U.S. Securities and Exchange Commission
                             Washington, D.C. 20549

                                   FORM 10-KSB

                 ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                  For the fiscal year ended September 30, 1996

                         Commission file number 0-26650

                            CSB FINANCIAL GROUP, INC.
                 (Name of small business issuer in its charter)

            Delaware                                            37-1336338
-------------------------------                             ------------------
(State or other jurisdiction of                              (I.R.S. Employer
 incorporation or organization)                             Identification No.)

                   200 South Poplar, Centralia, Illinois 62801
               ---------------------------------------------------
               (Address or principal executive offices) (Zip Code)

        Registrant's telephone number, including area code (618) 532-1918

       Securities registered under Section 12(b) of the Exchange Act: None

                Securities registered under Section 12(g) of the
                                 Exchange Act:

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

          Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the  Exchange  Act during the past 12 months (or for such
shorter period that the  registrant was required to file such reports),  and (2)
has been subject to such filing requirements for the past 90 days. Yes X No

          Check if there is no disclosure  of  delinquent  filers in response to
Item 405 of  Regulation  S-B contained in this form,  and no disclosure  will be
contained,  to the  best of  registrant's  knowledge,  in  definitive  proxy  or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. X

         State issuer's revenues for its most recent fiscal year.  $2,954,000

         The aggregate  market value of the voting stock held by  non-affiliates
of the  Registrant  at November  30, 1996 was  $9,566,870.  For purposes of this
determination only, directors and executive officers of the Registrant have been
presumed to be  affiliates.  The market  value is based upon $10 per share,  the
last sales price as quoted on The Nasdaq Stock Market for November 29, 1996.

         The  Registrant  had  956,687  shares of Common  Stock  outstanding  at
November 29, 1996, not including 78,313 shares held by the Registrant's Employee
Stock   Ownership  Plan  which  have  not  been  committed  to  be  released  to
participants.

Transitional Small Business Disclosure Format:       Yes             No     X

The Exhibit Index is located at page 2.


<PAGE>


                                      INDEX


PART I                                                                      Page

     Item 1. Description of Business

     Item 2. Description of Property

     Item 3. Legal Proceedings

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

PART II

     Item 5. Market for Common Equity and Related Stockholder Matters

     Item 6. Management's Discussion and Analysis or Plan of Operation

     Item 7. Financial Statements

     Item 8. Changes In and  Disagreements  With  Accountants  on Accounting and
             Financial Disclosure

PART III

     Item 9.  Directors,  Executive  Officers,  Promoters  and Control  Persons;
              Compliance with Section 16(a) of the Exchange Act

     Item 10. Executive Compensation

     Item 11. Security Ownership of Certain Beneficial Owners and Management

     Item 12. Certain Relationships and Related Transactions

     Item 13. Exhibits and Reports on Form 8-K

SIGNATURES




<PAGE>


                                     PART I

Item 1.  Description of Business.

         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  stock savings bank.  The Company  purchased  100% of the  outstanding
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 Caps 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  interests   method  records  the  assets  and
liabilities of the merged  entities on an historical cost basis with no goodwill
or other intangible assets being recorded.

         The  Company's  assets at September  30, 1996 consist  primarily of the
investment in the Bank of approximately  $8.6 million and short-term  marketable
securities  of  approximately  $3.3  million.  Currently,  the Company  does not
transact any material business other than through its subsidiary, the Bank.

Business of the Bank

         The Bank is an  Illinois-chartered  stock savings bank regulated by the
Illinois  Commissioner of Savings and Residential Finance (the  "Commissioner").
The Bank was originally  chartered in 1879 as a federally  chartered savings and
loan  association.  The  deposits of the Bank are  insured up to the  applicable
limits by the Federal Deposit Insurance  Corporation  ("FDIC") under the Savings
Association Insurance Fund ("SAIF").  The Bank's primary market area consists of
Marion County, Illinois, which includes the cities of Carlyle and Centralia. The
Bank maintains two offices,  one in Centralia and one in Carlyle, and provides a
full range of retail banking  services at each office,  with emphasis on one- to
four-family  residential  mortgage loans and consumer and commercial  loans.  At
September 30, 1996,  the Bank had total assets,  liabilities  and  stockholders'
equity  of  approximately  $46.6  million,   $38  million,   and  $8.6  million,
respectively.

         The Bank's  principal  business  consists of the  acceptance  of retail
deposits from the residents and small businesses surrounding its offices and the
investment of those  deposits,  together with funds  generated from  operations,
primarily  in one- to  four-family  residential  mortgage  loans.  The Bank also
invests in multifamily  mortgage,  commercial  real estate,  construction,  land
development  and other  loans.  At  September  30,  1996,  the Bank's gross loan
portfolio  totaled $26.9  million of 57.8% of total  assets.  In addition to its
lending  activities,   the  Bank  also  invests  in  U.S.  Treasury  securities,
government agency  securities,  local municipal  securities and  mortgage-backed
securities. At September 30, 1996, the Bank's securities portfolio totaled $12.9
million or 27.7% of total assets with $10.7 million  classified as available for
sale,  $2 million  classified  as held to maturity  and $165,000  classified  as
nonmarketable equity securities.

         The Bank's  revenues  are  derived  principally  from  interest  on its
mortgage,  consumer and commercial loans, and, to a lesser extent,  interest and
dividends on its  securities.  The Bank's primary sources of funds are deposits,
principal and interest payments and principal  prepayments on loans. Through its
wholly-owned  subsidiary,  Centralia  SLA, Inc., the Bank engages in the sale of
insurance services.



<PAGE>


         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  executive  offices of the Company and Savings  Bank are located at
200 South Poplar Street,  Centralia,  Illinois 62801 and the telephone number is
(618) 532-1918.

         Composition  of the  Loan  Portfolio.  The  Bank's  historical  lending
strategy has focused primarily on the origination of residential  mortgage loans
secured by one- to  four-family  homes and consumer loans to customers with whom
the Bank already had a deposit or lending relationship.  Beginning in May, 1994,
the Bank began offering  consumer  loans,  primarily  installment  loans for the
purchase of automobiles,  to the general public. The Bank also originates,  from
time to time,  multi-family  and  commercial  real estate  loans and  commercial
non-real  estate loans,  although such loans  presently  constitute a relatively
small  percentage of the Bank's total loan  portfolio.  The following table sets
forth in greater detail the  composition of the Bank's loan portfolio by type of
loan as of the dates indicated:
<TABLE>
                                                            At September 30,
                                                -----------------------------------------
                                                       1996                  1995
                                                ------------------     ------------------
                                                              (In Thousands)
                                                -----------------------------------------
                                                 Amount     Percent    Amount     Percent
                                                -----------------------------------------
<S>                                             <C>         <C>       <C>         <C>
Mortgage Loans:
     One- to four-family ....................   $17,285      63.69%   $13,086      66.72%
     Multi-family ...........................       527       1.94%       535       2.73%
     Commercial real estate .................       823       3.03%       835       4.26%
     Other loans secured by real estate .....     1,091       4.02%       638       3.25%
                                                -------               -------
          Total mortgage loans ..............    19,726      72.68%    15,094      76.96%
Commercial and Consumer Loans:
     Commercial .............................     1,462       5.39%       618       3.15%
     Consumer ...............................     4,637      17.09%     3,323      16.95%
     Home equity lines of credit ............       998       3.68%        18       0.09%
     Share loans ............................       316       1.16%       559       2.85%
                                                -------               -------
          Total commercial and consumer loans     7,413      27.32%     4,518      23.04%

Total loans .................................    27,139     100.00%    19,612     100.00%
                                                -------               -------
Less:
     Deferred fees ..........................        23                    30
     Unearned income on consumer loans ......        68                   192
     Allowance for loan losses ..............       117                   113
                                                -------               -------
Total loans, net ............................   $26,931               $19,277
                                                =======               =======
</TABLE>
     The Bank had no loans held for sale at  September  30, 1996 or 1995.  As of
September 30, 1996, 45% of the Bank's loans had adjustable interest rates.

         The types of loans that the Bank may  originate  are subject to federal
and state laws and regulations.  Interest rates charged by the Bank are affected
by the  demand  for such loans and the  supply of money  available  for  lending
purposes  and the rates  offered by  competitors.  These  factors  are, in turn,
affected by, among other things,  economic conditions,  monetary policies of the
federal  government,  including the Federal  Reserve Board and  legislative  tax
policies.




<PAGE>


Loan Maturity

         The following table shows the maturity of the Bank's loans at September
30,  1996.  The table  does not  include  the  effect of future  loan  repayment
activity.  While the Bank cannot project future loan  prepayment  activity,  the
Bank anticipates that in periods of stable interest rates,  prepayment  activity
would be lower than  prepayment  activity  experienced  in periods of  declining
interest rates. In general,  the Bank originates  adjustable and fixed-rate one-
to four-family  loans with  maturities from 15 to 30 years,  one-to-four  family
loans with balloon features which mature from 1 to 5 years,  multi-family  loans
with maturities from 1 to 5 years,  adjustable-rate commercial real estate loans
with maturities of 20 to 25 years,  commercial  loans with maturities of 90 days
to one year, and consumer loans with maturities of 1 to 5 years.
<TABLE>

                                                              At September 30, 1996
                                                     ---------------------------------------
                                                     Mortgage   Commercial Consumer   Total
                                                       Loans      Loans     Loans     Loans
                                                     ---------------------------------------
                                                                   (In Thousands)
<S>                                                  <C>         <C>       <C>       <C>
Amounts due:
   One year or less ..............................   $   5,074   $    487  $   504   $ 6,065
                                                     ======================================
   After one year:
      More than one year to five years ...........   $   9,607   $    849  $ 5,222   $15,678
      More than five years to ten years ..........         674        126      225     1,025
      More than ten years ........................       4,371         --       --     4,371
                                                     ---------------------------------------
         Total due after September 30, 1997 ......   $  14,652   $    975  $ 5,447   $21,074
                                                     =======================================

Interest rate terms on amounts due after one year:
      Fixed ......................................   $   6,740   $    975  $ 5,447   $13,162
      Adjustable .................................       7,912         --      --      7,912
</TABLE>

         One- to Four-Family Loans. The primary lending activity of the Bank has
been the extension of first mortgage  residential  loans to enable  borrowers to
purchase  existing  one-  to  four-family  homes  or to  construct  new  one- to
four-family  homes.  At  September  30,  1996 and 1995,  the  Bank's  gross loan
portfolio  consisted  of  approximately  $17.3  million,  or  63.69%,  and $13.1
million,  or  66.72%,  respectively  of  loans  secured  by one- to  four-family
residential real estate. The predominant type of first-mortgage residential loan
currently  offered by the Savings Bank to loan  customers is an adjustable  rate
mortgage  that adjusts on either a one-year or  three-year  basis with a 30 year
amortization.

         Balloon loans were the predominant  type of residential  first mortgage
loan  offered by the  Savings  Bank  prior to  September,  1994.  Such loans are
amortized  over a maximum  period  of 30 years for  purposes  of  computing  the
borrower's  monthly mortgage  payments.  Under the terms of its standard balloon
loan, the Savings Bank is generally obligated, at the option of the borrower, to
refinance the loan at the time the balloon  payment  becomes due,  provided that
the loan is current at such time. The initial interest rate on each balloon loan
offered by the Savings Bank is fixed at the rate prevailing at the time that the
loan is originated.  Most of the balloon loans in the Savings  Bank's  portfolio
further provide that the interest rate will not increase by more than one to two
percentage  points  at the end of each  balloon  period  and  that  the  maximum
interest  rate will not exceed the  initial  rate by more than three  percentage
points  either over the life of the  mortgage or for as long as the home that is
being financed remains owner-occupied.



<PAGE>


         The Bank  has  attempted  to shift  the  balance  between  its ARMs and
balloon loans by ceasing to offer balloon loans to new customers and encouraging
the holders of existing balloon loans to replace such loans, upon maturity, with
ARMs.  Management  believes  that the  higher  interest  rate  ceilings  and the
interest rate floor  included in its ARMS will result in less interest rate risk
to the Bank than the interest rate risk posed by its balloon loans.

         The Bank's one- to four-family residential loan portfolio also contains
a limited  number of fixed-rate  loans.  The Bank has  extended,  and expects to
continue to extend, from time to time,  fixed-rate loans to customers who prefer
a fixed rate of interest.  The Bank will not originate a fixed-rate  loan unless
such loan  complies  with the  underwriting  standards  of the Federal Home Loan
Mortgage Corporation  ("FHLMC") and the FNMA. This will give the Bank the option
of either holding such  fixed-rate  loans in its portfolio or selling such loans
in the secondary mortgage market.

         The Bank's  reliance on ARMs and balloon loans,  rather than fixed-rate
mortgage loans, makes the Bank's first-mortgage  residential loan portfolio more
interest-rate  sensitive.  However,  since  the  interest  earned  on ARMs or on
balloon loans which are refinanced on a one-,  three- or five-year  cycle varies
with prevailing  interest rates, such loans do not offer the Bank as predictable
a cash flow as do longer-term,  fixed-rate  loans.  ARMs and balloon loans which
are subject to refinancing on a one-,  three- or five-year  cycle may also carry
increased credit risk as the result of the imposition of higher monthly payments
upon borrowers during periods of rising interest rates. During such periods, the
risk of default  on such loans may  increase,  due to the upward  adjustment  of
interest  costs to the borrower.  Management has attempted to minimize such risk
by qualifying  borrowers at the maximum rate of interest payable under the terms
of the ARM or the refinanced balloon loan.

         The loan-to-value ratio of most single-family first-mortgage loans made
by the Bank is 80%. If the  loan-to-value  ratio  exceeds 85%, the Bank requires
private  mortgage  insurance  to cover the excess over 85%. If private  mortgage
insurance  is  obtained,  the  mortgage  is  limited to 95% of the lesser of the
appraised value or purchase price. The maximum loan-to-value ratio on a loan for
the construction of a new single-family residential home is 80%, and the maximum
loan-to-value ratio on loans on two- to four-family dwellings is 75%.

         The Bank  requires  title  insurance,  or an  attorney's  opinion as to
title,  and fire and casualty  insurance  coverage of the property  securing any
mortgage loan originated or purchased by the Bank. All of the Bank's real estate
loans contain  due-on-sale  clauses  which provide that if the mortgagor  sells,
conveys or alienates the property underlying the mortgage note, the Bank has the
right at its option to declare  the note  immediately  due and  payable  without
notice.

         Multi-family  Residential  Lending. At September 30, 1996 and 1995, the
Bank's gross loan portfolio consisted of approximately  $527,000,  or 1.94%, and
$535,000 or 2.73%,  respectively  of loans secured by  multi-family  residential
real estate.  Multi-family real estate loans are generally limited to 70% of the
appraised value of the property or the selling price,  whichever is less.  Loans
secured by  multi-family  real estate are generally  larger and, like commercial
real estate  loans,  involve a greater  degree of risk than one- to  four-family
residential loans.






<PAGE>


         Commercial Real Estate Loans. The Bank has historically made commercial
real estate loans on a limited basis. At September 30, 1996 and 1995, the Bank's
commercial  real  estate loan  portfolio  amounted to  $823,000,  or 3.03%,  and
$835,000, or 4.26%,  respectively of the Bank's gross loan portfolio. The Bank's
practice has been to  underwrite  such loans based on its analysis of the amount
of cash flow  generated by the business in which the real estate is used and the
resulting ability of the borrower to meet its payment obligations. Although such
loans are secured by a first  mortgage on the underlying  property,  the Savings
Bank also  generally  seeks to obtain a  personal  guarantee  of the loan by the
owner of the business in which the property is used.

         Commercial  Loans.  As of September 30, 1996 and 1995, the Bank's gross
loan portfolio consisted of approximately  $1,462,000 or 5.39% and $618,000,  or
3.15%,   respectively  of  commercial  loans  secured  by  accounts  receivable,
inventory, farm land or outstanding stock issued by a corporation.  The Bank has
also made, from time to time,  unsecured  personal loans to the sole proprietors
of small  businesses  on the same terms and  conditions  on which it makes other
unsecured personal loans.

         Consumer  Loans.  The Bank  originates  a variety  of  consumer  loans,
generally consisting of installment loans for the purchase of motor vehicles and
boats,  loans to purchase  household goods, loans secured by savings accounts at
the Bank and  unsecured  personal  loans.  At September  30, 1996 and 1995,  the
Bank's portfolio of consumer loans totaled approximately  $5,951,000, or 21.93%,
and $3,900,000, or 19.89%,  respectively of the Bank's gross loan portfolio. The
Bank may make a loan to finance the  purchase of a new and  previously  untitled
motor  vehicle or boat in an amount  equal to the lesser of 5% over the  factory
invoice price or 90% of the sticker  price of the motor  vehicle or boat.  Loans
for the  purchase  of used  motor  vehicles  are  limited  to the  amount of the
wholesale  price  listed for the  vehicle in the  National  Automobile  Dealers'
Association used car guide. Any loan for the purchase of a motor vehicle or boat
is secured by the  purchased  vehicle or boat and is written to amortize  over a
maximum period of between two and five years,  depending on the age of the motor
vehicle or boat  offered as  collateral.  Loans to finance  the  purchase of new
household  goods  may be made in an amount  equal to 100% of the sales  price of
such goods. Such loans are secured by the goods purchase. Loans for the purchase
of household  goods may be amortized for a maximum  period of four years.  Loans
secured by a customer's  savings account with the Savings Bank are limited to an
amount  equal to 90% of the amount of the  deposit.  A loan that is secured by a
deposit  with a specific  maturity  date is  written  with a term  matching  the
maturity date of the deposit.  Unsecured  personal  loans are limited to $15,000
per borrower and to a term of three to five years. As a practical  matter,  most
such loans do not exceed $10,000 and are amortized over a period of three years.

         Loan  Processing.  Upon receipt of a completed loan  application from a
prospective  borrower,  the Savings Bank  obtains a credit  report from a credit
reporting agency and, depending on the type of loan, verifies employment, income
and other  financial  information  received  from the  prospective  borrower and
requests additional financial information, if necessary. If a loan in the amount
of $50,000 or more is secured by real estate,  the Bank requires an  independent
appraisal of the real estate.  Real estate securing a loan of $50,000 or less is
appraised only by the Bank's internal appraisal committee. Once such information
and appraisals are complete,  the  application is submitted for  underwriting by
designated   staff.   The   application,   together   with   the   underwriter's
recommendations, is then forwarded for review and action to the President of the
Bank, the Loan Committee of the Board of Directors, or the Board of Directors as
a whole, depending on the size and nature of the loan.

         The  Board  of  Directors  of the Bank has  established  the  following
guidelines for loan approval authority for all loans originated by the Bank: (i)
any lending officer of the Bank may approve loans up to $75,000, (ii) the Bank's
President  may approve  loans up to  $125,000,  (iii) the Loan  Committee of the
Board of  Directors  may  approve  loans up to  $300,000,  and (iv) the Board of
Directors may approve any loan in excess of $300,000 up to the Bank's applicable
legal lending limit.





<PAGE>


         Loan Purchases and Sales.  The Bank has  occasionally  purchased  loans
originated  by other  financial  institutions,  secured  by one- to  four-family
residential  properties or commercial real estate located outside of its primary
market area. At September 30, 1996 and 1995,  the total balance  outstanding  on
first  mortgage  loans   purchased  by  the  Bank  was  $653,000  and  $703,000,
respectively.  At September  30, 1996 and 1995,  the Bank did not have any loans
held as available for sale. Historically, the Bank has not sold any of its loans
into the secondary market.

Delinquencies

         The Bank's  collection  procedures  with  respect to  delinquent  loans
include  written  notice of  delinquency  contact by letter or telephone by Bank
personnel.  Most loan delinquencies are cured within 90 days and no legal action
is taken.  With respect to mortgage loans, if the delinquency  exceeds 180 days,
and in the case of consumer loans, if the delinquency  exceeds 90 days, the Bank
institutes measure to enforce its remedies resulting from the default, including
the commencement of foreclosure action of the repossession of collateral.

         At September 30, 1996,  delinquencies in the Bank's loan portfolio were
as follows:

                                        At September 30, 1996
                             ---------------------------------------------------
                                                 90 Days             Total
                             30-89 Days(1)      or More (1)     Delinquent Loans
                             ---------------- ----------------  ----------------
                             Number Principal Number Principal  Number Principal
                              of    Balance   of     Balance    of     Balance
                             Loans  of Loans  Loans  of Loans   Loans  Of Loans
                             ---------------------------------------------------
                                         (Dollars in Thousands)

Real estate loans .......     11     $363      5      $115       16      $478
Commercial loans ........     --       --      1         1        1         1
Consumer loans ..........     18      119      6        27       24       146
                             ------------------------------------------------

     Total ..............     29     $482     12      $143       41      $625
                             ================================================

Delinquent loans to
   to gross loans .......       1.78%           0.53%             2.31%
                                =====           =====             =====






<PAGE>


         At September 30, 1995,  delinquencies in the Bank's loan portfolio were
as follows:

                                           At September 30, 1995
                             ---------------------------------------------------
                                                   90 Days           Total
                             30-89 Days (1)      Or More (1)    Delinquent Loans
                             ---------------- ----------------  ----------------
                             Number Principal Number Principal  Number Principal
                               of    Balance   of     Balance    of     Balance
                              Loans of Loans  Loans  of Loans   Loans   of Loans
                             ---------------------------------------------------
                                          (Dollars in Thousands)

Real estate loans ...........    3      $44     7      $213       10        $257
Commercial loans ............   --       --     1        34        1          34
Consumer loans ..............    1        6     6       114        7         120
                                ------------------------------------------------

     Total ..................    4      $50    14      $361       18        $411
                                ================================================

Delinquent loans to
   to gross loans ...........       0.26%         1.84%               2.10%
                                    =====         =====               =====

(1)      The Bank  discontinues  the  accrual  of  interest  on  loans  when the
         borrower is delinquent as to a contractually  due principal or interest
         payment and the Bank's management deems collection to be unlikely.  The
         number of loans and principal balance includes nonaccrual loans.

Nonperforming Assets

         The Bank places  loans that are 90 days or more past due on  nonaccrual
status  unless such loans are  adequately  collateralized  and in the process of
collection.  Accrual of interest on a  nonaccrual  loan is resumed only when all
contractually past due payments are brought current and management believes that
the  outstanding  loan  principal and  contractually  due interest are no longer
doubtful of collection.

         Foreclosed  properties  are  recorded  at the fair value at the date of
foreclosure.  Any  subsequent  reduction  in  the  fair  value  of a  foreclosed
property,  along with expenses to maintain or dispose of a foreclosed  property,
is charged against current earnings. As of September 30, 1996 and 1995, the Bank
had no foreclosed properties or "real estate owned."





<PAGE>


         The following table sets forth  information  with respect to the Bank's
nonperforming assets for the periods indicated.

                                                                        At
                                                                   September 30,
                                                                  --------------
                                                                  1996      1995
                                                                  --------------
                                                                  (In Thousands)
Loans accounted for on a nonaccrual basis
     One- to four-family loans ..............................     $189      $198
     Commercial loans .......................................        1        34
     Consumer loans .........................................       45       103
                                                                  --------------
          Total nonaccrual loans ............................     $235      $335
                                                                  --------------

Accruing loans which are contractually past due 90 days or more:
     One- to four-family loans ..............................       15        15
     Consumer loans .........................................        2        11
                                                                   -------------
           Total 90 days past due and accruing interest .....       17        26
                                                                   -------------

          Total nonaccrual and 90 days past due loans .......      252       361

Real estate owned                                                   --        --
                                                                   -------------

          Total nonperforming assets ........................      $252     $361
                                                                   =============

          Total nonperforming assets to total assets ........      0.50%   0.81%
                                                                   =============

         Classified  Assets.  FDIC policies require that each insured depository
institution  review and classify its assets on a regular basis. In addition,  in
connection with examinations of insured institutions,  regulatory examiners have
the authority to identify problem assets and, if appropriate, require them to be
classified. The Bank reviews and classifies its assets at least quarterly. There
are three  classifications for problem assets:  substandard,  doubtful and loss.
Substandard   assets  must  have  one  or  more  defined   weaknesses   and  are
characterized  by the distinct  possibility  that the insured  institution  will
sustain some loss if the  deficiencies  are not corrected.  Doubtful assets have
the weaknesses of substandard  assets,  with the additional  characteristic that
the weaknesses  make collection or liquidation in full on the basis of currently
existing  facts,  conditions  and  values,  questionable,  and  there  is a high
possibility of loss. An asset classified as loss is considered uncollectible and
of such little  value that  continued  treatment of the asset as an asset on the
books of the institution is not warranted.

         An  insured  institution  is  required  to  establish  prudent  general
allowances for the loan losses with respect to assets  classified as substandard
or doubtful.  The institution is required either to charge off assets classified
as loss or to  establish  a specific  allowance  for 100% of the  portion of the
asset classified as loss.





<PAGE>


         Allowance for Loan Losses. The allowance for loan losses is established
through a provision  for loan losses  based on  management's  evaluation  of the
risks inherent in its loan portfolio and the general economy.  The allowance for
loan losses is maintained at an amount  management  considers  adequate to cover
estimated  losses in loans  receivable  which are deemed  probable and estimable
based on  information  available to  management at such time.  While  management
believes  the Bank's  allowance  for loan losses is  sufficient  to cover losses
inherent in its loan portfolio at this time, no assurances can be given that the
Bank's level of  allowance  for loan losses will be  sufficient  to cover future
loan losses incurred by the Bank or that future adjustments to the allowance for
loan  losses  will not be  necessary  if economic  and other  conditions  differ
substantially  from the  economic and other  conditions  used by  management  to
determine the current  level of the allowance for loan losses.  The allowance is
based  upon a number  of  factors,  including  asset  classifications,  economic
trends, industry experience and trends, industry and geographic  concentrations,
estimated  collateral  values,  management's  assessments  of  the  credit  risk
inherent  in the  portfolio,  historical  loan loss  experience,  and the Bank's
underwriting  policies.  As of September 30, 1996 and 1995, the Bank's allowance
for loan losses was 0.43% and 0.58%, respectively, of total loans. The Bank will
continue  to monitor  and modify its  allowance  for loan  losses as  conditions
dictate.  Various regulatory agencies,  as an integral part of their examination
process,  periodically review the Bank's valuation allowance. These agencies may
require the Bank to establish  additional valuation  allowances,  based on their
judgments of the information available at the time of the examination.

         It is the  policy of the Bank to charge off  customer  loans when it is
determined that they are no longer collectible.  The policy for loans secured by
real estate,  which comprise the bulk of the Bank's  portfolio,  is to establish
loss reserves in accordance with the Bank's loan classification  process,  based
on  generally  accepted  accounting  practices.  It is the policy of the Bank to
obtain an appraisal on all real estate acquired through  foreclosure at the time
of foreclosure.

         The  following  table sets forth  activity in the Bank's  allowance for
loan losses for the periods set forth in the table.


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

Balance 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 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>


         The following  table sets forth the Bank's  allocation of the allowance
for loan losses by category  and the percent of the  allocated  allowance to the
total  allowance for each specific loan  category.  The portion of the allowance
for loan losses  allocated to each loan  category  does not  represent the total
available for future  losses which may occur within the loan category  since the
total  allowance  for loan  losses is a  valuation  reserve to the  entire  loan
portfolio.
<TABLE>
                                                                               At September 30,
                                                ----------------------------------------------------------------------------------
                                                              1996                                       1995
                                                -------------------------------------    -----------------------------------------
                                                         As % Of           As % of                      As % of         As % of
                                                          Gross            Loans in                      Gross          Loans in
                                                         Loans in         Category to                   Loans in       Category to
                                                Amount   Category         Gross Loans    Amount         Category       Gross Loans
                                                ----------------------------------------------------------------------------------
<S>                                             <C>      <C>              <C>            <C>            <C>            <C>
                                                                           (Dollars in Thousands)
Mortgage Loans:
   One- to four-family ..................        $ 10             0.05%      63.69%       $ 25             0.19%          66.72%
   Multi-family .........................          --               --        1.94%         --               --            2.73%
   Commercial real estate ...............          --               --        3.03%         --               --            4.26%
   Other loans ..........................          --
      secured by
      real estate .......................          --               --        4.02%         --               --            3.25%
                                                 -------------------------------------------------------------------------------
         Total morgage loans ............          10             0.05%      72.68%         25             0.17%          76.96%
                                                 -------------------------------------------------------------------------------
                                                
Commercial and
   Consumer Loans:
      Commercial ........................          26             1.78%       5.39%         22             3.56%           3.15%
      Consumer ..........................          41             0.88%      17.09%         35             1.05%          16.95%
      Home equity lines of credit .......          --               --        3.68%         --               --            0.09%
      Other consumer loans ..............          --               --        1.16%         --               --            2.85%
                                                 -------------------------------------------------------------------------------
             Total commercial and
               consumer loans ...........           67            0.90%      27.32%         57             1.26%          23.04%
                                                 -------------------------------------------------------------------------------

Total Allocated .........................           77            0.28%     100.00%         82             0.42%         100.00%
                                                                            =======                                      =======
Unallocated .............................           40            0.15%                     31             0.16%
                                                 ----------------------                   ----------------------
Total allowance for loan losses .........         $117            0.43%                   $113             0.58%
                                                 ======================                   ======================

</TABLE>
<PAGE>


Investment Activities

         The investment  policies of the Company and the Bank, as established by
the respective Board of Directors,  attempts to provide and maintain  liquidity,
generate a favorable return on investments without incurring undue interest rate
and credit risk and complement the Company's lending activities.  The investment
policies  generally  limit  investments to government and federal  agency-backed
securities and other non-government  guaranteed securities,  including corporate
debt  obligations,  that are investment  grade. The investment  policies provide
authority to invest in U.S. Treasury and U.S. Government guaranteed  securities,
securities  backed  by  federal  agencies  such  as  Federal  National  Mortgage
Association  ("FNMA"),  Federal Home Loan Mortgage Corporation ("FHLMC") and the
Federal Farm Credit Bureau  ("FFCB"),  mortgage-backed  securities  with maximum
maturities  of  20  years  which  are  backed  by  federal  agency   securities,
obligations  of state and  political  subdivisions  with at least an "A" rating,
certificates  of deposit and  securities  issued by mutual funds which invest in
securities  consistent with the Company's or Bank's allocable  investments.  The
investment  policies  provide that the  President is  authorized  to execute all
transactions  within  specified  limits  which  are  reviewed  by the  Board  of
Directors on a monthly  basis.  From time to time,  the Board of  Directors  may
authorize the President to exceed the policy  limitations.  The Bank's  Interest
Rate Risk Committee  monitors  compliance with the Bank's  investment policy and
generally meets on a quarterly basis.

At September 30, 1996,  the Company had $16.2  million in investment  securities
consisting of $1.8 million invested in mortgage-backed securities, $13.4 million
invested in U.S.  Government and agency,  $752,000  invested in local  municipal
securities,  and $165,000 invested in FHLB stock. Investments in mortgage-backed
securities  involve a risk  that  actual  prepayments  will  exceed  prepayments
estimated  over the  life of the  security  which  may  result  in a loss of any
premium  paid  for  such  instruments  thereby  reducing  the net  yield on such
securities.  In addition,  if interest  rates  increase the market value of such
securities may be adversely  affected,  which, in turn,  would adversely  affect
stockholders'  equity to the extent such  securities  are held as available  for
sale.

         Mortgage-backed securities represent a participation interest in a pool
of single-family or multi-family mortgages,  the principal and interest payments
on  which  are  passed  from the  mortgage  originators  through  intermediaries
(generally federal government-sponsored enterprises) that pool and repackage the
participation  interest in the form of securities to investors such as the Bank.
Such federal  government-sponsored  enterprises,  which guarantee the payment of
principal  and  interest  to  investors,  include  the  FHLMC,  FNMA  and  GNMA.
Mortgage-backed  securities  generally increase the quality of the Bank's assets
by virtue of the  guarantees  that back  them.  They are also more  liquid  than
individual  mortgage loans and may be used to collateralize  borrowings or other
obligations of the Bank. The Bank has no investments in collateralized  mortgage
obligations   or  real   estate   investment   conduits.   The  Bank  holds  all
mortgage-backed securities as available for sale.





<PAGE>


         The  following  tables  set forth  certain  information  regarding  the
amortized  cost and  market  values  of the  Company's  securities  at the dates
indicated.
<TABLE>
                                                            At September 30,
                                                  -------------------------------------
                                                         1996               1995
                                                  -------------------------------------
                                                  Amortized  Fair    Amortized   Fair
                                                    Cost     Value     Cost      Value
                                                  -------------------------------------
<S>                                               <C>       <C>        <C>      <C>
Available for Sale                                            (In Thousands)

U.S. Government and agency securities ..........   $13,477  $13,441   $ 2,000   $ 2,026
Obligations of states and political subdivisions       606      603        --        --
                                                   ------------------------------------

      Total Available for Sale .................   $14,083  $14,044   $ 2,000   $ 2,026
                                                   ====================================
</TABLE>
<TABLE>
                                                          At September 30,
                                                 ------------------------------------
                                                        1996               1995
                                                 ----------------  ------------------
                                                 Amortized  Fair   Amortized   Fair
                                                  Cost      Value     Cost     Value
                                                 ------------------------------------
<S>                                              <C>       <C>       <C>      <C>

Held to Maturity                                            (In Thousands)

U.S. Government and agency securities ..........   $    -  $     -   $8,479   $ 8,455
Obligations of states and political subdivisions      149      143      165       169
Mortgage backed securities .....................    1,838    1,948    2,335     2,517
                                                   ----------------------------------
      Total Held to Maturity ...................   $1,987   $2,091  $10,979   $11,141
                                                   ==================================

</TABLE>
<PAGE>




     The following table sets forth  information  concerning the carrying value,
weighted average yields, and maturities of the Company's  investment  securities
at September 30, 1996.
<TABLE>

                                          Less             One
                                      Than One Year    To Five Years    Five to Ten Years      Over Ten Years         Total
                                     ---------------  ----------------  --------------------  ----------------   -----------------
                                             Weighted          Weighted              Weighted         Weighted             Weighted
                                      Fair   Average   Fair     Average    Fair       Average   Fair   Average     Fair     Average
                                      Value   Yield    Value     Yield     Value       Yield    Value   Yield      Value     Yield
                                     ----------------------------------------------------------------------------------------------
Available for Sale                                           (Dollars in Thousands)
<S>                                  <C>     <C>        <C>    <C>         <C>      <C>        <C>    <C>         <C>      <C>    

U.S. Government and agency
  securities .....................   $ 6,020    6.06%  $6,421      5.62%   $   --        -     $1,000    7.37%     $13,441    5.95%
Obligations of states and
   political subdivisions (2) ....      --       --        --        --       506      4.91%       97    4.70%         603    4.88%
                                     ----------------------------------------------------------------------------------------------
Total Available for Sale .........   $ 6,020    6.06%  $6,421       5.62%  $  506      4.91%   $1,097     7.13%    $14,044    5.90%
                                     ==============================================================================================
</TABLE>
<TABLE>
                                      Less
                                  Than One Year      One to Five Years    Five to Ten Years     Over Ten Years          Total
                                 ------------------  -------------------  ------------------  ------------------  ------------------
                                           Weighted             Weighted            Weighted            Weighted            Weighted
                                 Amortized  Average  Amortized   Average  Amortized  Average  Amortized  Average  Amortized  Average
                                   Cost      Yield      Cost      Yield      Cost     Yield      Cost     Yield      Cost     Yield
                                 ---------------------------------------------------------------------------------------------------
<S>                              <C>         <C>     <C>         <C>      <C>        <C>      <C>        <C>      <C>        <C>

Held to Maturity (1)

Obligations of states and
   political subdivisions (2)    $     -       -       $    -         -    $   41     5.30%    $  108     5.90%    $   149    5.73%
                                 --------------------------------------------------------------------------------------------------

Total Held to Maturity           $     -       -       $    -         -    $   41     5.30%    $  108     5.90%    $   149    5.73%
                                 ==================================================================================================
<FN>
(1)  Excludes mortgage-backed securities.

(2)  These  investments  yield  lower  interest  rates as they are  exempt  from
     federal taxes.
</FN>
</TABLE>
<PAGE>




Deposit Activities and Other Sources of Funds

         General.  The Company's primary sources of funds for use in lending and
investing and for other  general  purposes are deposits at the Bank and proceeds
from principal and interest  payments on loans,  mortgage-backed  securities and
investment  securities.  Contractual  loan  repayments  are a relatively  stable
source of funds,  while deposit  inflows and outflows and loan  prepayments  are
significantly  influenced by general interest rates and money market conditions.
Borrowings may be used on a short-term basis to compensate for reductions in the
availability of funds from other sources.

         Deposit Accounts.  The Bank attracts deposits within its primary market
area by offering a variety of deposit accounts,  including  noninterest  bearing
checking accounts, negotiable order of withdrawal ("NOW") accounts, money-market
accounts,  passbook savings  accounts and  certificates of deposit.  The flow of
deposits is influenced significantly by general economic conditions,  changes in
money  market  and  prevailing  interest  rates,  and  competition.   Management
generally  reviews  on a weekly  basis the  interest  rates set for its  deposit
accounts.   The  Bank  also  relies  on  customer   service  and   long-standing
relationships with customers to attract and retain deposits.

         The following  table sets forth the  distribution of the Bank's deposit
accounts at the dates  indicated and the weighted  average nominal rates on each
category of deposits presented.
<TABLE>
                                                          At September 30,
                                ----------------------------------------------------------------
                                            1996                              1995
                                ------------------------------      ----------------------------
                                         Percent of   Weighted              Percent of  Weighted
                                           Average    Average                Average    Average
                                Average     Total     Nominal       Average   Total     Nominal
                                Balance   Deposits     Rate         Balance  Deposits    Rate
                                ----------------------------------------------------------------
                                                     (Dollars in Thousands)
<S>                             <C>       <C>         <C>           <C>      <C>        <C>
Transaction accounts:
   Noninterest bearing          $    19     0.06%        -          $    15     0.05%        -
   Interest-bearing (NOW)         4,393    14.83%      1.73%          3,720    13.06%      1.77%
   Money market                   1,918     6.48%      3.34%          2,698     9.48%      3.11%
   Passbook                       2,952     9.97%      3.08%          3,335    11.71%      2.49%
   Certificates of deposit       20,333    68.66%      5.26%         18,701    65.70%      5.16%
                                ----------------------------------------------------------------
      Total deposit accounts    $29,615   100.00%      4.40%        $28,469   100.00%      4.21%
                                ================================================================
</TABLE>

         The  following   table   indicates  the  amount  of  the  Bank's  jumbo
certificates  of deposit  and other time  deposits  of  $100,000 or more by time
remaining until maturity as of September 30, 1996. Jumbo certificates of deposit
require  minimum  deposits  of  $100,000  and rates  paid on such  accounts  are
negotiable.

                                     Certificates
           Maturity Period                of
                                       Deposits
-------------------------------------------------
                                   (In Thousands)

Less than three months                 $   491
Three through six months                   731
Six through twelve months                    -
Over twelve months                         667
                                       -------
     Total                             $ 1,889
                                       =======




<PAGE>


         Borrowings.  The Bank may rely on advances  from the FHLB of Chicago in
the event of a reduction in available  funds from other  sources.  The Bank is a
member  of the FHLB of  Chicago,  which  functions  as a  central  reserve  bank
providing  credit for savings and loan  associations  and other member financial
institutions. As a member, the Bank is required to own capital stock in the FHLB
of Chicago and is authorized to apply for advances on the security of such stock
and certain of its mortgage-based loans and other assets,  provided that certain
standards relating to creditworthiness have been met. The Bank has borrowed from
the FHLB of Chicago,  from time to time, on an overnight basis. At September 30,
1996 and 1995, the Bank had no outstanding borrowings from the FHLB.

Subsidiary Activities

         The Bank has one wholly-owned  service  corporation,  Centralia SLA, an
Illinois  corporation.  Centralia  SLA is  engaged  in the  business  of selling
mortgage life, mortgage disability,  credit life and credit disability insurance
to mortgage and consumer  loan  customers of the Bank  interested in buying such
insurance.  As of September  30, 1996,  the Bank's  investment  in Centralia SLA
amounted to approximately $13,000 or 0.03% of the Bank's total assets. Insurance
commissions  accounted for $9,000 or  approximately  2.0% of the Bank's  pre-tax
income during the year.  Management continues to place less emphasis on the sale
of insurance  and  anticipates  that the amount of such income will  continue to
decline over the next few years.

Competition

         The Bank's  deposit and lending base is presently  concentrated  in the
city of Centralia and the surrounding area, including Central City to the north,
Wamac to the  South,  Salem  to the east and  Hoffman  to the  west.  This  area
includes portions of the Illinois counties of Washington,  Jefferson, Marion and
Clinton,  which are  primarily  agricultural.  Population  growth in those  four
counties has remained relatively flat in recent years. Management believes that,
in recent  years,  total  deposits  have grown only  modestly and there has been
relatively little new construction or real estate development in the four-county
area.  Management further believes that, as a result, any growth in the mortgage
lending business within the area has also been modest.

         The  Bank has five  principal  competitors  for  deposits  and  lending
business  within the city of  Centralia.  All five  competitors  are branches or
subsidiaries of commercial banks. Of these five competitors,  two are affiliated
with multi-bank  holding  companies based in St. Louis, one is affiliated with a
regional  bank  based  in St.  Louis,  and the  remaining  two are  branches  of
independent,  community  banks which have their main offices in the  neighboring
towns of Hoffman and  Irvington.  Each of the three St.  Louis-based  banks with
affiliates in Centralia have  established  those  branches  during the last five
years through the  acquisition  of formerly  independent  community  banks.  The
multi-bank  holding  companies  and  regional  bank have  substantially  greater
financial  resources  and currently  offer a larger array of financial  services
than the Bank.  Each of the  independent  banks also has a slightly larger asset
base than the Bank.

         Given the relative lack of growth in its market area and the number and
greater resources of the banks with which it competes, the Bank has experienced,
and expects to continue to experience, strong competition in attracting deposits
and in its mortgage and consumer loan business.  In order to retain existing and
attract new deposits, the Bank has historically paid deposit rates at the higher
end  of the  range  offered  by its  competitors.  All of the  Bank's  principal
competitors in Centralia are,  moreover,  branches or subsidiaries of commercial
banks with deposits insured under the BIF. Unlike the Bank, such competitors are
able to take advantage of the reduction in the insurance  premiums to be paid on
BIF-insured deposits.

         Management also believes that, in order to compete effectively for both
deposits  and lending  business,  the Bank must  enhance the retail  services it
offers, so that its range of services is more comparable to the range offered by
its larger competitors. In providing such services,  management hopes to be able
to  capitalize  on the Bank's  ability,  as a community  bank,  to identify  and
respond more quickly to local customer  needs.  The Bank has expanded the retail
services it offers to customers  to include,  for  example,  travelers'  checks,
money orders, debit cards and ATM services.


<PAGE>


Personnel

         As of September 30, 1996, the Company had a total of fourteen full-time
employees  and two  part-time  employees,  all of whom were employed at the Bank
level.  The  Company's  employees are not  represented  by a union or collective
bargaining  group. The Company  considers its relationship with its employees to
be satisfactory.

Regulation

         General

         Financial  institutions  and their holding  companies  are  extensively
regulated  under  federal  and  state  law  by  various  regulatory  authorities
including  the Board of Governors of the Federal  Reserve  System (the  "Federal
Reserve Board"), the FDIC and the Commissioner. The financial performance of the
Company and the Savings  Bank may be affected by such  regulation,  although the
extent to which they may be affected  cannot be predicted  with a high degree of
certainty.

         Federal  and  state  laws  and  regulations   generally  applicable  to
financial institutions and their holding companies regulate, among other things,
the scope of business,  investments,  reserves against deposits,  capital levels
relative  to  operations,  the nature and amount of  collateral  for loans,  the
establishment of branches, mergers,  consolidations and dividends. The system of
supervision  and  regulation  applicable  to the Company  and the  Savings  Bank
establishes  a  comprehensive  framework  for their  operations  and is intended
primarily  for the  protection  of the FDIC's  deposit  insurance  funds and the
depositors of the Savings Bank, rather than the stockholders of the Company.

         The following references to material statutes and regulations affecting
the Company and the Bank are brief summaries  thereof and are qualified in their
entirety by reference to such statutes and regulations. Any change in applicable
law or regulations may have a material effect on the business of the Company and
the Bank.

         The Savings Bank

         General.  The Bank is an  Illinois-chartered  savings bank, the deposit
accounts  of which  are  insured  by the SAIF of the  FDIC.  As a  SAIF-insured,
Illinois-chartered  savings  bank,  the  Bank  is  subject  to the  examination,
supervision,  reporting and enforcement requirements of the Commissioner, as the
chartering  authority for Illinois savings banks, and the FDIC, as administrator
of  the  SAIF,  and  to  the  statutes  and  regulations   administered  by  the
Commissioner and the FDIC governing such matters as capital standards,  mergers,
establishment  of branch  offices,  subsidiary  investments  and  activities and
general  investment  authority.  The Bank is required to file  reports  with the
Commissioner and the FDIC concerning its activities and financial  condition and
will be required to obtain  regulatory  approvals prior to entering into certain
transactions,  including  mergers  with,  or  acquisitions  of, other  financial
institutions.

         The Commissioner and the FDIC have extensive enforcement authority over
Illinois-chartered  savings banks, such as the Bank. This enforcement  authority
includes,  among other things, the ability to issue  cease-and-desist or removal
orders, to assess civil money penalties and to initiate  injunctive  actions. In
general,  these enforcement  actions may be initiated for violations of laws and
regulations and unsafe and unsound practices.

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



<PAGE>


         The  system  of  regulation  and  supervision  applicable  to the  Bank
establishes  a  comprehensive  framework  for  its  operations  and is  intended
primarily  for the  protection  of the FDIC's  deposit  insurance  funds and the
depositors  of the  Bank.  Changes  in the  regulatory  framework  could  have a
material  adverse effect on the Bank and its operations  which,  in turn,  could
have a material adverse effect on the Company.

         Deposit Insurance Premiums

         Recent Developments  Affecting 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.

         Capital Requirements.  Under the Illinois Savings Bank Act ("ISBA") and
the regulations of the  Commissioner,  an Illinois  savings bank must maintain a
minimum  level of total capital equal to the higher of 4% of total assets or the
amount required to maintain  insurance of deposits by the FDIC. The Commissioner
has the authority to require an Illinois savings bank to maintain a higher level
of capital if the  Commissioner  deems such higher level  necessary based on the
savings bank's financial condition, history, management or earnings prospects.

         FDIC-insured  institutions  are  required  to  follow  certain  capital
adequacy  guidelines which prescribe  minimum levels of capital and require that
institutions meet certain  risk-based and leverage capital  requirements.  Under
the FDIC capital  regulations,  an FDIC-insured  institution is required to meet
the following capital standards: (i) "Tier 1 capital" in an amount not less than
4% of average adjusted total assets; (ii) "Tier 1 capital" in an amount not less
than 4% of risk-weighted assets; and (iii) "total capital" in an amount not less
than 8% of risk-weighted assets.

         FDIC-insured  institutions  in the strongest  financial and  managerial
condition  (with  a  composite  rating  of  "1"  under  the  Uniform   Financial
Institutions  Rating System  established by the Federal  Financial  Institutions
Examination Council) are required to maintain "Tier 1 capital" equal to at least
4%  of  total  assets  (the  "leverage  limit"   requirement).   For  all  other
FDIC-insured institutions, the minimum leverage limit requirement is 3% of total
assets plus at least an additional  100 to 200 basis  points.  Tier 1 capital is
defined  to  include  the  sum of  common  stockholders'  equity,  noncumulative
perpetual  preferred  stock  (including  any  related  surplus),   and  minority
interests in consolidated  subsidiaries,  less all intangible assets (other than
qualifying servicing rights,  qualifying purchased credit-card relationships and
qualifying supervisory  goodwill),  certain identified losses (as defined in the
FDIC's regulations) and investments in certain subsidiaries.


<PAGE>


         FDIC-insured  institutions  also are  required  to  adhere  to  certain
risk-based capital guidelines which are designed to provide a measure of capital
more  sensitive to the risk profiles of individual  banks.  Under the risk-based
capital guidelines, capital is divided into two tiers: core (Tier 1) capital, as
defined above, and supplementary (Tier 2) capital.  Tier 2 capital is limited to
100%  of  core  capital  and  includes  cumulative  perpetual  preferred  stock,
perpetual  preferred  stock for which the  dividend  rate is reset  periodically
based on current credit standing, regardless of whether dividends are cumulative
or  noncumulative,   mandatory   convertible   securities,   subordinated  debt,
intermediate  preferred  stock and the  allowance  for  possible  loan and lease
losses.  The allowance  for possible loan and lease losses  includable in Tier 2
capital is limited to a maximum of 1.25% of risk-weighted  assets. Total capital
is the  sum of Tier 1 and  Tier 2  capital.  The  risk-based  capital  framework
assigns  balance  sheet  assets to one of four broad risk  categories  which are
assigned  risk-weights  ranging from 0% to 100% based primarily on the degree of
credit risk associated with the obligor.  Off-balance  sheet items are converted
to an on-balance sheet "credit  equivalent"  amount utilizing certain conversion
factors.  The sum of the  four  risk-weighted  categories  equals  risk-weighted
assets. The following table presents the Bank's capital position relative to its
capital requirements on September 30, 1996.
<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    $   12,925,000     60.30%   $    1,715,000    = 8.0%          N/A
         Centralia
            Savings
            Bank         $    8,742,000     42.18%   $    1,658,000    = 8.0%=   $   2,072,000    = 10.0%
   Tier I Capital (to
      Risk Weighted
      Assets)
         Consolidated    $   12,087,000     56.39%   $      857,000    = 4.0%    $     N/A
         Centralia
            Savings
            Bank         $    7,903,000     38.14% = $      829,000    = 4.0% =  $    1,243,000   =  6.0%
   Tier I Capital (to
      Average Assets)
         Consolidated    $   12,087,000     27.72%   $    1,744,000    = 4.0%    $     N/A
         Centralia
            Savings
            Bank         $    7,903,000     19.67% = $    1,607,000    = 4.0% =  $    2,009,000   =  5.0%

</TABLE>
<PAGE>


         Dividends. Under the ISBA, dividends may be paid by the Bank out of its
net profits  (i.e.,  earnings  from current  operations,  investments  and other
assets  plus  actual  recoveries  on loans,  net of current  expenses  including
dividends  or interest  on  deposits,  additions  to reserves as required by the
Commissioner,  actual losses,  accrued dividends on preferred stock, if any, and
all state and federal taxes).  The written approval of the Commissioner  must be
obtained, however, before the Bank may declare dividends in any calendar year in
an amount  in  excess  of 50% of its net  profits  for that  calendar  year.  In
addition,  before  declaring  a dividend  on its  capital  stock,  the Bank must
transfer no less than one-half of its net profits of the preceding  half year to
its paid-in  surplus  until it shall have  paid-in  surplus  equal to 20% of its
capital  stock.  Finally,  the Bank will be unable to pay dividends in an amount
which would reduce its capital  below the greater of (i) the amount  required by
the FDIC,  (ii) the  amount  required  by the  Commissioner  or (iii) the amount
required for the liquidation account to be established by the Bank in connection
with the Conversion.  The  Commissioner  and the FDIC also have the authority to
prohibit the payment of any dividends by the Savings Bank if the Commissioner or
the FDIC determines that the distribution  would constitute an unsafe or unsound
practice.  For the fiscal year ended  September 30, 1996, the Bank's net profits
were  approximately  $175,000  and the  Savings  Bank could have paid  dividends
totaling $87,500 without the written approval of the Commissioner.

         Community Reinvestment Act Requirements.  The FDIC, the Federal Reserve
Board,  the  Office  of  Thrift  Supervision  ("OTS")  and  the  Office  of  the
Comptroller of the Currency ("OCC") have jointly issued a final rule (the "Final
Rule")  under  the  Community  Reinvestment  Act (the  "CRA").  The  Final  Rule
eliminates  the  existing  CRA  regulation's   twelve  assessment   factors  and
substitutes a performance based evaluation system. The Final Rule will be phased
in over a period of time and become fully effective by July 1, 1997.

         Under the Final  Rule,  an  institution's  performance  in meeting  the
credit needs of its entire community,  including low- and moderate-income areas,
as required by the CRA,  will  generally  be evaluated  under three  tests:  the
"lending  test," the  "investment  test," and the "service  test."  However,  an
independent  financial  institution with assets of less than $250 million,  or a
financial institution with assets of less than $250 million that is a subsidiary
of a holding  company  with  assets of less than $1 billion,  will be  evaluated
under a streamlined assessment method based primarily on its lending record. The
streamlined test considers an institution's  loan-to-deposit  ratio adjusted for
seasonal variation and special lending  activities,  its percentage of loans and
other lending related  activities in the assessment  area, its record of lending
to borrowers of different  income levels and  businesses  and farms of different
sizes,  the  geographic  distribution  of its  loans,  and its  record of taking
action,  if  warranted,  in  response  to written  complaints.  In lieu of being
evaluated under the three assessment tests or the streamlined  test, a financial
institution can adopt a "strategic  plan" and elect to be evaluated on the basis
of achieving the goals and benchmarks outlined in the strategic plan. Based upon
a review of the Final Rule,  management of the Company does not anticipate  that
the new CRA regulations will adversely affect the Savings Bank.

         The Company

         General. On October 5, 1995, the Company became the sole stockholder of
the Bank.  As such,  the Company is a bank  holding  company.  As a bank holding
company, the Company is subject to regulation by the Federal Reserve Board under
the Bank Holding  Company Act (BHCA).  In accordance  with Federal Reserve Board
policy,  the Company is expected to act as a source of financial strength to the
Bank and to commit  resources  to support  the Bank in  circumstances  where the
Company  might not do so absent  such  policy.  Under the BHCA,  the  Company is
subject to periodic  examination by the Federal Reserve Board and is required to
file periodic  reports of its operations and such additional  information as the
Federal Reserve Board may require.  Because the Bank is chartered under Illinois
law, the Company is also subject to  registration  with,  and regulation by, the
Commissioner under the ISBA.




<PAGE>


         The BHCA requires prior Federal Reserve Board approval for, among other
things,  the  acquisition  by a bank  holding  company  of  direct  or  indirect
ownership  or  control  of more  than  five  percent  of the  voting  shares  or
substantially  all the assets of any bank, or for a merger or consolidation of a
bank holding company with another bank holding company. With certain exceptions,
the BHCA  prohibits a bank  holding  company from  acquiring  direct or indirect
ownership or control of voting shares of any company which is not a bank or bank
holding  company and from engaging  directly or indirectly in any activity other
than banking or managing or  controlling  banks or  performing  services for its
authorized  subsidiaries.  A bank  holding  company may,  however,  engage in or
acquire an interest in a company  that engages in  activities  which the Federal
Reserve Board has determined by regulation or order to be so closely  related to
banking or managing or controlling banks as to be a proper incident thereto.

         A bank holding company is a legal entity separate and distinct from its
subsidiary  bank or banks.  Normally,  the major  source of a holding  company's
revenue is dividends a holding company  receives from its subsidiary  banks. The
right  of a  bank  holding  company  to  participate  as a  stockholder  in  any
distribution  of  assets of its  subsidiary  banks  upon  their  liquidation  or
reorganization  or otherwise is subject to the prior claims of creditors of such
subsidiary  banks.  The subsidiary  banks are subject to claims by creditors for
long-term and short-term debt obligations, including substantial obligations for
federal funds purchased and securities sold under repurchase agreements, as well
as deposit liabilities.  Under the Financial  Institutions Reform,  Recovery and
Enforcement  Act of  1989,  in the  event  of a loss  suffered  by the  FDIC  in
connection with a banking subsidiary of a bank holding company (whether due to a
default or the provision of FDIC assistance),  other banking subsidiaries of the
holding company could be assessed for such loss.

         Federal laws limit the  transfer of funds by a  subsidiary  bank to its
holding  company in the form of loans or  extensions of credit,  investments  or
purchases  of assets.  Transfers  of this kind are  limited to ten  percent of a
bank's  capital and surplus with respect to each affiliate and to twenty percent
to all affiliates in the aggregate,  and are also subject to certain  collateral
requirements.  These  transactions,  as well as  other  transactions  between  a
subsidiary bank and its holding company, must also be on terms substantially the
same  as,  or at  least  as  favorable  as,  those  prevailing  at the  time for
comparable  transactions  with  non-affiliated  companies  or, in the absence of
comparable  transactions,  on  terms or under  circumstances,  including  credit
standards,  that  would  be  offered  to,  or  would  apply  to,  non-affiliated
companies.

         Capital  Requirements.  The Federal  Reserve Board has adopted  capital
adequacy  guidelines  for  bank  holding  companies  (on a  consolidated  basis)
substantially  similar to those of the FDIC for the Savings Bank.  The Company's
Tier 1 and total  capital  significantly  exceed  the  Federal  Reserve  Board's
capital adequacy requirements.

         Other Regulations.

         FDICIA.  FDICIA was  enacted on  December  19,  1991.  In  addition  to
providing for the  recapitalization  of the Bank  Insurance  Fund ("BIF") of the
FDIC,  FDICIA  represents  a  comprehensive  and  fundamental  change to banking
supervision.  FDICIA  imposes  relatively  detailed  standards  and mandates the
development  of  additional  regulations  governing  nearly  every aspect of the
operations,  management and supervision of banks and bank holding companies like
the Company and the Bank.



<PAGE>


         As required by FDICIA, and subsequently amended by the Riegle Community
Development  and  Regulatory  Improvement  Act  of  1994,  the  federal  banking
regulators   adopted   (effective   August  9,  1995)   interagency   guidelines
establishing  standards for safety and soundness for depository  institutions on
matters such as internal  controls,  loan  documentation,  credit  underwriting,
interest-rate  risk exposure,  asset growth, and compensation and other benefits
(the  "Guidelines").  In addition,  the federal banking regulators have proposed
asset quality and earnings standards to be added to the Guidelines. The agencies
expect to request a compliance  plan from an  institution  whose failure to meet
one or more of the standards is of such severity that it could threaten the safe
and sound operation of the institution.  FDIC  regulations  enacted under FDICIA
also require all depository  institutions to be examined annually by the banking
regulators  and  depository  institutions  having $500  million or more in total
assets to have an annual independent audit, an audit committee  comprised solely
of outside directors, and to hire outside auditors to evaluate the institution's
internal  control   structure  and  procedures  and  compliance  with  laws  and
regulations  relating  to safety  and  soundness.  The  FDIC,  in  adopting  the
regulations, reiterated its belief that every depository institution, regardless
of size,  should  have an  annual  independent  audit and an  independent  audit
committee.

         FDICIA requires the banking regulators to take prompt corrective action
with respect to depository  institutions  that fall below certain capital levels
and prohibits any depository  institution  from making any capital  distribution
that would cause it to be considered undercapitalized.  Regulations establishing
five  capital   categories   of  well   capitalized,   adequately   capitalized,
undercapitalized, significantly undercapitalized and critically undercapitalized
became  effective  December  19,  1992.  Institutions  that  are not  adequately
capitalized  may  be  subjected  to a  broad  range  of  restrictions  on  their
activities and will be required to submit a capital  restoration  plan which, to
be accepted by the regulators,  must be guaranteed in part by any company having
control of the institution.  Only well  capitalized  institutions and adequately
capitalized  institutions  receiving a waiver from the FDIC will be permitted to
accept  brokered  deposits,  and only  those  institutions  eligible  to  accept
brokered deposits may provide pass-through deposit insurance for participants in
employee  benefit  plans.  In  other  respects,  FDICIA  provides  for  enhanced
supervisory  authority,  including  greater  authority for the  appointment of a
conservator or receiver for undercapitalized institutions.

         A range of other  regulations  adopted  as a result of  FDICIA  include
requirements  applicable  to  closure of  branches;  additional  disclosures  to
depositors  with  respect  to terms and  interest  rates  applicable  to deposit
accounts; requirements for the banking agencies to adopt uniform regulations for
extensions  of  credit  secured  by  real  estate;  modification  of  accounting
standards to conform to generally accepted accounting  principles  including the
reporting of off-balance  sheet items and  supplemental  disclosure of estimated
fair market value of assets and liabilities in financial  statements  filed with
the  banking  regulators;  increased  penalties  in  making or  failing  to file
assessment reports with the FDIC;  greater  restrictions on extensions of credit
to directors,  officers and  principal  stockholders;  and  increased  reporting
requirements on agricultural loans and loans to small businesses.

         As required by FDICIA, the FDIC has established a risk-based assessment
system  for  the  deposit   insurance   provided  to  depositors  at  depository
institutions  whereby  assessments to each  institution  are calculated upon the
probability  that the  insurance  fund  will  incur a loss with  respect  to the
institution,  the  likely  amount of such  loss,  and the  revenue  needs of the
insurance fund. Under the system,  deposit insurance  premiums are based upon an
institution's  assignment  to one of  three  capital  categories  and a  further
assignment  to  one of  three  supervisory  subcategories  within  each  capital
category.  The  result  is  a  nine  category  assessment  system  with  initial
assessment  rates ranging from  twenty-three  cents to thirty-one  cents per one
hundred  dollars  of  deposits  in  an  institution.  The  classification  of an
institution into a category will depend,  among other things,  on the results of
off-site  surveillance  systems,  capital ratio, and CAMEL rating (a supervisory
rating of capital, asset quality, management, earnings and liquidity).



<PAGE>


         The CDR Act. On September 23, 1994,  the Riegle  Community  Development
and Regulatory  Improvement Act of 1994 (the "CDR Act") was enacted. The CDR Act
includes more than 50 regulatory  relief  provisions  designed to streamline the
regulatory  process for banks and thrifts and to eliminate  certain  duplicative
regulations  and  paperwork  requirements  established  after,  and largely as a
result of, the savings and loan debacle. Well run community banks with less than
$250 million in assets will be examined  every 18 months  rather than  annually.
The  application  process for forming a bank  holding  company has been  greatly
reduced.  Also,  the  requirement  that call report data be  published  in local
newspapers has been eliminated.

         Also, the CDR Act establishes dual programs and provides funding in the
amount  of $382  million  to  provide  for  development  services,  lending  and
investment  in  distressed  urban  and  rural  areas  by  community  development
financial  institutions and banks. In addition,  the CDR Act includes provisions
relating to flood insurance reform,  money  laundering,  regulation of high-cost
mortgages, and small business and commercial real estate loan securitization.

         The Branching  Act. On September 29, 1994, the  Riegle-Neal  Interstate
Banking and Branching  Efficiency Act of 1994 (the "Branching Act") was enacted.
Under the Branching Act, beginning  September 29, 1995,  adequately  capitalized
and  adequately  managed bank  holding  companies  are allowed to acquire  banks
across state lines,  without regard to whether the  transaction is prohibited by
state law, however,  they are required to maintain the acquired  institutions as
separately chartered institutions.  Any state law relating to the minimum age of
target banks (not to exceed five years) will be  preserved.  Under the Branching
Act, the Federal  Reserve Board will not be permitted to approve any acquisition
if, after the acquisition,  the bank holding company would control more than 10%
of the deposits of insured depository  institutions nationwide or 30% or more of
the deposits in the state where the target bank is located.  The Federal Reserve
Board could approve an acquisition,  notwithstanding the 30% limit, if the state
waives the limit either by statute, regulation or order of the appropriate state
official.

         In addition,  under the Branching Act beginning on June 1, 1997,  banks
will be  permitted  to merge with one  another  across  state  lines and thereby
create a main bank with branches in separate states. After establishing branches
in a state through an interstate  merger  transaction,  the bank could establish
and  acquire  additional  branches  at any  location in the state where any bank
involved  in the merger  could  have  established  or  acquired  branches  under
applicable federal or state law.

         The  responsible  federal  agency will not be  permitted to approve any
merger if, after the merger, the resulting entity would control more than 10% of
the deposits of insured depository institutions nationwide or 30% or more of the
deposits in any state  affected  by the merger.  The  responsible  agency  could
approve a merger,  notwithstanding  the 30% limit,  if the home state waives the
limit either by statute, regulation or order of the appropriate state official.

         Under  the  Branching  Act,  states  may adopt  legislation  permitting
interstate  mergers  before  June  1,  1997.  In  contrast,   states  may  adopt
legislation  before June 1, 1997, subject to certain  conditions,  opting out of
interstate  branching.   If  a  state  opts  out  of  interstate  branching,  no
out-of-state bank may establish a branch in that state through an acquisition or
de  novo,  and a bank  whose  home  state  opts  out may not  participate  in an
interstate  merger  transaction.  Illinois  has adopted  legislation  permitting
interstate mergers beginning on June 1, 1997.

         Impact of New Accounting Standards

         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  securitizes  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.


<PAGE>


         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".

         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.

         Executive Officers of the Registrant

         The following table sets forth certain  information as of September 30,
1996 with respect to the executive officers of the Company and the Savings Bank.

Name                      Age                        Position
------------------        ---           ----------------------------------------

K. Gary Reynolds           45           President and Chief Executive Officer of
                                        the Company and the Savings Bank

Stephen J. Greene          38           Vice President of the Savings Bank

         K. Gary Reynolds has been the president and chief executive  officer of
the Savings Bank since May, 1994 and the president and chief  executive  officer
of the Company since its formation.  Prior to that time, he was an examiner with
the OCC.

         Stephen J. Greene has been a vice  president  of the Savings Bank since
January,  1995. Mr. Greene was an examiner with the OCC from  November,  1993 to
December,  1994.  Prior to that time, he was a vice president of Mercantile Bank
of Centralia,  N.A. where his  responsibilities  included managing a $25 million
loan portfolio consisting of residential real estate loans and consumer loans.


<PAGE>


         Item 2.           Description of Property

         The following table sets forth  information  concerning the main office
and the branch office of the Bank, at September 30, 1996. At September 30, 1996,
the  Company's  premises  had an  aggregate  net  book  value  of  approximately
$347,000.

                                                        Lease
                                                     Expiration   Net Book
Location                  Year Opened   Owned/Leased    Date        Value
--------------------------------------------------------------------------------
                                                                    (In
                                                                  Thousands)
Main office
200 South Poplar Street       1975         Owned         N/A        $107
Centralia, Illinois

Branch office
801 12th Street               1996 (1)     Owned         N/A         240
Carlyle, Illinois                                                   ----

                                                                    $347
                                                                    ====

(1)  The Carlyle  branch was  purchased  during  September  1996.  The  branch's
     original opening date was 1989.

Item 3. Legal Proceedings

         The Company is, from time to time, a party to legal proceedings arising
in the ordinary course of its business,  including legal  proceedings to enforce
its rights against borrowers.  The Company is not currently a party to any legal
proceedings which could reasonably be expected to have a material adverse effect
on the consolidated financial condition or operations of the Company.

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

         No matter was  submitted  to a vote of  security  holders,  through the
solicitation  of proxies or otherwise,  during the quarter  ended  September 30,
1996.

                                     PART II

Item 5. Market for Common Equity and Related Shareholder Matters

         Information  relating to the market for  Registrant's  common stock and
related stockholder matters appears under "Shareholder  Information" in the 1996
Annual Report and is incorporated herein by reference.

Item 6. Management's Discussion and Analysis or Plan of Operations

         The above captioned information appears under the caption "Management's
Discussion and Analysis of Financial Condition and Results of Operations" in the
1996 Annual Report to Stockholders and is incorporated herein by reference.

Item 7. Financial Statements

         The consolidated  financial statements of CSB Financial Group, Inc. and
subsidiary  as of  September  30,  1996 and 1995,  together  with the  report of
McGladrey & Pullen, LLP appears in the 1996 Annual Report to Stockholders and is
incorporated herein by reference.
<PAGE>


Item 8.  Changes  in  and  Disagreements  with  Accountants  on  Accounting  and
         Financial Disclosure

         The Company hereby incorporates by reference the information called for
by item 8 of Form  10KSB  from the Form 8-K dated  April 17,  1996  filed by the
Company with the SEC in  connection  with the  dismissal of Larsson,  Woodyard &
Henson,  LLP as  the  Company's  independent  auditors  and  the  engagement  of
McGladrey & Pullen,  LLP as the  Company's  independent  auditors for the fiscal
year ending December 31, 1996.

                                    PART III

Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance
        with Section 16(a) of the Exchange Act

         The  information  relating to directors and  executive  officers of the
Registrant  is  incorporated  herein  by  reference  to the  Registrant's  Proxy
Statement for the Annual Meeting of Stockholders to be held on January 10, 1997.

Item 10. Executive Compensation

         The  information  relating to executive  compensation  is  incorporated
herein by reference to the  Registrant's  Proxy Statement for the Annual Meeting
of Stockholders to be held on January 10, 1997.

Item 11. Security Ownership of Certain Beneficial Owners and Management

         The information  relating to security  ownership of certain  beneficial
owners and management is  incorporated  herein by reference to the  Registrant's
Proxy Statement for the Annual Meeting of Stockholders to be held on January 10,
1997.

Item 12. Certain Relationships and Related Transactions

         The  information   relating  to  certain   relationships   and  related
transactions  is  incorporated  herein by  reference to the  Registrant's  Proxy
Statement for the Annual Meeting of Stockholders to be held on January 10, 1997.



<PAGE>

Item 13. Exhibits and Reports on Form 8-K

     (a)  Exhibits

               See Exhibit Index and exhibits attached.

     (b)  Form 8-K

               No Reports on Form 8-K were filed  during the last quarter of the
               fiscal year covered by this Form 10-KSB.

Exhibit No.                       Exhibit                         

  3.1          Certificate  of  Incorporation  of  CSB  Financial  Group,   Inc.
               (incorporated  herein  - by  reference  to  Exhibit  3.1  to  the
               Registrant's  Registration  Statement on Form SB-2 as  originally
               filed on March 1, 1995, Registration No. 33-89842)

  3.2          Bylaws  of CSB  Financial  Group,  Inc.  (incorporated  herein by
               reference  to -  Exhibit  3.2  to the  Registrant's  Registration
               Statement  on Form  SB-2 as  originally  filed on March 1,  1995,
               Registration No. 33-89842)

  4.1          Specimen  Stock   Certificate  of  CSB  Financial   Group,   Inc.
               (incorporated   herein  -  by  reference  to  Exhibit  1  to  the
               Registrant's  Registration  Statement on Form 8-A filed on August
               21, 1995, Registration No. 0-26650)

  4.2          Articles IV, V, VI, XIV and XVI of CSB  Financial  Group,  Inc.'s
               Certificate - of Incorporation (see Exhibit 3.1 above)

  4.3          Articles II and IV of CSB  Financial  Group,  Inc.'s  Bylaws (see
               Exhibit 3.2 - above)

  10.1         Centralia    Savings   Bank   Employee   Stock   Ownership   Plan
               (incorporated  herein by - by  reference  to Exhibit  10.1 to the
               Registrant's  Registration  Statement on Form SB-2 as  originally
               filed on March 1, 1995, Registration No. 33-89842)

  10.2         Credit Agreement  between CSB Financial Group, Inc. and Centralia
               Savings - Bank Employee Stock Ownership Plan (incorporated herein
               by  reference to Exhibit  10.2 to the  Registrant's  Registration
               Statement  on Form  SB-2 as  originally  filed on March 1,  1995,
               Registration No. 33-89842)

  10.3         CSB Financial  Group,  Inc. 1995 Stock Option and Incentive  Plan
               (incorporated  -  herein  by  reference  to  Exhibit  10.3 to the
               Registrant's  Registration  Statement on Form SB-2 as  originally
               filed on March 1, 1995, Registration No. 33-89842)

  10.4         CSB Financial Group, Inc. Management  Development and Recognition
               Plan and - and Trust Agreement  (incorporated herein by reference
               to Exhibit  10.4 to the  Registrant's  Registration  Statement on
               Form SB-2 as originally filed on March 1, 1995,  Registration No.
               33-89842)

  10.5         Employment Agreement between Centralia Savings Bank and K. Gary -
               Reynolds (incorporated herein by reference to Exhibit 10.5 to the
               Registrant's  Registration  Statement on Form SB-2 as  originally
               filed on March 1, 1995, Registration No. 33-89842)

  13.1         CSB Financial Group, Inc. 1996 Annual Report to Stockholders -

  21.1         Subsidiaries of the Registrant (incorporated herein by reference
               to Exhibit - 21.1 to the Registrant's  Registration  Statement on
               Form SB-2 as originally filed on March 1, 1995,  Registration No.
               33-89842)

  23.1         Consent of Larsson, Woodyard & Henson, LLP -

  23.2         Consent of McGladrey & Pullen, LLP -

  27.1         Financial Data Schedule -

  99.1         Report of  Larrson,  Woodyard & Henson,  LLP on the  Registrant's
               financial - statements  for the fiscal year ended  September  30,
               1995




<PAGE>


                                   SIGNATURES

         In accordance  with Section 13 or 15(d) of the Securities  Exchange Act
of 1934,  as  amended,  the  Registrant  caused  this report to be signed on its
behalf by the undersigned, thereunto duly authorized.



                                                  CSB FINANCIAL GROUP, INC.
                                                         (Registrant)


Date:    December 20, 1996

                                         By:  /s/ K. Gary Reynolds
                                              ----------------------------
                                              K. Gary Reynolds, President,
                                              Chief Executive Officer and 
                                                  Director


         In  accordance  with the  Securities  Exchange Act of 1934, as amended,
this  report has been  signed  below by the  following  persons on behalf of the
Registrant and in the capacities and on the dates indicated.





/s/ K. Gary Reynolds                            /s/ A. John Byrne
-----------------------------------------       ------------------------
K. Gary Reynolds, President, Chief              A. John Byrne, Director
Executive Officer and Director (Principal
Executive Officer, Principal Financial          Date:  December 20, 1996
Officer and Principal Accounting Officer)

Date:  December 20, 1996





/s/ Wesley N. Breeze                             /s/ Michael Donnewald
--------------------------                       ---------------------------
Wesley N. Breeze, Director                       Michael Donnewald, Director

Date:  December 20, 1996                         Date:  December 20, 1996





/s/ Larry M. Irvin                               /s/ W. Harold Monken
--------------------------                       ----------------------------
Larry M. Irvin, Director                         W. Harold Monken, Director

Date:  December 20, 1996                         Date:  December 20, 1996