ended  September 30, 1995 compared to $2,893,000 for the fiscal year
ended  September 30, 1996. The increase  resulted  primarily from a $7.8 million
increase  in the  average  balance  of the  Company's  interest-earning  assets,
despite a 30 basis point decrease in average yields of such assets. The increase
in the average  balances of interest earning assets was due to the investment of
the additional funds received from the stock conversion.

         The average balance of mortgage loans  increased $1.9 million  combined
with the 27 basis point  increase in the average  yield on such loans  causing a
$179,000  increase in interest  income  between  the fiscal  years.  The average
balances  increased for both consumer  loans and  investment  securities by $1.6
million and $2.7 million, respectively.  These increases more than offset the 40
basis  point  decline and 60 basis  point  decline in the average  yield on such
earning-assets,  resulting  in a  $120,000  increase  and  $92,000  increase  in
interest income, respectively. The average balance of mortgage-backed securities
decreased  $435,000  combined with the 40 basis point decrease in average yields
contributed  to a $51,000  decrease  in  interest  income.  The  increase in the
average balance of loans and investments  between the fiscal years was primarily
the result of the  utilization  of cash  received in the stock  conversion.  The
increases in average loan balances was also funded by interest-bearing  deposits
and repayments on mortgage and consumer loans.

         Interest  expense  increased  $98,000,  or 8.1%, to $1,301,000  for the
fiscal  year ended  September  30,  1996 from  $1,203,000  for fiscal year ended
September  30, 1995.  This  increase  primarily  resulted  from a 19 basis point
increase in the average cost of  interest-bearing  liabilities  combined  with a
$1.0  million  increase  in average  balance of the  Company's  interest-bearing
liabilities.

         Provision for Loan Losses. The Company's  provision for loan losses for
the fiscal year ended  September  30, 1996 was $64,000,  compared to $80,000 for
the fiscal year ended September 30, 1995.  Management  evaluates the adequacy of
the Company's  allowance for loan losses on a quarterly  basis and may, based on
such review,  adjust the amount of the  provision  for loan  losses.  Classified
loans are considered as part of this review.

         Non-Interest  Income. The Company's  non-interest income for the fiscal
year ended September 30, 1996 was $61,000, as compared to $72,000 for the fiscal
year ended September 30, 1995. This represents an $11,000, or 15.3%, decrease in
non-interest income.

         Non-Interest Expense. The Company's non-interest expense for the fiscal
year ended  September 30, 1996 was  $1,148,000,  as compared to $740,000 for the
fiscal year ended  September  30, 1995.  The $408,000  increase in  non-interest
expense is due to increased  expenses  related to the employee  stock  ownership
plan, the one-time SAIF assessment and professional  fees relating to regulatory
reporting.

         Compensation  and  Employee   Benefits  expense  increased  $55,000  to
$446,000  for the fiscal  year ended  September  30,  1996.  This  increase  was
primarily due to the Company's contribution to the Employee Stock Ownership Plan
(ESOP).  The  consolidated  financial  statements  reflect a charge  of  $92,000
relating to contributions to the ESOP. These  contributions are accounted for as
compensation  and employee  benefits  expense which will  increase  non-interest
expense.  The  Company  records  compensation  expense  related  to the  ESOP in
accordance with SOP 93-6. As a result,  to the extent the value of the Company's
common  stock  appreciates,  compensation  expense  related  to the  ESOP  could
increase.




<PAGE>


         The SAIF Deposit Insurance  expense increased  $191,000 to $255,000 for
the fiscal year ended  September 30, 1996 as compared to $64,000 for fiscal year
ended  September  30, 1995.  The primary cause for the increase was the one-time
special FDIC assessment of $188,000 to recapitalize the SAIF insurance fund.

         Professional  fees increased  $90,000 to $113,000 for fiscal year ended
September 30, 1996 from $23,000 for fiscal year ended  September  30, 1995.  The
primary  causes for the increase were  professional  fees relating to regulatory
reporting and a market study for branch expansion.

         Other  non-interest  expenses  increased  $64,000 to  $205,000  for the
fiscal year ended September 30, 1996 as compared to $141,000 for the fiscal year
ended  September  30, 1995.  The primary  cause for the increase  were  expenses
relating to the operations of the holding company.

          Provision for Income Taxes.  The Company's  provision for income taxes
for the fiscal  year ended  September  30,  1996 was  $206,000,  as  compared to
$181,000  for the fiscal  year ended  September  30,  1995.  This  represents  a
$25,000, or 13.8%, increase in the provision for income taxes.

Comparison of Financial Condition as of September 30, 1996 and 1995

         General.  At September 30, 1996, the Company's  total assets were $50.0
million,  an increase of $5.4 million, or 12.1%, as compared to $44.6 million at
September  30,  1995.  The  increase  resulted  from an increase  in  investment
securities of $3.0 million,  or 22.7%, an increase in loans  receivable,  net of
the allowance for loan losses, of $7.7 million, or 39.7%, a decrease in cash and
cash  equivalents  of $6.1 million,  or 56.3%,  and an increase in the remaining
assets of  $583,000,  or 46.9%.  The  primary  cause of the  increases  in loans
receivable and other non-interest  earning assets was the Company's  acquisition
of  the  Carlyle  branch  office  from  Kankakee   Federal  Savings  Bank.  This
acquisition,  as of  September  13,  1996,  resulted  in an  increase  in  loans
receivable  of $3.8  million,  fixed  assets of $295,000,  intangible  assets of
$722,000,  other assets of $24,000,  deposits of $8.6 million, other liabilities
of $114,000, and cash of $3.9 million. The decrease in cash and cash equivalents
between fiscal years was used to fund loan growth and investment purchases.

         Loans  Receivable.  Loans  receivable,  net of the  allowance  for loan
losses,  at September 30, 1996 were $26.9 million,  an increase of $7.7 million,
or 39.7%,  compared to $19.2  million for the fiscal  year ended  September  30,
1995.  Mortgage  loans  increased  $4.6 million,  or 30.7%,  and consumer  loans
increased $2.0 million, or 52.6%, as compared to the fiscal year ended September
30, 1995.  Commercial loans increased $844,000, or 136.6%, to $1,462,000 for the
year  ended  September  30,  1996 as  compared  to  $618,000  for the year ended
September 30, 1995.  The Carlyle  branch office  acquisition  accounted for $2.6
million in  mortgage  loans,  $1.2  million  in  consumer  loans and  $62,000 in
commercial loans.

         Average loan balances for 1996 amounted to $22.3  million,  an increase
of $4.2 million,  or 23.4%, over the previous fiscal year. The Company hired Mr.
Stephen J. Greene to manage and supervise the lending  portfolio and to continue
the Bank's emphasis on consumer and commercial lending.  Mr. Greene's experience
includes serving as a commercial retail lending officer for a commercial bank.

         The  residential  mortgage loans increased $4.2 million during 1996, or
30.8%, to $17.8 million as compared to the fiscal year ended September 30, 1995.
During 1996, loan  originations for residential  mortgage loans amounted to $3.9
million as compared to $2.2 million in originations for the prior fiscal year.



<PAGE>


         Residential  mortgage loans represents  65.6% of gross loans.  Consumer
loans,  consisting primarily of automobile loans, made up 21.9 % of gross loans,
commercial  loans made up 5.4% of gross loans, and  non-residential  real estate
loans comprised 7.1% of the portfolio at September 30, 1996.

         Allowance  for Loan Losses.  An allowance for loan losses is maintained
at a level considered  adequate by management to absorb potential loan losses as
determined by  evaluations  of the loan  portfolio on a continuing  basis.  This
evaluation by management  includes  consideration  of past loan loss experience,
changes in the  composition of the loan  portfolio,  the volume and condition of
the loan portfolio as well as the financial  condition of specific borrowers and
current  economic  conditions.   Loans  with  principal  and  interest  payments
contractually  due but not yet paid are  reviewed at least  semimonthly  and are
placed on a nonaccrual status when scheduled  payments remain unpaid for 90 days
or  more,  unless  the  loan is  both  well  secured  and is in the  process  of
collection.

         Nonperforming  loans as of September  30, 1996  amounted to $252,000 or
 .5% of total  assets  as  compared  to  $361,000  or .8% of total  assets  as of
September 30, 1995.

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

                                                           For the Fiscal Year
                                                           Ended September 30,
                                                          ---------------------
                                                           1996           1995
                                                          ---------------------
                                                             (In Thousands)

Allowance at beginning of period .................        $  113         $   99
Provision for loan losses ........................            64             80
Recoveries:
    Consumer loans ...............................            10              4
                                                          ---------------------
          Total recoveries .......................            10              4
                                                          ---------------------

Charge-offs:
    One- to four-family loans ....................            --              5
    Consumer loans ...............................            48             65
    Commercial ...................................            22             --
                                                          ---------------------
          Total charge-offs ......................            70             70
                                                          ---------------------
          Net charge-offs ........................           (60)           (66)
                                                          ---------------------
          Balance at end of period ...............        $  117         $  113
                                                          =====================

Ratio of allowance for loan losses to gross loans 
    outstanding at the end of the period                   0.43%          0.58%
Ratio of net charge offs to average loans outstanding 
    net during the period                                  0.27%          0.36%
Ratio of allowance for loan losses to total 
    nonperforming assets at the end of the period         46.43%         31.30%




<PAGE>


         Investment Securities. Investment securities represented 32.4% of total
assets  as of  September  30,  1996  compared  to 29.6% of  total  assets  as of
September 30, 1995.  Investment  securities increased $3.0 million,  22.7%, from
$13.2  million to $16.2 million as of September 30, 1996. At September 30, 1996,
the Company held approximately  $16.2 million in investment  securities of which
$14.0  million  were held as  available  for  sale,  $2.0  million  were held to
maturity,  and $165,000  were  non-marketable  equity  securities.  Of the $16.2
million in investment securities, $13.4 million, or 83.0%, were U. S. Government
and  agency  securities,  $752,000,  or 4.6%,  were  obligations  of  state  and
political subdivisions, $165,000, or 1.0%, were non-marketable equity securities
and $1.8 million, or 11.4%, were mortgage-backed securities.

         Deposits.  At September  30,  1996,  total  deposits  amounted to $36.9
million,  or 73.8%, of total assets.  Total deposits increased $7.4 million,  or
24.9%  from  September  30,  1995.  Deposits  of  $8.6  million  assumed  in the
acquisition  of the Carlyle  branch on September 13, 1996 were the primary cause
for the increase in deposits.

Return on Equity and Assets

          Net income for the fiscal year ended  September  30, 1996 was $235,000
as compared to $317,000 for the fiscal year ended September 30, 1995.

         Return on average  assets (ROA) for the year ended  September  30, 1996
was .55% as compared to .92% for the year ended  September  30, 1995.  The cause
for the decrease in ROA was due to the one-time SAIF assessment  which decreased
net income for the year ended September 30, 1996 by $188,000.

         Return on average  equity (ROE) for the year ended  September  30, 1996
was 1.87% as compared to 5.81% for the year ended September 30, 1995. The causes
for the decrease in ROE were the one-time SAIF  assessment  which  decreased net
income for the year ended  September 30, 1996 by $188,000 and the  conversion of
the Bank from a mutual to a stock  organization  which increased  equity by $7.0
million,  net of conversion  expenses and unearned employee stock ownership plan
shares.

         The average equity to average assets ratio as of September 30, 1996 was
29.6% as compared  to 15.78%  September  30,  1995.  The  primary  cause for the
increase was the conversion of the Bank from a mutual to a stock organization on
October  5, 1995  which  increased  equity by $7.0  million,  net of  conversion
expenses and unearned employee stock ownership plan shares.

Average Balance Sheet

         The following  table presents the average balance sheet for the Company
for the years  ended  September  30,  1996 and 1995,  the  interest  on interest
earning assets and interest bearing liabilities and the related average yield or
cost.  The yields and costs are  derived  by  dividing  income or expense by the
average balance of the related asset or liability for the periods shown. Average
balances were determined from averaging month-end balances.





<PAGE>

<TABLE>
                                                          For the Fiscal Year Ended September 30,
                                           --------------------------------------------------------------------
                                                          1996                               1995                      
                                           ----------------------------------   -------------------------------
                                                                      (In Thousands)

                                              Average    Interest &    Yield/    Average   Interest &   Yield/ 
                                              Balance    Dividends      Cost     Balance   Dividends     Cost  
                                           --------------------------------------------------------------------
<S>                                        <C>           <C>           <C>       <C>       <C>          <C>
Interest-earning assets:
  Mortgage loans (5)                       $     16,542       1,222     7.39%      14,656       1,043     7.12%                   
  Commercial loans (5)                            1,258         107     8.51%         544          71    13.05%
  Consumer loans (5)                              4,491         363     8.08%       2,867         243     8.48%
                                           -------------------------          ------------------------
        Total loans, net                   $     22,291       1,692     7.59%      18,067       1,357     7.51%                   

  Mortgage-backed securities               $      2,091         197     9.42%       2,526         248     9.82%                  
  Investment securities (2)(3)(6)                14,013         842     6.01%      11,346         750     6.61%
  Daily interest-bearing deposits                 2,728         150     5.50%       1,375          81     5.89%
  FHLB stock (3)                                    176          12     6.82%         191          13     6.81%
                                           -------------------------          ------------------------
        Total interest-earning assets      $     41,299       2,893     7.01%      33,505       2,449     7.31%                 

Non-interest earning assets:
  Office properties and equipment, net     $        282                               251                                         
  Real estate, net                                    -                                 4
  Other non-interest earning assets                 867                               833
                                           -------------                      ------------
        Total assets                       $     42,448                            34,593                                        
                                           ============                       ============
Interest-bearing liabilities:
  Passbook accounts                        $      2,952          91     3.08%       3,335          83     2.49%                   
  NOW accounts                                    4,393          76     1.73%       3,720          66     1.77%
  Money market accounts                           1,918          64     3.34%       2,698          84     3.11%
  Certificates of deposit                        20,333       1,070     5.26%      18,701         965     5.16%
                                           -------------------------          ------------------------
        Total deposits                     $     29,596       1,301     4.40%      28,454 $     1,198     4.21%                   
  FHLB advances                                       -           -     0.00%         105           5     4.76%
                                           -------------------------          ------------------------
        Total interest-bearing liabilities $     29,596       1,301     4.40%      28,559       1,203     4.21%                  

Non-interest bearing liabilities:
  Non-interest bearing deposits            $         19                               294                                       
  Other liabilities                                 273                               282
                                           -------------                      ------------
        Total liabilities                  $     29,888                            29,135                                          
Stockholders' equity                             12,560                             5,458
                                           -------------                      ------------
        Total liabilities and retained     $     42,448                            34,593                                       
          earnings                         ============                       ============

Net interest income                                           1,592                             1,246                             
                                                        ============                      ============
Interest rate spread (4)                                                2.61%                             3.10%
Net interest margin (1)                                                 3.85%                             3.72%
Ratio of average interest-earning assets
  to average interest-bearing liabilities       139.54%                           117.32%

<FN>
(1)  Net interest income as a percentage of average interest-earning assets.

(2)  Includes available for sale and held to maturity investment securities.

(3)  Interest  is  classified  as  interest   income  on   investments   in  the
     Consolidated Statement of Income.

(4)  Difference  between weighted average yield on  interest-earning  assets and
     weighted average cost of interest-bearing liabilities.

(5)  Average volume includes nonaccrual loans.

(6)  Includes securities purchased under agreements to resell.
</FN>
</TABLE>
<PAGE>


Rate and Volume Analysis

         The following  table sets forth the effects of changing  interest rates
and volumes of interest earning assets and interest  bearing  liabilities on net
interest income for the Company. The combined rate-volume variances are included
in the total volume variance.  In addition to this schedule,  a two year average
balance sheet and an analysis of net interest  income  setting forth (i) average
assets,  liabilities and  stockholder's  equity;  (ii) interest income earned on
interest  earning  assets and  interest  expense  incurred  on  interest-bearing
liabilities;  (iii) average yields earned on interest-earning assets and average
rates incurred on  interest-bearing  liabilities;  (iv) the net interest  margin
(i.e. the average yield earned on interest  earning assets less the average rate
incurred   on   interest-bearing   liabilities);   and  (v)  the  net  yield  on
interest-earning   assets  (i.e.   net  interest   income   divided  by  average
interest-earning assets).
<TABLE>
                                                       1996 Compared to 1995                     1995 Compared to 1994
                                                     Increase (Decrease) Due to                Increase (Decrease) Due to
                                                   Rate       Volume          Net           Rate          Volume        Net
                                                -------------------------------------------------------------------------------
                                                                                 (In Thousands)
<S>                                             <C>         <C>            <C>            <C>            <C>          <C>
Interest-earning assets:
  Mortgage loans ...........................    $      40   $       139    $      179     $     (49)     $    (19)    $     (68)
  Commercial loans .........................          (25)           61            36             0            71            71
  Consumer loans ...........................          (11)          131           120           (45)           30           (15)
                                                -------------------------------------------------------------------------------
        Total loans ........................            4           331           335           (94)           82           (12)

  Mortgage-backed securities ...............          (10)          (41)          (51)            6           (85)          (79)
  Investment and other
    securities .............................          (68)          160            92             5            60            65
  Interest-bearing deposits ................           (5)           74            69            41           (28)           13
  FHLB stock ...............................           --            (1)           (1)            2            (2)           --
                                                -------------------------------------------------------------------------------
        Total net change income
          on interest-earning
          assets ...........................          (79)          523           444           (40)           27           (13)
                                                -------------------------------------------------------------------------------

Interest-bearing liabilities:
  Passbook .................................           20           (12)            8            (4)           --            (4)
  Interest-bearing demand
    (NOW) accounts .........................           (2)           12            10           (13)           (1)          (14)
  Money market deposit
    accounts ...............................            6           (26)          (20)            7           (28)          (21)
  Certificates of deposit ..................           19            86           105           119            35           154
  FHLB advances ............................           --            (5)           (5)           --             5             5
                                                -------------------------------------------------------------------------------
        Total net change in
          expense on interest-
          bearing liabilities ..............           43            55            98           109            11           120
                                                -------------------------------------------------------------------------------
        Net change in net
          interest income ..................    $    (122)  $       468    $      346     $    (149)     $     16       $  (133)
                                                ===============================================================================

</TABLE>
<PAGE>


Asset and Liability Management

         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 can be considered to be interest-rate sensitive within a specific time
period if it will mature or reprice within that time period.  The  interest-rate
sensitivity   gap  is  defined  as  the   difference   between   the  amount  of
interest-earning assets anticipated,  based upon certain assumptions,  to mature
or reprice  within a specific  time period,  and the amount of  interest-bearing
liabilities  anticipated,  based upon certain assumptions,  to mature or reprice
within that same time period.  A gap is  considered  positive when the amount of
interest-rate  sensitive  assets exceeds the amount of  interest-rate  sensitive
liabilities.  A gap is  considered  negative  when the  amount of  interest-rate
sensitive liabilities exceeds the amount of interest-rate sensitive assets.

         During a period of rising  interest rates, a negative gap would tend to
adversely  affect net interest  income while a positive gap would tend to result
in an  increase  in net  interest  income.  During a period of falling  interest
rates, a negative gap would tend to result in an increase in net interest income
while a positive gap would tend to adversely affect net interest income.

         At  September  30, 1996,  the  Company's  interest-bearing  liabilities
either  maturing or  repricing  within one year  exceeded  its  interest-earning
assets  either   maturing  or  repricing   within  one  year  by  $4.0  million,
representing a cumulative  one-year  interest-rate  sensitivity  gap of negative
8.7%.  During periods of rising interest rates, it is expected that the yield on
the  Company's  interest-earning  assets would rise more slowly than the cost on
its  interest-bearing  liabilities,  which  would be expected to have a negative
effect on net  interest  income.  A decrease  in  interest  rates would have the
opposite  effect  on  net  interest  income,  as  the  interest  rates  paid  on
interest-bearing  liabilities  would fall more  rapidly  than would the interest
rates earned on interest-earning assets.

         The primary  function of asset and liability  management is to maintain
an appropriate  balance between liquidity on the one hand, and  interest-earning
assets and  liabilities on the other.  The  appropriate  balance will enable the
Company to produce stable net income during changing interest-rate cycles.

         In recent years, the Company's assets have been comprised  primarily of
one-to-four-family   residential  mortgage  balloon  payment  notes  along  with
long-term investment and mortgage-backed securities,  while its liabilities have
been comprised primarily of short-term  certificates of deposit. The majority of
the  Company's  balloon  payment notes have  maturities of three years,  while a
small number have  maturities of either one or five years.  The balloon  payment
notes are not  interest-rate  sensitive  in a rapidly  increasing  interest-rate
environment  because  the  interest  rate  remains  fixed  for up to five  years
regardless of an increase in market  interest rates.  Furthermore,  although the
interest rate on the balloon payment notes may be changed if the note is renewed
at the end of the term, the balloon payment notes have interest rate caps of one
or two  percentage  points over the initial rate of interest.  Consequently,  if
interest rates increase by an amount  exceeding the interest rate cap during the
term of the note, the Company may be forced to renew the notes at interest rates
below the prevailing market rate.

         Since the first calendar quarter of 1995, the  adjustable-rate-mortgage
(ARM) has replaced the standard  balloon  payment loan as the principal  type of
mortgage  loan  offered  to  new  residential  first-mortgage  customers  of the
Company.  The ARM's have higher  interest rate ceilings than the balloon payment
loans, along with interest rate floors, and will accordingly provide the Company
with increased interest rate protection. Beginning in February 1996, the Company
initiated a program of converting  the balloon  mortgage loans to comparable ARM
mortgage loans. As the balloon  mortgage loans mature,  they are converted to an
ARM. It is anticipated the balloon  mortgage loan portfolio will be converted to
ARM mortgage loans by the end of fiscal year 1998.


<PAGE>


         Because the majority of the Company's  deposits are in higher  yielding
short-term  certificates  of deposit  (which  can be  expected  to reprice  upon
maturity), an increase in market interest rates will have a more dramatic effect
on the  Company's  cost of funds than if such deposits  were in  transaction  or
passbook  savings account.  The interest rates on the Company's  certificates of
deposit  tend to  increase  more  quickly  and in  greater  increments  than the
interest rates on its transaction or passbook savings accounts.

         The Company's  investment  securities portfolio had an average maturity
of two years or less, excluding mortgage-backed  securities, as of September 30,
1996.  Accordingly,  the Company's investment securities portfolio could be made
more interest-rate  sensitive by reducing the average maturity of the portfolio.
The Company is in the process of creating a shorter-term  investment  securities
portfolio  with more evenly  staggered  maturities.  The Company also intends to
attract   longer-term   certificates   of  deposits  by  pricing  such  deposits
competitively on a case-by-case basis, thereby making the Company's  liabilities
less interest-rate sensitive.

Liquidity and Capital Resources

         The Company's primary sources of funds are customer deposits,  proceeds
from  principal  and  interest  payments on loans,  payments on  investment  and
mortgage-backed   securities  and  sales  of  Company  stock.   While  scheduled
maturities  of  loans  and   investment  and   mortgage-backed   securities  are
predictable  sources  of funds,  deposit  flows,  mortgage  prepayments  and the
Company's  ability to renew  balloon  payment  notes are greatly  influenced  by
general interest rates, economic conditions and competition.

         The primary  investing  activity of the Company is the  origination  of
one-to-four-family  residential  mortgage loans. During each of the fiscal years
ended  September 30, 1996 and 1995,  the Company  originated  one-to-four-family
residential  mortgage  loans in the  amount of $3.9  million  and $2.2  million,
respectively.  These activities were funded primarily by principal repayments on
loans,  payments on  mortgage-backed  securities  and  maturities  of investment
securities.

         The net cash used for  investing  activities  for the fiscal year ended
September  30, 1996 totaled $3.4  million.  Investment  activities  included the
purchase of investment securities which totaled $8.6 million and $44,000 for the
fiscal year ended September 30, 1996 and 1995, respectively.  The cash for these
investing  activities was provided by proceeds  received in the  mutual-to-stock
conversion and cash acquired in the Carlyle office acquisition. Other sources of
cash for investing  activities was provided by operating activities and cash and
cash equivalents held at the beginning of the fiscal year.

         The Company must maintain an adequate  level of liquidity to ensure the
availability of sufficient funds to support loan growth and deposit withdrawals,
satisfy  financial  commitments and take advantage of investment  opportunities.
During the fiscal year ended  September 30, 1996 and 1995,  the Company used its
sources of funds primarily to fund loan commitments,  pay maturing  certificates
of deposits and satisfy deposit withdrawals.  At September 30, 1996, the Company
had  commitments  to  extend  credit  in the  amount  of  $1.13  million.  These
commitments  were comprised of variable-rate  and fixed-rate  commitments in the
amounts of $248,000 and $882,000, respectively. The range of rates on fixed-rate
commitments was 7.5% to 11.0%.



<PAGE>


         At September 30, 1996,  certificates of deposits totaled $24.3 million,
or 66.0% of total  deposits,  as  compared to $19.6  million,  or 66.5% of total
deposits for fiscal year ended  September 30, 1995.  Time deposits over $100,000
accounted for $1.9 million and $1.5 million, respectively, of the certificate of
deposit totals. Historically,  the Company has been able to retain a significant
amount of its maturing  deposits by increasing  the interest rates earned by the
certificates of deposit.  Because deposit insurance  premiums paid by commercial
banks on BIF-insured  deposits have been  drastically  reduced,  the Company may
find it more difficult to retain such deposits. Management believes it will have
adequate  resources to fund maturing  deposits and  withdrawals  from additional
deposits,  proceeds of scheduled  repayments  of loans as well as from  payments
received on investment and mortgage-backed securities.

         Capital.  The  Company is  required  to  maintain a specific  amount of
capital  pursuant  to  the  regulations  of  the  Commissioner  of  Savings  and
Residential Finance and the Federal Deposit Insurance  Corporation (FDIC). As of
September 30, 1996, the Company was in compliance  with all  regulatory  capital
requirements  with a Tier 1  capital  to  risk-weighted  assets  ratio of 56.4%,
compared to the minimum ratio required of 4.0%,  total capital to  risk-weighted
assets ratio of 60.3%  compared to the minimum ratio required of 8.0% and a Tier
1 capital  to  average  assets  ratio of 27.7%  compared  to the  minimum  ratio
required of 4.0%.

         The Company  continues to maintain a strong capital position to support
its capital  requirements.  Stockholders' equity increased $7.2 million to $12.8
million as of  September  30,  1996.  This  increase  was  primarily  due to the
conversion of the Company,  on October 5, 1995, from a mutual state savings bank
to a stock savings bank. The Company sold 1,035,000 shares of common stock at an
initial price of $8.00 per share.  The conversion  transaction,  net of expenses
and unearned  employee stock  ownership plan shares,  increased  capital by $7.0
million.  The capital  position was also  increased as a result of net income of
$235,000.

Impact of New Accounting Pronouncements

         Accounting  for mortgage  servicing  rights In May 1995,  the Financial
Accounting Standards Board issued Statement of Financial Accounting Standard No.
122 (Statement 122),  "Accounting for Mortgage  Servicing Rights." Statement 122
requires the Company to recognize as separate assets rights to service  mortgage
loans for others,  however those servicing  rights are acquired.  If the Company
acquires mortgage servicing rights through either the purchase or origination of
mortgage  loans  and sells or  securities  those  loans  with  servicing  rights
retained,  the Company  should  allocate the total cost of the mortgage loans to
mortgage  servicing rights and the loans (without the mortgage servicing rights)
based on their  relative fair values.  The mortgage  servicing  rights should be
amortized  in  proportion  to and over the  period of  estimated  net  servicing
income.

         Statement 122 is effective for fiscal years  beginning  after  December
15,  1995.  The Company will be required to adopt  Statement  122 for the fiscal
year ending  September 30, 1997. The Company  believes the adoption of Statement
122 will not have a material impact on the consolidated financial statements.

         Accounting for stock-based  compensation In October 1995, the Financial
Accounting Standards Board issued Statement of Financial Accounting Standard No.
123 (FAS 123), "Accounting for Stock-Based Compensation".  FAS 123 established a
fair  value  based  method of  accounting  for stock  options  and other  equity
instruments.



<PAGE>


         FAS  123  permits  the  continued  use of the  intrinsic  value  method
included in Accounting  Principals  Board Opinion 25 (APB-25),  "Accounting  for
Stock Issued to Employees", but regardless of the method used to account for the
compensation  cost  associated  with stock option or similar plans,  it requires
employers to disclose information required by FAS 123.

         The Company plans to adopt the disclosure  requirements of FAS 123. The
disclosure  requirement of FAS 123 is effective for fiscal years beginning after
December 15, 1995. The Company will be required to include these  disclosures in
their financial statements for the year ended September 30, 1997.

         Accounting  for  transfers  and  servicing  of  financial   assets  and
extinguishments of liabilities In June 1996, the Financial  Accounting Standards
Board  issued  Statement  of  Financial  Accounting  Standard No. 125 (FAS 125),
"Accounting for Transfers and Servicing of Financial Assets and  Extinguishments
of Liabilities".

         FAS 125 requires that an entity should only recognize those assets that
it controls and liabilities it has incurred.  Assets should be recognized  until
control has been  surrendered,  and liabilities  should be recognized until they
have been extinguished. Recognition of financial assets and liabilities will not
be  affected  by  the  sequence  of  transactions   unless  the  effect  of  the
transactions  is to maintain  effective  control  over a  transferred  financial
asset.

         FAS 125 is effective  for  transactions  after  December 31, 1996.  The
Company  believes the adoption of FAS 125 will not have a material effect on the
consolidated financial statements.

Recent Regulatory Developments

         Deposit Insurance Premiums.  Deposits of the Bank are currently insured
by the FDIC under the SAIF. The FDIC also maintains  another insurance fund, the
BIF,  which  primarily  insures  commercial  bank and some  state  savings  bank
deposits.  Applicable  law requires that the SAIF and BIF funds each achieve and
maintain a ratio of insurance reserves to total insured deposits equal to 1.25%.
In 1995,  the BIF reached this 1.25%  reserve  level,  and the FDIC  announced a
reduction in BIF premiums for most banks.  Based on this reduction,  the highest
rated  institutions  (approximately 92 percent of the nearly 11,000  BIF-insured
banks) will pay the statutory annual minimum of $2,000 for FDIC insurance. Rates
for all other  institutions  were  reduced  to $.04 per $100 as well,  leaving a
premium  range of $.03 to $.27 per $100 instead of the previous $.04 to $.31 per
$100. Currently,  SAIF-member  institutions pay deposit insurance premiums based
on a schedule of $0.23 to $0.31 per $100 of deposits.

         Effective  September  30,  1996,  legislation  was  enacted to fund the
Savings Association Insurance Fund (SAIF) by assessing SAIF insured institutions
a one-time special assessment of 65.7 basis points on March 31, 1995 deposits.

         The  assessment  for the Bank is $188,000  as of  September  30,  1996.
Additionally,  as part of the purchase  agreement with Kankakee  Federal Savings
and Loan (Kankakee), the Company agreed to reimburse Kankakee for the portion of
Kankakee's  assessment  which related to the Carlyle,  Illinois branch which was
approximately $54,000.

         The $242,000  assessment payable is included in other liabilities.  The
assessment  for  the  Bank  is not  deductible  for  tax  purposes  until  paid,
therefore,  deferred tax assets of $94,000 have been provided for the tax impact
of the assessment.



<PAGE>


         Income Tax  Regulations  Affecting  Bad Debt  Reserve.  Under  existing
provisions  of the Internal  Revenue  Code and similar  sections of the Illinois
income tax law,  qualifying  thrifts may claim bad debt deductions  based on the
greater of (1) a specified  percentage  of taxable  income,  as defined,  or (2)
actual loss  experience.  If, in the  future,  any of the  accumulated  bad debt
deductions are used for any purpose other than to absorb bad debt losses,  gross
taxable income may result and income taxes may be payable.

         The Small  Business Job  Protection  Act became law on August 20, 1996.
One of the  provisions in this law repealed the reserve method of accounting for
bad debts for thrift  institutions  so that the bad debt deduction  described in
the  preceding  paragraph  will no longer be effective  for tax years  beginning
after  December 31, 1995.  The change in the law requires  that the tax bad debt
reserves  accumulated after September 30, 1988 be recaptured into taxable income
over a six-year  period.  The start of the six-year period can be delayed for up
to two  years if the  Company  meets  certain  residential  lending  thresholds.
Deferred  taxes have been  provided  on the  portion of the tax reserve for loan
loss that must be recaptured.

Effect of Inflation and Changing Prices

         The Consolidated Financial Statements and Notes thereto included herein
have been prepared in accordance  with GAAP,  which require the  measurement  of
financial  position and operating results in terms of historical dollars without
considering  changes in the relative  purchasing power of money over time due to
inflation.  The impact of inflation is  reflected in the  increased  cost of the
Company's operations.  Unlike industrial companies, nearly all of 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 the same extent as the prices of goods and services.





<PAGE>



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

                              CORPORATE INFORMATION
                        --------------------------------

<TABLE>


<S>                                                         <C> 

Holding Company                                             Form 10-KSB Annual Report
CSB Financial Group, Inc.                                   Copies of CSB Financial Group, Inc.'s Form
200 South Poplar Street                                     10-KSB annual report as filed with the
Centralia, Illinois 62801                                   Securities and Exchange Commission and other
                                                            published reports may be obtained without
Subsidiaries                                                charge by writing our corporate headquarters:
Centralia Savings Bank
200 South Poplar Street                                                   CSB Financial Group, Inc.
Centralia, Illinois 62801                                                  200 South Poplar Street
                                                                          Centralia, Illinois 62801
Centralia SLA, Inc.                                                      Attention: K. Gary Reynolds
200 South Poplar Street
Centralia, Illinois 62801                                   Registrar and Transfer Agent
                                                            The Registrar and Transfer Company
Stock Information                                           ("Registrar")  maintains all stockholder  records. The Common
Stock  of  the  Holding   Company  is                       Registrar   handles  stock  transfer  and registration,  
quoted on the Nasdaq  "SmallCap"  market under              address  changes, corrections/changes  in 
the  symbol  "CSBF"  since  its  subsidiary,                taxpayer identification numbers, and Form 1099 
Centralia Savings Bank, converted to stock form             tax  reporting  questions.  If you  require  assistance in October 1995.
                                                            assistance or have any questions, please contact
                                                            Registrar by mail or phone:
As of September 30, 1995, the Holding Company
had not issued any capital stock and,                                   Registrar and Transfer Company
consequently, there was no market for its Common                              10 Commerce Drive
Stock.  On October 5, 1995, the Company issued                            Cranford, New Jersey 07016
1,035,000 shares of its Common Stock at a
purchase price of $8.00 per share in connection             Annual Meeting
with the conversion of the Savings Bank from a              The annual meeting of stockholders of CSB
state chartered mutual savings bank to a state              Financial Group, Inc. will be held on January
chartered capital stock savings bank.  The closing          10, 1997 at 10:00 a.m. at 200 South Poplar Street,
price per share for the Holding Company's                   Street, Centralia, Illinois.
Common Stock as reported on the Nasdaq
"SmallCap" market on December 2, 1996                       Independent Auditors
$10.0625.  The Holding Company has not paid                 McGladrey & Pullen, LLP
cash dividends on its Common Stock.                         1806 Fox Drive
                                                            Champaign, Illinois 61820
Stock Pricing History
The following table sets forth the high and low             Special Counsel
sales prices as reported on the Nasdaq                      Schiff Hardin & Waite
"SmallCap" market during the past year.                     7200 Sears Tower
                                                            Chicago, Illinois 60606

</TABLE>
Fiscal 1996                    High           Low
--------------------------------------------------------
First Quarter                 9 5/8           8
Second Quarter                9 3/8           8 3/4
Third Quarter                 9 5/8           9
Fourth Quarter                9 5/8           9


<PAGE>



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

                                    DIRECTORS
                            CSB Financial Group, Inc.
                                       and
                             Centralia Savings Bank
                    ----------------------------------------

                                Wesley N. Breeze
                   Owner and Operator, Byrd Watson Drug Store

                                  A. John Byrne
                                     Retired

                                Michael Donnewald
                      President, Donnewald Distributing Co.

                                 Larry M. Irvin
                  Chairman of the Board, Centralia Savings Bank
                  Owner and Operator, Irvin Funeral Homes, Ltd.

                                W. Harold Monken
                        Auto Dealer, Centralia, Illinois

                                K. Gary Reynolds
          President and Chief Executive Officer, Centralia Savings Bank


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

                                    OFFICERS
                            CSB Financial Group, Inc.
                    ----------------------------------------

                                K. Gary Reynolds
                      President and Chief Executive Officer

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

                                    OFFICERS
                             Centralia Savings Bank
                    ----------------------------------------

                                K. Gary Reynolds
                      President and Chief Executive Officer

                                Stephen J. Greene
                                 Vice President

                                Joanne S. Ticknor
                             Secretary and Treasurer

<PAGE>

                          INDEPENDENT AUDITOR'S REPORT


To the Stockholders and Board of Directors
CSB Financial Group, Inc.
Centralia, Illinois


We have audited the  accompanying  consolidated  balance  sheet of CSB Financial
Group,   Inc.  and  subsidiary  as  of  September  30,  1996,  and  the  related
consolidated statements of income,  stockholders' equity, and cash flows for the
year then ended. 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 audit. The consolidated
financial  statements of CSB Financial Group, Inc. and subsidiary,  for the year
ended  September  30, 1995,  were audited by other  auditors  whose report dated
October 20, 1995, expressed an unqualified opinion on those statements.

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

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material  respects,  the consolidated  financial  position of CSB
Financial  Group,  Inc. and subsidiary as of September 30, 1996, and the results
of their  operations  and their cash flows for the year then ended in conformity
with generally accepted accounting principles.


/s/ McGladrey & Pullen, LLP



Champaign, Illinois
October 18, 1996




<PAGE>


CSB FINANCIAL GROUP, INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS
September 30, 1996 and 1995
(in thousands, except share data)

ASSETS
                                                                1996     1995
--------------------------------------------------------------------------------

Cash and due from banks ...................................... $   598  $   321
Interest-bearing deposits ....................................   4,168   10,585
                                                               ----------------
              Cash and cash equivalents ......................   4,766   10,906
Securities held to maturity (fair value of $2,091 for 1996 and
   $11,141 for 1995) .........................................   1,987   10,979
Securities available for sale ................................  14,044    2,026
Securities purchased under agreements to resell ..............     300
Nonmarketable equity securities ..............................     165      192
Loans ........................................................  27,048   19,390
Allowance for loan losses ....................................    (117)    (113)
                                                               ----------------
              Loans, net .....................................  26,931   19,277
Premises and equipment .......................................     594      252
Accrued interest receivable ..................................     331      290
Intangible assets ............................................     722      - -
Other assets .................................................     176      698
                                                               ----------------

              Total assets ................................... $50,016  $44,620
                                                               ================


See Notes to Consolidated Financial Statements.




<PAGE>


CSB FINANCIAL GROUP, INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS
September 30, 1996 and 1995
(in thousands, except share data)
<TABLE>

LIABILITIES AND STOCKHOLDERS'  EQUITY
                                                                          1996       1995
-------------------------------------------------------------------------------------------
<S>                                                                      <C>        <C>

LIABILITIES:
   Deposits:
      Demand .........................................................   $ 8,754    $ 6,515
      Savings ........................................................     3,779      3,360
      Time deposits > $100,000 .......................................     1,889      1,468
      Other time deposits ............................................    22,432     18,160
                                                                         ------------------
              Total deposits .........................................    36,854     29,503
                                                                         ------------------
   Stock conversion deposits .........................................     9,193
   Other liabilities .................................................       297        187
   Deferred income taxes .............................................        81        162
                                                                         ------------------
              Total liabilities ......................................    37,232     39,045
                                                                         ------------------

COMMITMENTS, CONTINGENCIES AND CREDIT RISK

STOCKHOLDERS' EQUITY
   Preferred stock, $0.01 par value; 100,000 shares authorized;
      none issued and outstanding                                            - -        - -
   Common stock, $0.01 par value; authorized 2,000,000 shares;
      1996 1,035,000 shares issued and outstanding ...................        10        - -
   Paid-in capital ...................................................     7,586        - -
   Retained earnings, substantially restricted .......................     5,794      5,559
   Less:
      Unrealized gain (loss) on securities available for sale, net  of
        income tax effect ............................................       (24)        16
      Unearned employee stock ownership plan shares ..................      (582)       - -
                                                                         ------------------
              Total stockholders' equity .............................    12,784      5,575
                                                                         ------------------

              Total liabilities and stockholders' equity .............   $50,016    $44,620
                                                                         ==================

</TABLE>
See Notes to Consolidated Financial Statements.


<PAGE>


CSB FINANCIAL GROUP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF INCOME
Years Ended September 30, 1996 and 1995
(in thousands, except share data)
<TABLE>

                                                                       1996      1995
--------------------------------------------------------------------------------------
<S>                                                                  <C>       <C> 

Interest income:
   Loans and fees on loans .......................................   $ 1,692   $ 1,357
   Interest and dividends on securities:
      Taxable ....................................................     1,026     1,004
      Nontaxable .................................................        25         7
   Other interest income .........................................       150        81
                                                                     -----------------
                                                                       2,893     2,449
                                                                     -----------------
Interest expense:
   Deposits ......................................................     1,301     1,198
   Other borrowings ..............................................       - -         5
                                                                     -----------------
                                                                       1,301     1,203
                                                                     -----------------
              Net interest income ................................     1,592     1,246

Provision for loan losses ........................................        64        80
                                                                     -----------------
              Net interest income after  provision for loan losses     1,528     1,166
                                                                     -----------------

Noninterest income:
   Service charges on deposits ...................................        47        44
   Other .........................................................        14        28
                                                                     -----------------
                                                                          61        72
                                                                     -----------------
Noninterest expense:
   Compensation and employee benefits ............................       446       391
   Occupancy expense and furniture and fixtures expense ..........        59        55
   Data processing ...............................................        70        66
   SAIF deposit insurance ........................................       255        64
   Professional fees .............................................       113        23
   Other .........................................................       205       141
                                                                     -----------------
                                                                       1,148       740
                                                                     -----------------

              Income before income taxes .........................       441       498
Income taxes .....................................................       206       181
                                                                     -----------------

              Net income .........................................   $   235   $   317
                                                                     =================

              Earnings per share .................................   $  0.25   $   - -
                                                                     =================

              Weighted average number of shares ..................   958,648       - -
                                                                     =================

</TABLE>
See Notes to Consolidated Financial Statements.

<PAGE>




CSB FINANCIAL GROUP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Years Ended September 30, 1996 and 1995
(In thousands, except share data)

<TABLE>
----------------------------------------------------------------------------------------------------------------------------------
                                                                                              Unrealized       Unearned
                                                                                              Gain (Loss)      Employee
                                                                                             on Securities      Stock
                                                 Preferred  Common      Paid-In    Retained    Available      Ownership
                                                   Stock     Stock      Capital    Earnings    For Sale       Plan Shares   Total
                                                 ---------------------------------------------------------------------------------
<S>                                              <C>        <C>         <C>        <C>         <C>            <C>          <C>

Balance at September 30, 1994 .................  $    - -   $    - -    $   - -    $ 5,242     $      28      $     - -    $ 5,270

   Change in unrealized gain (loss) on
      securities available for sale ...........       - -        - -        - -        - -           (12)           - -        (12)
   Net income .................................       - -        - -        - -        317           - -            - -        317
                                                 ---------------------------------------------------------------------------------

Balance at September 30, 1995 .................       - -        - -        - -      5,559            16            - -      5,575

   Net proceeds from 1,035,000 shares of
      common stock issued in conversion .......       - -         10      7,574        - -           - -           (662)     6,922
   Employee stock ownership plan shares
      allocated ...............................       - -        - -         12        - -           - -             80         92
   Change in unrealized gain (loss) on
      securities available for sale ...........       - -        - -        - -        - -           (40)           - -        (40)
   Net income .................................       - -        - -        - -        235           - -            - -        235
                                                ----------------------------------------------------------------------------------

Balance at September 30, 1996 ................. $     - -   $     10  $   7,586    $ 5,794     $    (24)      $    (582)  $ 12,784
                                                ==================================================================================

</TABLE>

See Notes to Consolidated Financial Statements.

<PAGE>




CSB FINANCIAL GROUP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended September 30, 1996 and 1995
(in thousands)

<TABLE>
                                                                   1996      1995
-----------------------------------------------------------------------------------
<S>                                                              <C>       <C>

CASH FLOWS FROM OPERATING ACTIVITIES
   Net income ................................................   $   235   $    317
   Adjustments to reconcile net income to net cash provided by
      operating activities:
      Amortization of premium (discount) on securities, net ..        (3)       (10)
      Employee stock ownership plan compensation expense .....        92        - -
      Provision for loan losses ..............................        64         80
      (Decrease) in deferred income taxes ....................       (56)       (15)
      Depreciation ...........................................        20         20
      Change in assets and liabilities:
        (Increase) in accrued interest receivable ............       (23)       (75)
        (Increase) decrease in other assets ..................       528       (585)
        Increase (decrease) in other liabilities .............        (4)        86
                                                                 ------------------
              Net cash from operating activities .............       853       (182)
                                                                 ------------------

CASH FLOWS FROM INVESTING ACTIVITIES
   Loan originations, net of principal payments on loans .....    (3,873)    (2,489)
   Purchase of securities held to maturity ...................      (596)       (44)
   Purchase of securities available for sale .................    (7,978)       - -
   Proceeds from maturity of securities held to maturity .....       986      1,772
   Proceeds from maturity of securities available for sale ...     4,527        - -
   Purchase of security under agreement to resell ............      (300)       - -
   Purchases of premises and equipment .......................       (67)      (187)
   Proceeds from the sale of OREO ............................       - -         32
   Purchase of branch, net of cash acquired ..................     3,852        - -
                                                                 ------------------
              Net cash from investing activities .............    (3,449)      (747)
                                                                 ------------------

CASH FLOWS FROM FINANCING ACTIVITIES
   Increase (decrease) stock conversion deposits .............    (9,193)     9,193
    Proceeds from sale of common stock, net of offering cost .     6,922        - -
   Net (decrease) in demand deposits, NOW accounts
      passbook savings accounts ..............................    (1,043)      (273)
   Net increase (decrease) in time deposits ..................      (230)     2,072
   Payment of Federal Home Loan Bank advances ................      (360)
                                                                 ------------------
              Net cash from financing activities .............    (3,544)    10,632
                                                                 ------------------
<PAGE>


CSB FINANCIAL GROUP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended September 30, 1996 and 1995
(in thousands)

                                                                 1996      1995
-----------------------------------------------------------------------------------

              Net increase (decrease) in cash and cash 
                equivalents ..................................   $(6,140)   $ 9,703
Cash and cash equivalents, beginning of year .................    10,906      1,203
                                                                 ------------------
Cash and cash equivalents, end of year .......................   $ 4,766    $10,906
                                                                 ==================
Cash paid during the year for:
   Interest ..................................................   $ 1,295    $ 1,254
                                                                 ==================
   Income taxes ..............................................   $   264    $   244
                                                                 ==================

Supplemental Disclosures of Investing and Financing Activities:
   Change in unrealized gain (loss) on securities available 
     for sale .................................................  $  (65)    $   (16)
                                                                 ==================

   Change in deferred income taxes attributable to the 
      unrealized gain (loss) on securities available for sale .  $  (25)    $    (4)
                                                                 ==================

Transfer of securities from held to maturity to available
     for sale .................................................  $ 8,602    $   - -
                                                                 ==================
Assets acquired:
   Loans ......................................................  $ 3,845    $   - -
   Premises and equipment .....................................      295        - -
   Accrued interest receivable ................................       18        - -
   Intangible assets ..........................................      722        - -
    Other assets ..............................................        6        - -
Liabilities assumed:
   Demand deposits ............................................   (2,764)       - -
   Savings deposits ...........................................     (937)       - -
   Time deposits ..............................................   (4,923)       - -
   Other liabilities ..........................................     (114)       - -
                                                                 ------------------

              Purchase of branch, net of cash acquired ........  $(3,852)   $   - -
                                                                 ==================                                               
</TABLE>

See Notes to Consolidated Financial Statements.

<PAGE>



CSB FINANCIAL GROUP, INC. AND SUBSIDIARY

NOTE TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE DATA)
--------------------------------------------------------------------------------

Note 1.  Summary of Significant Accounting Policies

Nature of  operations  CSB  Financial  Group,  Inc. (the Company) is the holding
company of its  wholly-owned  subsidiary,  Centralia  Savings  Bank (the  Bank).
Centralia  Savings Bank is a state chartered stock savings bank,  converted from
mutual form on October 5, 1995, located in Marion County,  Illinois.  The Bank's
deposits are insured by the Federal Deposit Insurance Corporation (FDIC) through
the  Savings  Association  Insurance  Fund  (SAIF).  The Bank is  subject to the
regulations  of  certain  federal  and state  agencies  and  undergoes  periodic
examinations by those agencies.

Principles of presentation The accompanying  consolidated  financial  statements
include the accounts of the Company and its wholly-owned  subsidiary,  the Bank,
and the Bank's  wholly-owned  subsidiary,  Centralia SLA.  Centralia SLA, Inc.'s
principal  business activity is to provide insurance  services.  For purposes of
the consolidated  financial  statements,  all material intercompany amounts have
been eliminated.

In preparing  the  consolidated  financial  statements,  Company  management  is
required  to make  estimates  and  assumptions  which  significantly  affect the
amounts reported in the consolidated financial statements. Significant estimates
which are  particularly  susceptible to change in a short period of time include
the  determination of the allowance for loan losses and valuation of real estate
and other properties acquired in connection with foreclosures or in satisfaction
of amounts due from  borrowers on loans.  Actual results could differ from those
estimates.

The  accounting  and  reporting  policies  of the Company  conform to  generally
accepted accounting  principles and general practice within the savings and loan
industry.  Following is a description of the more significant policies which the
Company follows in preparing and presenting its financial statements.

Cash and cash  equivalents  For  purposes of reporting  cash flows,  the Company
considers all cash on hand,  deposit accounts and money-market  funds to be cash
equivalents.

Securities held to maturity Securities  classified as held to maturity are those
debt  securities  the  Company  has the  positive  intent and ability to hold to
maturity regardless of changes in market conditions,  liquidity needs or changes
in general  economic  conditions.  These securities are carried at cost adjusted
for  amortization of premium and accretion of discount,  which are recognized in
interest income using the interest method over the period to maturity.

Securities  available for sale  Securities  classified as available for sale are
those debt securities that the Company intends to hold for an indefinite  period
of time, but not necessarily to maturity and marketable equity  securities.  Any
decision to sell a security  classified  as available for sale would be based on
various factors,  including  significant movements in interest rates, changes in
the maturity  mix of the  Company's  assets and  liabilities,  liquidity  needs,
regulatory  capital  considerations,   and  other  similar  factors.  Securities
available for sale are carried at fair value. The difference  between fair value
and  amortized  cost,  adjusted  for  amortization  of premium and  accretion of
discounts,  which are  recognized in interest  income using the interest  method
over their contractual lives, results in an unrealized gain or loss.  Unrealized
gains or losses are reported as increases or decreases in  stockholders  equity,
net of the related deferred tax effect. Realized gains or losses,  determined on
the basis of the cost of specific securities sold, are included in earnings.

Securities  purchased  under  agreements to resell  Securities  purchased  under
agreements  to  resell  are  carried  at cost and  consist  of  mortgage  backed
securities.  As of September  30,  1996,  the  agreement is a 91 day  agreement.
Securities purchased under agreements to resell averaged  approximately $300,000
during 1996.
<PAGE>


Loans  Loans are  stated  at the  principal  amount  outstanding  less  unearned
interest  income and an allowance for loan losses.  Unearned  income on consumer
loans is recognized as income based on the interest  method.  Interest income on
substantially  all other  loans is  credited  to income  based on the  principal
balance outstanding.

Loan  origination  fees and  certain  direct  loan  origination  costs are being
deferred and  recognized  over the life of the related loans as an adjustment to
interest  income using the interest  method.  Net deferred  fees are included as
components of the carrying value of the loan.

The Company's  policy is to  discontinue  the accrual of interest  income on any
loan when, in the opinion of  management,  there is  reasonable  doubt as to the
timely  collectibility of interest or principal.  Interest income on these loans
is  recognized  to the  extent  payments  are  received,  and the  principal  is
considered fully collectible.

Allowance  for losses The  allowance  for loan losses is  established  through a
provision  for loan  losses  charged to  operating  expenses.  Loans are charged
against  the  allowance  for  loan  losses  when  management  believes  that the
collectibility  of the  principal is unlikely.  The  allowance is an amount that
management believes will be adequate to absorb losses on existing loans that may
become  uncollectible,  based on evaluations of the  collectibility of loans and
prior loan loss experience. The evaluations take into consideration such factors
as changes in the nature  and volume of the loan  portfolio,  overall  portfolio
quality,  review of specific problem loans and current economic  conditions that
may  affect  the  borrowers'  ability  to pay.  While  management  uses the best
information  available  to  make  its  evaluation,  future  adjustments  to  the
allowance  may be  necessary  if  there  are  significant  changes  in  economic
conditions.  In  addition,  regulatory  agencies,  as an integral  part of their
examination  process,  periodically review the Bank's allowance for loan losses,
and may  require  the Bank to make  additions  to the  allowance  based on their
judgment about information available to them at the time of their examination.
<PAGE>


Accounting  by creditors for the  impairment  of a loan On October 1, 1995,  the
Company  adopted  Financial  Accounting  Standards  Board Statement of Financial
Accounting  Standards  No. 114,  "Accounting  by Creditors  for  Impairment of a
Loan," as amended by FAS 118,  which  requires  loans to be considered  impaired
when, based on current  information and events,  it is probable the Company will
not be able to collect all amounts due. The portion of the  allowance  for loans
losses applicable to impaired loans is to be computed based on the present value
of the estimated  future cash flows of interest and principal  discounted at the
loan's  effective  interest  rate or on the  fair  value of the  collateral  for
collateral  dependent loans. The entire change in present value of expected cash
flows of  impaired  loans or of  collateral  value is to be reported as bad debt
expense in the same manner in which impairment  initially was recognized or as a
reduction in the amount of bad debt expense  that  otherwise  would be reported.
Management had not classified any loans as impaired as of September 30, 1996.

Premises  and  equipment   Premises  and  equipment  are  stated  at  cost  less
accumulated  depreciation.  Depreciation  is provided over the estimated  useful
lives of the related assets principally on the straight-line basis.

Income taxes Deferred income tax assets and  liabilities  are computed  annually
for  differences  between the  financial  statement  and tax bases 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 common share Earnings per share is computed based upon the weighted
average common shares  outstanding during the period plus shares committed to be
released  by the  employee  stock  ownership  plan.  Unallocated  shares  of the
Employee Stock Ownership Plan are not considered common shares outstanding.

Accounting for mortgage  servicing rights In May 1995, the Financial  Accounting
Standards  Board  issued  Statement  of  Financial  Accounting  Standard No. 122
(Statement  122),  "Accounting  for Mortgage  Servicing  Rights."  Statement 122
requires the Company to recognize as separate assets rights to service  mortgage
loans for others,  however those servicing  rights are acquired.  If the Company
acquires mortgage servicing rights through either the purchase or origination of
mortgage  loans  and sells or  securities  those  loans  with  servicing  rights
retained,  the Company  should  allocate the total cost of the mortgage loans to
mortgage  servicing rights and the loans (without the mortgage servicing rights)
based on their  relative fair values.  The mortgage  servicing  rights should be
amortized  in  proportion  to and over the  period of  estimated  net  servicing
income.

Statement 122 is effective for fiscal years  beginning  after December 15, 1995.
The Company will be required to adopt  Statement  122 for the fiscal year ending
September 30, 1997. The Company  believes the adoption of Statement 122 will not
have a material impact on the consolidated financial statements.

Accounting  for   stock-based   compensation  In  October  1995,  the  Financial
Accounting Standards Board issued Statement of Financial Accounting Standard No.
123 (FAS 123), "Accounting for Stock-Based Compensation".  FAS 123 established a
fair  value  based  method of  accounting  for stock  options  and other  equity
instruments.

FAS 123 permits the  continued  use of the  intrinsic  value method  included in
Accounting Principals Board Opinion 25 (APB-25), "Accounting for Stock Issued to
Employees",  but  regardless of the method used to account for the  compensation
cost  associated  with stock option or similar plans,  it requires  employers to
disclose information required by FAS 123.

The  Company  plans  to  adopt  the  disclosure  requirements  of FAS  123.  The
disclosure  requirement of FAS 123 is effective for fiscal years beginning after
December 15, 1995. The Company will be required to include these  disclosures in
their financial statements for the year ended September 30, 1997.

Accounting for transfers and servicing of financial  assets and  extinguishments
of  liabilities In June 1996, the Financial  Accounting  Standards  Board issued
Statement of Financial  Accounting  Standard No. 125 (FAS 125),  "Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of Liabilities".
<PAGE>


FAS 125  requires  that an entity  should only  recognize  those  assets that it
controls and  liabilities  it has incurred.  Assets  should be recognized  until
control has been  surrendered,  and liabilities  should be recognized until they
have been extinguished. Recognition of financial assets and liabilities will not
be  affected  by  the  sequence  of  transactions   unless  the  effect  of  the
transactions  is to maintain  effective  control  over a  transferred  financial
asset.

FAS 125 is effective  for  transactions  after  December  31, 1996.  The Company
believes  the  adoption  of FAS 125  will  not  have a  material  effect  on the
consolidated financial statements.

Reclassifications Certain reclassifications have been made to the balances as of
September  30, 1995,  with no effect on net income,  to be  consistent  with the
classifications adopted for September 30, 1996.

<PAGE>
Note 2.  Conversion to Stock Ownership

On October 5, 1995, CSB Financial  Group,  Inc. (the "Company")  acquired all of
the  outstanding  shares of Centralia  Savings Bank (the "Bank") upon the Bank's
conversion  from a state  chartered  mutual  savings  bank to a state  chartered
capital  stock  savings  bank.  The company  purchased  100% of the  outstanding
capital  stock of the bank  using  50% of the net  proceeds  from the  Company's
initial stock  offering which was completed on October 5, 1995. The Company sold
1,035,000  shares of $0.01 par value  common  stock at a price of $8 per  share,
including  82,800 shares  purchased by the Bank's  Employee Stock Ownership Plan
("ESOP"). The ESOP shares were acquired by the Bank with proceeds from a Company
loan  totaling  $662.  The gross  proceeds of the offering  were  $8,280.  After
reducing  gross  proceeds  for  conversion  costs of $696 net  proceeds  totaled
$7,584.  The  Company's  stock  trades on the NASDAQ  Small Cap market under the
symbol "CSBF".

The  acquisition  of the  Bank by the  Company  is  being  accounted  for like a
"pooling of interests"  under  generally  accepted  accounting  principles.  The
application of the pooling of interest method records the assets and liabilities
of the merged  entities  on a  historical  cost basis with no  goodwill or other
intangible assets being recorded.


 Note 3.  Securities

Amortized cost and fair values of securities are as follows:

                                                 September 30, 1996
                                      ---------------------------------------
                                                  Held to Maturity
                                      ---------------------------------------
                                                             Gross     Gross
                                      Amortized Unrealized Unrealized  Fair
                                         Cost     Gains      Losses    Value
                                       --------------------------------------

Obligations of states 
     and political subdivisions ....   $   149  $   - -   $     6     $   143
Mortgage backed securities .........     1,838      111         1       1,948
                                       --------------------------------------

                                       $1,987   $   111   $     7     $ 2,091
                                       ======================================





<PAGE>


                                        September 30, 1996
                              --------------------------------------
                                        Available for Sale
                              --------------------------------------
                                          Gross      Gross
                              Amortized Unrealized Unrealized  Fair
                                 Cost     Gains      Losses    Value
                               -------------------------------------

Obligations of states and 
     political subdivisions    $   606  $     3     $     6   $    603
U.S. Government and agency      13,477       22          58     13,441
                               ---------------------------------------

                               $14,083  $    25     $    64   $ 14,044
                               =======================================

                                         September 30,  1995
                               ---------------------------------------
                                           Held to Maturity
                               ---------------------------------------
                                          Gross      Gross
                              Amortized Unrealized Unrealized  Fair
                                 Cost     Gains      Losses    Value
                               -------------------------------------

Obligations of states and 
     political subdivisions   $   165   $     4   $    - -    $   169
Mortgage backed securities      2,335       182        - -      2,517
U.S. Government and agency      8,479        38         62      8,455
                              ---------------------------------------

                              $10,979   $   224   $     62    $11,141
                              =======================================

                                        September 30, 1995
                              ---------------------------------------
                                          Available for Sale
                              ---------------------------------------
                                          Gross      Gross
                              Amortized Unrealized Unrealized  Fair
                                 Cost     Gains      Losses    Value
                               -------------------------------------


U.S. Government and agency     $ 2,000  $     26  $   - -     $ 2,026
                               ======================================




<PAGE>


The amortized  cost and fair value of securities  held to maturity and available
for sale at  September  30,  1996,  by  contractual  maturity,  are shown below.
Maturities may differ from contractual maturities in mortgage-backed  securities
because the mortgages  underlying the securities may be called or repaid without
any  penalties.  Therefore,  these  securities  are not included in the maturity
categories in the following maturity summary:

                                                   As of September 30, 1996
                                              ----------------------------------
                                                                   Available
                                              Held to Maturity     for Sale
                                              ----------------------------------
                                             Amortized   Fair  Amortized  Fair
                                                Cost    Value     Cost    Value
                                             -----------------------------------
                                            
Less than one year .........................  $   - -  $   - -  $ 6,013  $ 6,020
Due after one year through five years ......      - -      - -    6,465    6,421
Due after five years through ten years .....       41       41      508      506
Due after ten years ........................      108      102    1,097    1,097
Mortgage-backed securities .................    1,838    1,948      - -      - -
                                              ----------------------------------

                                              $ 1,987  $ 2,091  $14,083  $14,044
                                              ==================================

There  were no gains or losses  on the sale of  securities  for the years  ended
September 30, 1996 and 1995.

During 1995,  the  Financial  Accounting  Standards  Board  decided to allow all
enterprises to make a one-time  reassessment of the classification of securities
under  FAS  115,   "Accounting  for  Certain  Investments  in  Debt  and  Equity
Securities".  The Company  transferred debt securities with an amortized cost of
$8,602  from  the  held-to-maturity  classification  to  the  available-for-sale
classification  and recorded,  as a component of equity,  an unrealized  gain of
$48, net of $30 of deferred taxes.

As a member of the  Federal  Home  Loan Bank  system,  the Bank is  required  to
maintain an  investment  in capital  stock of the  Federal  Home Loan Bank in an
amount equal to 1% of its outstanding home loans. No ready market exists for the
Bank stock,  and it has no quoted market value.  For disclosure  purposes,  such
stock is assumed to have a market value which is equal to cost.

There were no securities  pledged as collateral for public deposits or for other
purposes as required or permitted by law for the year ended  September  30, 1996
and  securities  with a carrying  value of $500 were  pledged for the year ended
September 30, 1995.


Note 4.  Loans

Loans are summarized as follows:

                                                                September 30,
                                                             -----------------
                                                               1996      1995
                                                             -----------------
Mortgage loans:
   One to four family ..................................     $17,812   $13,621
   Commercial real estate ..............................         823       835
   Other loans secured by real estate ..................       1,091       638
                                                             -----------------
              Total mortgage loans .....................      19,726    15,094
                                                             -----------------

Commercial and consumer loans:
   Commercial loans ....................................       1,462       618
   Consumer loans ......................................       4,637     3,323
   Home equity lines of credit .........................         998        18
   Share loans .........................................         316       559
                                                             -----------------
              Total commercial and consumer loans ......       7,413     4,518
                                                             -----------------

Less:
   Allowance for loan losses ...........................       (117)      (113)
   Deferred loan fees ..................................        (23)       (30)
   Unearned income on consumer loans ...................        (68)      (192)
                                                            ------------------
                                                               (208)      (335)
                                                            ------------------

              Loans, net ..............................     $26,931    $19,277
                                                            ==================
<PAGE>


Management had not identified any impaired loans as of September 30, 1996 

In the  normal  course  of  business,  the bank  makes  loans  to its  executive
officers,  directors and employees,  and to companies and individuals affiliated
with  officers,  directors  and  employees of the bank and the  Company.  In the
opinion of management,  these loans were made on  substantially  the same terms,
including  interest rates and  collateral,  as those  prevailing at the time for
comparable  transactions  with  unrelated  parties.  The activity in these loans
during 1996 is as follows:

Balance as of October 1, 1995 ................................            $ 876
   New loans .................................................              351
   Repayments ................................................             (293)
                                                                          -----

Balance as of September 30, 1996 .............................            $ 934
                                                                          =====


Note 5.  Allowance for Loan Losses

The following is an analysis of the allowance for loan losses:

                                                          Year Ended
                                                         September 30,
                                                       ----------------
                                                        1996      1995
                                                       ----------------

Balance, beginning ..........................          $  113    $   99
   Provision charged to income ..............              64        80
   Charge-offs ..............................             (70)      (70)
   Recoveries ...............................              10         4
                                                       ----------------

Balance, ending .............................          $  117    $  113
                                                       ================


Note 6.  Premises and Equipment

Premises and equipment consist of:

                                                              September 30,
                                                          --------------------
                                                            1996        1995
                                                          --------------------

Land ..................................................   $    136    $     86
Office building .......................................        454         210
Furniture and equipment ...............................        363         295
                                                          --------------------
                                                               953         591
Less accumulated depreciation .........................       (359)       (339)
                                                          --------------------

                                                          $    594    $    252
                                                          ====================


Note 7.  Deposits

At September 30, 1996, the scheduled maturities of CD's are as follows:

Year Ended September 30:      Amount         
--------------------------------------------------------------------------------

1997                          $16,553
1998                            3,739
1999                            2,514
2000                            1,115
2001 and thereafter               400
                              -------

                              $24,321
                              =======
<PAGE>

Note 8.  Income Taxes

Income taxes for the years ended  September  30, 1996 and 1995,  consists of the
following components:

                                                     Current  Deferred   Total
                                                     -------------------------

1996
   Federal ........................................   $214      $(38)     $176
   State ..........................................     48       (18)       30
                                                      ------------------------
                                                      $262      $(56)     $206
                                                      ========================

1995
   Federal ........................................   $196      $(10)     $186
   State ..........................................    - -        (5)       (5)
                                                      ------------------------
                                                      $196      $(15)     $181
                                                      ========================

Under existing  provisions of the Internal  Revenue Code and similar sections of
the Illinois  income tax law,  qualifying  thrifts may claim bad debt deductions
based on the  greater  of (1) a  specified  percentage  of  taxable  income,  as
defined,  or  (2)  actual  loss  experience.  If,  in  the  future,  any  of the
accumulated  bad debt  deductions  are used for any purpose other than to absorb
bad debt  losses,  gross  taxable  income may  result  and  income  taxes may be
payable.

The Small  Business Job Protection Act became law on August 20, 1996. One of the
provisions in this law repealed the reserve  method of accounting  for bad debts
for  thrift  institutions  so  that  the bad  debt  deduction  described  in the
preceding  paragraph will no longer be effective for tax years  beginning  after
December 31, 1995. The change in the law requires that the tax bad debt reserves
accumulated  after  September 30, 1988 be recaptured  into taxable income over a
six-year  period.  The start of the six-year period can be delayed for up to two
years if the Company  meets certain  residential  lending  thresholds.  Deferred
taxes have been  provided  on the  portion of the tax reserve for loan loss that
must be recaptured.

Retained earnings at September 30, 1996 and 1995, includes approximately $867 of
the tax reserve which  accumulated  prior to 1988, for which no deferred federal
income tax liability has been recognized.  This amount  represents an allocation
of income to bad-debt deductions for tax purposes only.  Reduction of amounts so
allocated for purposes  other than tax bad-debt  losses or  adjustments  arising
from  carryback of net  operating  losses  would create  income for tax purposes
only, which would be subject to the then-current  corporate income tax rate. The
unrecorded  deferred income tax liability on the above amounts was approximately
$336 as of September 30, 1996 and 1995.

Income tax expense differed from the statutory federal rate of 34% for the years
ended September 30, 1996 and 1995, as follows:


                                                                 1996     1995
                                                               ----------------

Statutory rate applied to earnings before income tax ....      $   150   $  170
Increase in income taxes resulting from:
   State income taxes, net of federal income tax benefit .          20       (3)
   Other .................................................          36       14
                                                               ----------------

                                                               $   206   $  181
                                                               ================
<PAGE>

The net deferred tax liability in the  accompanying  balance  sheets include the
following amounts of deferred tax assets and liabilities:


                                                       1996        1995
                                                     -------------------

Deferred tax liability ...........................   $  (235)    $  (206)
Deferred tax asset ...............................       154          44
Valuation allowance for deferred tax assets
                                                     -------------------

                                                     $   (81)   $   (162)
                                                     ===================

The tax effect of principal  temporary  differences  are shown in the  following
table:


                                                            1996         1995
                                                          ----------------------

Securities market value allowance ..................      $    15     $     (10)
Cash basis adjustment ..............................         (124)         (105)
Allowance for loan losses - book ...................           45            44
Allowance for loan losses - tax ....................          (79)          (57)
FHLB stock basis ...................................           (8)           (8)
Premises and equipment basis .......................          (14)          (14)
SAIF assessment ....................................           94           - -
Other ..............................................          (10)          (12)
                                                          ---------------------
                                                          $   (81)    $    (162)
                                                          =====================


Note 9.  Fair Value of Financial Instruments

Financial  Accounting Standard Board Statement of Financial  Accounting Standard
No. 107 (FAS 107),  "Disclosures  about  Fair Value of  Financial  Instruments",
requires  disclosure  of fair value  information  about  financial  instruments,
whether or not recognized in the balance  sheet,  for which it is practicable to
estimate that value. In cases where quoted market prices are not available, fair
values are based on estimates using present value or other valuation techniques.
Those techniques are significantly  affected by the assumptions used,  including
the  discount  rate and  estimates  of future cash flows.  In that  regard,  the
derived  fair  value  estimates   cannot  be   substantiated  by  comparison  to
independent  markets  and,  in many cases,  could not be  realized in  immediate
settlement of the instrument. FAS 107 excludes certain financial instruments and
all nonfinancial instruments from its disclosure requirements.  Accordingly, the
aggregate fair value amounts  presented do not represent the underlying value of
the Company and its subsidiary.

The following table reflects a comparison of carrying values and the fair values
of the financial instruments as of September 30, 1996:

                                                       Carrying  Fair
                                                        Value    Value
                                                       ----------------
Assets:
   Cash and cash equivalents ........................  $ 4,766 $  4,766
   Securities held to maturity ......................    1,987    2,091
   Securities available for sale ....................   14,044   14,044
   Securities purchased under agreements to resell ..      300      300
   Nonmarketable equity securities ..................      165      165
   Accrued interest receivable ......................      331      331
   Loans ............................................   26,931   26,793
Liabilities:
   Deposits .........................................   36,854   36,894
   Accrued interest payable .........................       14       14
<PAGE>


The following methods and assumptions were used by the Company in estimating the
fair value disclosures for financial instruments:

Cash and due from banks The carrying  values  reported in the balance  sheet for
cash and due from banks,  including interest earning deposits  approximate their
fair values.  The carrying value for securities  purchased  under  agreements to
resell and nonmarketable equity securities approximates their fair values.

Securities  Fair values for securities are based on quoted market prices,  where
available.  If quoted market prices are not available,  fair values are based on
quoted market prices of comparable  instruments.  The carrying  value of accrued
interest  receivable  approximates its fair value. The carrying value for equity
securities  purchased  under  agreements  to  resell  and  nonmarketable  equity
securities approximates their fair values.

Loans For  variable-rate  loans that reprice  frequently and with no significant
change in credit risk, fair values are based on carrying values. The fair values
for fixed-rate  loans are estimated  using  discounted  cash flow analyses using
interest rates currently being offered for loans with similar terms to borrowers
of similar credit  quality.  The carrying value of accrued  interest  receivable
approximates its fair value.

Deposits The fair value disclosed for demand deposits are, by definition,  equal
to the amount payable on demand at the balance sheet date.  The carrying  values
for  variable-rate,  demand  deposits and savings deposit  accounts  approximate
their  fair  values at the  balance  sheet  date.  Fair  values  for  fixed-rate
certificates of deposit are estimated  using a discounted cash flow  calculation
that  applies  interest  rates  currently  being  offered on  certificates  to a
schedule  of  aggregated  expected  monthly  maturities  on time  deposits.  The
carrying value of accrued interest payable approximates its fair value.

Off-balance-sheet  instruments  Fair  values  for the  Bank's  off-balance-sheet
instruments,  which consist of commitments to extend credit and standby  letters
of credit, are based on fees currently charged to enter into similar agreements,
taking  into   account  the   remaining   terms  of  the   agreements   and  the
counterparties'  credit standing.  The fair value for such financial instruments
is nominal.


Note 10.  Capital Ratios

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

Quantitative  measures  established  by  regulation to ensure  capital  adequacy
require the Bank to maintain  minimum amounts and ratios (set forth in the table
below)  of  total  and  Tier  I  capital  (as  defined  in the  regulations)  to
risk-weighted assets (as defined), and of Tier I capital (as defined) to average
assets (as defined).  Management  believes,  as of September 30, 1996,  that the
Bank meets all capital adequacy requirements to which it is subject.





<PAGE>


As of September 30, 1996, the most recent  notification from the Federal Deposit
Insurance  Corporation  categorized  the  Bank as  well  capitalized  under  the
regulatory  framework  for  prompt  corrective  action.  To  be  categorized  as
adequately capitalized,  the Bank must maintain minimum total risk-based, Tier I
risk-based,  and Tier I leverage ratios as set forth in the table.  There are no
conditions  or events since that  notification  that  management  believes  have
changed the Bank's category.
<TABLE>

                                                                                        To Be Well
                                                                                     Capitalized Under
                                                         For Capital                 Prompt Corrective
                                 Actual                Adequacy Purposes             Action Provisions
                       --------------------------- ----------------------------- -------------------------
                          Amount         Ratio        Amount         Ratio        Amount           Ratio
                       -----------------------------------------------------------------------------------
<S>                    <C>               <C>       <C>               <C>          <C>              <C>
As of September 30,
   1996:
   Total Capital (to
      Risk Weighted
      Assets)
        Consolidated  $        12,925     60.30%   $         1,715     = 8.0%          N/A
        Centralia
           Savings
           Bank       $         8,742     42.18% = $         1,658     = 8.0% = $         2,072     = 10.0%
   Tier I Capital (to
      Risk Weighted
      Assets)
        Consolidated  $        12,087     56.39%   $           857     = 4.0%   $      N/A
        Centralia
           Savings
           Bank       $         7,903     38.14% = $           829     = 4.0% = $         1,243      = 6.0%
   Tier I Capital (to
      Average Assets)
        Consolidated  $        12,087     27.72%   $         1,744     = 4.0%   $      N/A
        Centralia
           Savings
           Bank       $         7,903     19.67% = $         1,607     = 4.0% = $         2,009      = 5.0%

</TABLE>
In order to grant  priority to eligible  account  holders in the event of future
liquidation,  the Bank,  at the time of  conversion,  established  a liquidation
account in an amount equal to regulatory  capital as of September 30, 1995. This
amount  was  $5,575,000.  In the  event of a  future  liquidation  of the  Bank,
eligible  account holders who continue to maintain their deposit  accounts shall
be entitled to receive a distribution  from the liquidation  account.  The total
amount of the  liquidation  account  will be  decreased  as the  balance  of the
eligible account holders are reduced  subsequent to the conversion,  based on an
annual  determination  of such balances.  The Bank may not declare or pay a cash
dividend  to the  Company on, or  repurchase  any of, its  capital  stock if the
effect  thereof  would  cause the net worth of the Bank to be reduced  below the
amount required for the liquidation account.

The Illinois Savings Bank Act (ISBA) capital  distribution  regulations restrict
the Bank's cash  dividend  payments  or other  capital  distributions.  The ISBA
regulations generally provide that an institution can make capital distributions
during a  calendar  year up to 50% of its net  income to date  during the fiscal
year. Any  additional  capital  distributions  would require prior notice to the
Commissioner. The Company is not subject to these regulatory restrictions on the
payment of dividends to its stockholders, however, the ability of the Company to
pay future dividends will depend on dividends from the Bank.
<PAGE>


Note 11.  Officer, Director and Employee Benefit Plans

Employee  Stock  Ownership  Plan In  connection  with the  conversion,  the Bank
formed, for eligible employees,  an employee stock ownership plan ("ESOP").  The
ESOP obtained a term loan from the Company and purchased  82,800 shares of $0.01
par value common stock at the subscription price of $8 per share.  Employees who
are 21 or older who have  completed  at least 1,000 hours of service in a twelve
month period are eligible to  participate.  A  participant  is 100% vested after
five years of credited service.

The Bank makes  contributions  to the ESOP equal to the ESOP's debt service less
dividends  received by the ESOP.  Dividends  received by the ESOP on unallocated
shares are used to pay debt service.  The ESOP shares were pledged as collateral
for its debt.  As the debt is repaid,  shares are released from  collateral  and
allocated to active employees,  based on the ratio of debt service paid to total
original  principal  plus the interest to be paid. As shares are committed to be
released from  collateral,  the Bank reports  compensation  expense equal to the
current  market  price of the  shares,  and the shares  become  outstanding  for
earnings-per-share  calculation.  ESOP compensation expense was $92 for the year
ended September 30, 1996.

The  following  table  reflects the shares held by the plan as of September  30,
1996:

Shares allocated to participants ....................................      4,487
Unallocated shares (Fair value at September 30, 1996 $743,974) ......     78,313
                                                                          ------

              Total .................................................     82,800
                                                                          ------

Shares committed to be released .....................................      5,611
                                                                          ======

Since the ESOP borrowed from the Company to purchase the shares of common stock,
the loan obligation is considered  unearned employee stock ownership plan shares
and is reflected as a reduction of stockholders' equity.

The Board of  Directors of the Company may direct  payment of cash  dividends be
paid in cash to the  participants or to be credited to participant  accounts and
invested.

Profit  Sharing  Plan  The  bank  has  a  noncontributory  defined  contribution
profit-sharing  plan for all  employees who have attained age 21 and one year of
service. Nondeductible voluntary contributions are permitted, but none have been
made to date.  Annually,  the Board of Directors  determined the contribution to
the plan which is  allocated to those  employees  who worked more than 500 hours
during  the  plan  year or who are  employed  at the end of the plan  year.  The
allocations  are made without  regard to hours of service  completed  during the
plan  year.  The  allocation  of  the  contribution  is in  proportion  to  each
participant's  compensation  for the plan year. There have been no contributions
for the years ended September 30, 1996 and 1995.

Management  Recognition Plan At the annual stockholder's meeting on May 22, 1996
the  Management  Recognition  Plan  ("MRP")  was  approved.  The MRP  intends to
purchase with funds provided by the Company,  whether in the open market or from
the Holding Company in the form of newly issued shares,  41,400 shares, or 4% of
the  aggregate  number of shares of Common Stock  issued and sold in  connection
with the  Conversion for issuance to officers,  directors,  and employees of the
Holding Company. Directors,  officers, and employees become vested in the shares
of  common  stock  awarded  to them  under  the  MRP at a rate of 20% per  year,
commencing  one year  after the grant  date,  and 20% on each  anniversary  date
thereof for the following  four years.  As of September 30, 1996 there have been
no shares purchased for the management recognition plan.
<PAGE>


Stock Option Plan At the annual stockholder's  meeting on May 22, 1996 the Stock
Option Plan  ("SOP")  was  approved.  The board has  reserved an amount of stock
equal to, 103,500 shares,  or 10% of the common stock sold in the conversion for
issuance under the SOP. The options will be granted by a Committee, comprised of
directors, to key employees and directors based on their services. Upon approval
of the SOP each nonemployee  director was awarded a nondiscretionary  grant of a
ten-year  nonstatutory  option to purchase  5,175  shares of common  stock.  The
exercise  price of options  granted  must be at least  equal to the fair  market
value of the common stock on the date the option is granted. The options granted
under the plan become  exercisable  at a rate of 20 percent per year  commencing
one year after the grant date and 20  percent on each  anniversary  date for the
following four years. As of September 30, 1996, 25,875 options had been granted.

Employment  Agreement The Bank has entered into an employment  agreement with an
executive  officer  which is renewable on November 30 of each year.  The term of
the agreement will be automatically  renewed for another one-year period, unless
the Board of Directors of the Bank gives the  executive  officer  notice 90 days
prior to the anniversary date.


Note 12.  Commitments, Contingencies, and Credit Risk

In the normal  course of  business,  the Company is  involved  in various  legal
proceedings.  In the opinion of  management,  any liability  resulting from such
proceedings would not have a material adverse effect on the Company's  financial
statements.

The Bank is 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.  Those instruments  involve,  to varying degrees,  elements of credit
risk in excess of the amount  recognized in the balance sheet.  The  contractual
amounts of those  instruments  reflect the extent of involvement the Bank has in
particular classes of financial instruments.

The Bank's exposure to credit loss in the event of  nonperformance  by the other
party to the financial  instrument for  commitments to extend credit and standby
letters of credit  written is  represented  by the  contractual  amount of those
instruments.  The Bank uses the same credit  policies in making  commitments and
conditional obligations as it does for on-balance-sheet  instruments.  Financial
instruments  whose contract amounts  represent credit risk at September 30, 1996
follows:

                                 
                                                                      Range of
                                  Variable                            Rates on
                                    Rate     Fixed Rate     Total    Fixed Rate
                                 Commitments Commitments Commitments Commitments
                                 -----------------------------------------------

Commitment to extend credit ....  $    248    $    882 $    1,130    7.5% - 11%

The Company does not engage in the use of interest rate swaps, futures, forwards
or   option   contracts,   or   other   financial   instruments   with   similar
characteristics.

Stock  Repurchase  Program On October 10, 1996, the Company's Board of Directors
approved a stock  repurchase  program whereby the Company would repurchase up to
93,150 shares, or 9%, of its outstanding common stock.
<PAGE>


Note 13.  Concentration of Credit Risk

The Bank generally originates single-family residential loans within its primary
lending area, Marion County. The Bank's underwriting policies require such loans
to be made at 80%  loan-to-value  based upon  appraised  values  unless  private
mortgage  insurance  is  obtained.  These  loans are  secured by the  underlying
properties.


Note 14.  Branch Acquisition

On September 13, 1996, the Company  acquired the Carlyle,  Illinois  branch (the
"branch") of Kankakee  Federal  Savings and Loan.  The branch had  approximately
$8.6 million in deposits at the date of acquisition. In addition to assuming the
deposit  liabilities  attributable to the branch,  the Company  acquired certain
assets associated with the branch, including the building. The operations of the
branch are included in the Company's Consolidated  Statements of Income from the
acquisition  date  and  reflect  the  application  of  the  purchase  method  of
accounting.

Under this method of accounting, the aggregate cost to the Company of the branch
was allocated to the assets acquired and the liabilities assumed, based on their
estimated  fair value as of September  13, 1996.  Goodwill in the amount of $343
and core  deposit  intangible  in the amount of $378 was recorded by the Bank in
connection  with the branch.  The goodwill and core deposit  intangible  will be
amortized  on  a   straight-line   basis  over  fifteen  years  and  ten  years,
respectively.


Note 15.  Savings Association Insurance Fund

Effective  September  30,  1996,  legislation  was  enacted to fund the  Savings
Association  Insurance  Fund (SAIF) by  assessing  SAIF insured  institutions  a
one-time special assessment of 65.7 basis points on March 31, 1995 deposits.

The assessment for the bank is $188 as of September 30, 1996.  Additionally,  as
part  of  the  purchase   agreement  with  Kankakee  Federal  Savings  and  Loan
(Kankakee),  the  Company  agreed  to  reimburse  Kankakee  for the  portion  of
Kankakee's  assessment  which  related to the  Carlyle,  Illinois  branch  which
amounts to $54.

The $242 assessment payable is included in other liabilities in the accompanying
balance  sheet.  The  assessment for the Bank is not deductible for tax purposes
until paid, therefore, deferred tax assets of $94 have been provided for the tax
impact of the assessment.