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


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

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

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





<PAGE>


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

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



Dear Fellow Shareholders:

It is my privilege to report to you on the  highlights  of this past year and to
share our  strategies  for the future  goals of CSB  Financial  Group,  Inc. and
subsidiary.

I am pleased to report the diluted earnings per share has increased $.15 to $.42
per share. Net income for the year increased $100,000 to $345,000. This increase
was primarily  accomplished  through  reductions in professional  fees and other
noninterest expenses.

In August 1998 the Board of Directors  announced  and  implemented  a repurchase
program to acquire up 82,000  shares of its own common  stock.  This  repurchase
program is the  reason for the  $1,523,000  decline in  stockholders'  equity to
$10,129,000  at September  30,  1998.  As of the date of these  financials,  the
Company has completed the repurchase of 302,080 shares, or 29.2%, of the initial
common stock issuance.

The stock  market  has  proven  that it can  shift  rapidly  and with  velocity.
Technology has provided  investors  with a connection to other world markets,  a
continuous  flow  of  information  on  world  events  and  the  ability  to make
investment  decisions in the blink of an eye.  The recent  downturn in the stock
market has shown us how quickly this can occur.  The stock market  declines have
been the harshest on the small and mid-capitalization stocks and, in particular,
your company's  stock.  The Company's stock price had a high of $14.00, a low of
$9.00,  and closed the year at $9.75.  It is important to note that this setback
occurs during a time of improved performance for CSB Financial Group, Inc. It is
even more  important  to note that the stock market is a cyclical  business.  We
must not confuse stock price with operating performance.

This  past  year  has seen a  record-breaking  event  in the  level of  mortgage
interest rates. Mortgage customers,  desiring to reduce their real estate costs,
have sought new financing of their residential mortgage loans. Centralia Savings
Bank  originated  in excess of $5,000,000 in real estate loans during the fiscal
year 1998.  The bank sold the  majority of these loans into the  secondary  real
estate  markets  in  exchange  for  origination  fees.  The bank plans to retain
residential   real  estate  loans   during  1999  and   annually   evaluate  the
interest-rate risks and earnings impact of this strategy.

The board of directors and management  recently  completed its planning  session
for fiscal year 1999. We have identified a number of strategies,  all focused on
improving  return on equity.  Management  is  confident  these  strategies  will
provide for loan growth,  minimizing  the marginal  costs of funding the growth,
reducing  operating  expenses,  and  continuing  our repurchase of the Company's
stock.

On behalf of the board of  directors,  management  and staff of the  Company,  I
thank you for your continued support.

                                            Sincerely,


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


                  -------------------------------------------
                     Management's Discussion and Analysis of
                  Financial Condition & Results of Operations
                  ------------------------------------------- 

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

General

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

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

Comparison  of Operating  Results for the Fiscal Years Ended  September 30, 1997
and 1996

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

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

         The Company's  net income for the fiscal year ended  September 30, 1998
was  $345,000 as compared to $245,000  for the fiscal year ended  September  30,
1997. This represents a $100,000, or 40.8%, increase in net income.

         Net Interest  Income.  The Company's net interest income for the fiscal
years  ended  September  30,  1998  and 1997  were  $1,666,000  and  $1,611,000,
respectively.  This  represents  a $55,000,  or 3.4%,  increase in net  interest
income. This is primarily due to an increase in the yield on earning assets.

         Interest  income  increased  $51,000,  or 1.6%, from $3,253,000 for the
fiscal year ended  September 30, 1997 compared to $3,304,000 for the fiscal year
ended September 30, 1998. The increase resulted  primarily from a 23 basis point
increase in the average rate earned on the Company's interest-earning assets.

         The average balances of mortgage loans increased  $79,000 combined with
the 40 basis point  increase in the  average  yield on such loans  resulted in a
$86,000  increase in the  interest  income  between  fiscal  years.  The average
balance of investment  securities  increased $1,520,000 combined with a 20 basis
point  increase in the average  yield on  investment  securities  resulted in an
increase in interest  income of $120,000  between fiscal years.  These increases
more than offset the decreases in the other average interest bearing assets. The
$213,000  decrease in the average  balance of consumer  loans combined with a 72
basis point  decrease in the average yield of these loans  resulted in a $60,000
decrease in interest income between the fiscal years.  The $178,000  decrease in
the average balance of commercial loans was offset by a 130 basis point increase
in the average yield resulting in a decrease of $3,000 in interest  income.  The
$364,000 decrease in the average balance of mortgage-backed  securities combined
with a 21 basis  point  decrease  in the  average  yield  resulted  in a $37,000
decrease in interest income between fiscal years.
<PAGE>


         Interest expense decreased $4,000, or .2%, to $1,638,000 for the fiscal
year ended  September 30, 1998 from  $1,642,000 for fiscal year ended  September
30, 1997.

         Provision for Loan Losses. The Company's  provision for loan losses for
the fiscal year ended  September  30, 1998 was $63,000,  compared to $90,000 for
the fiscal year ended September 30, 1997.  Management  evaluates the adequacy of
the Company's  allowance for loan losses on a quarterly  basis and may, based on
such review, adjust the amount of the provision for loan losses.
Classified loans are considered as part of this review.

         Non-Interest  Income. The Company's  non-interest income for the fiscal
year ended  September  30, 1998 was  $134,000,  as compared to $154,000  for the
fiscal year ended September 30, 1997. This represents a decrease of $20,000,  or
13.0%, in non-interest  income.  The decrease resulted  primarily from a $49,000
decrease  in gains on sale of  securities  combined  with a $9,000  increase  in
service charges on deposits and a $20,000 increase in other non-interest  income
fees.

         Non-Interest Expense. The Company's non-interest expense for the fiscal
year ended September 30, 1998 was $1,273,000,  as compared to $1,319,000 for the
fiscal year ended  September  30,  1997.  The $46,000  decrease in  non-interest
expense is due to decreased expenses related to professional fees.

         Compensation and Employee Benefits expense increased $3,000 to $631,000
for the fiscal year ended September 30, 1998. This increase was primarily due to
an  increase  of $41,000 in  salaries  related to an  increase  in the number of
employees  offset by a decrease in the  Company's  contribution  to the Employee
Stock Ownership Plan (ESOP).  The consolidated  financial  statements  reflect a
charge of $32,000  relating to  contributions to the ESOP as compared to $69,000
for the fiscal year ended September 30, 1997. The Company  records  compensation
expense  related to the ESOP in accordance  with SOP 93-6.  As a result,  to the
extent the value of the Company's common stock appreciates, compensation expense
related to the ESOP could increase.

         Data  processing  expense  increased  $8,000 to $103,000 for the fiscal
year ended  September 30, 1998.  This  increase was  primarily  attributed to an
increase  in the  per-item  processing  costs  and the  increased  need  for and
associated costs of management reports.

         Professional  fees  decreased  $45,000 to $83,000 for fiscal year ended
September 30, 1998 from $128,000 for fiscal year ended  September 30, 1997.  The
primary  causes for the  decrease  relate to  professional  fees for  regulatory
reporting which were incurred in 1997 but not in 1998.

         Other  non-interest  expenses  decreased  $12,000 to  $345,000  for the
fiscal year ended September 30, 1998 as compared to $357,000 for the fiscal year
ended September 30, 1997.

         Provision  for Income Taxes.  The Company's  provision for income taxes
for the fiscal  year ended  September  30,  1998 was  $119,000,  as  compared to
$111,000 for the fiscal year ended September 30, 1997. This represents a $8,000,
or 7.2%, increase in the provision for income taxes.

Comparison of Financial Condition as of September 30, 1998 and 1997

         General.  At September 30, 1998, the Company's  total assets were $46.4
million,  a decrease of $2.1  million,  or 4.4%, as compared to $48.5 million at
September  30,  1997.  The  decrease  resulted  from a decrease in cash and cash
equivalents  of $1.1 million,  or 42.4%,  a decrease in other assets of $114,000
and a $1.0 million decrease in loans  receivable,  net of the allowance for loan
losses  which  offset  the  $159,000  increase  in  investment  securities.  The
repurchase  of the Company's  common stock between  fiscal years was the primary
cause for this decrease.

         Loans.  Loans,  net of the allowance for loan losses,  at September 30,
1998 were $26.1 million,  a decrease of $1,023,000,  or 3.8%,  compared to $27.1
million for the fiscal year ended  September 30, 1997.  Mortgage loans increased
$241,000,  or 1.2%, consumer loans decreased $676,000,  or 14.2%, as compared to
the fiscal year ended September 30, 1997.  Commercial loans decreased  $388,000,
or 38.3%,  to  $625,000  for the year ended  September  30,  1997 as compared to
$1,013,000  for the year ended  September 30, 1997.  Home equity lines of credit
and  share  loans  decreased  $138,000  and  $73,000,  respectively.  This was a
decrease of 16.9% and 27.4% as compared to fiscal year ended September 30, 1997.
Commercial  and consumer  lending have declined due to increased  competition on
rates and a shift in management's focus towards mortgage lending.
<PAGE>


         Average loan balances for 1998 amounted to $26.9 million as compared to
$27.2 million in the previous  fiscal year.  The Company  continues to emphasize
mortgage lending.

         The residential mortgage loans increased $251,000 during 1998, or 1.3%,
to $19.3 million as compared to the fiscal year ended September 30, 1997. During
1998, loan originations for residential  mortgage loans amounted to $5.2 million
as compared to $2.1 million in originations for the prior fiscal year.

         Residential  mortgage loans  represent  73.4% of gross loans.  Consumer
loans,  consisting  primarily of automobile loans, made up 15.6% of gross loans,
commercial  loans made up 2.4% of gross  loans,  home equity lines of credit and
share loans made up 3.3% of gross loans, and  non-residential  real estate loans
comprised 5.3% of the portfolio at September 30, 1998.

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

         Nonperforming  loans as of September  30, 1998  amounted to $410,000 or
 .88% of total  assets as  compared  to  $385,000  or .79% of total  assets as of
September 30, 1997.

         The  following  table sets forth an  analysis  of the  Company's  gross
allowance for loan losses for the periods indicated.
<TABLE>
                                                                               For the Fiscal Year
                                                                               Ended September 30,
                                                                               -------------------
                                                                                   1998     1997
                                                                                -----------------
                                                                                 (In Thousands)
<S>                                                                             <C>       <C>  


Allowance at beginning of period ..........................................     $     165 $   117
Provision for loan losses .................................................            63      90
Recoveries:
    Consumer loans ........................................................             4       1
                                                                                -----------------
          Total recoveries ................................................             4       1
                                                                                -----------------

Charge-offs:
    One- to four-family loans .............................................           - -       2
    Consumer loans ........................................................            61      37
    Commercial ............................................................           - -       4
                                                                                -----------------
          Total charge-offs ...............................................            61      43
                                                                                -----------------
          Net charge-offs .................................................           (57)    (42)
                                                                                -----------------
          Balance at end of period ........................................     $     171 $   165
                                                                                =================

Ratio of allowance for loan losses to gross loans outstanding at
    the end of the period .................................................          .65%   0.60%
Ratio of net charge offs to average loans outstanding net during the period          .18%   0.15%
Ratio of allowance for loan losses to total nonperforming assets
    at the end of the period ..............................................        41.71%  42.86%
</TABLE>
<PAGE>


         Investment Securities. Investment securities represented 36.9% of total
assets  as of  September  30,  1998  compared  to 35.0% of  total  assets  as of
September 30, 1997.  Investment  securities increased $159,000,  .9%, from $17.0
million to $17.2 million as of September  30, 1998.  At September 30, 1998,  the
Company held approximately $17.2 million in investment securities of which $16.9
million were held as available for sale, and $215,000 were non-marketable equity
securities.  Of the $17.2 million in investment  securities,  $13.9 million,  or
81.0%, were U. S. Government and agency securities,  $1.7 million, or 9.8%, were
obligations  of state  and  political  subdivisions,  $215,000,  or  1.3%,  were
non-marketable equity securities and $1.4 million, or 7.9%, were mortgage-backed
securities.

         Deposits.  At September  30,  1998,  total  deposits  amounted to $35.9
million, or 77.2%, of total assets.  Total deposits decreased $731,000,  or 2.0%
from  September  30, 1997.  A $595,000  increase in time  deposits  greater than
$100,000 offset by $530,000  decrease in demand deposits,  an $8,000 decrease in
savings, and a $788,000 decrease in other time deposits.

Return on Equity and Assets

         Net income for the fiscal year ended September 30, 1998 was $345,000 as
compared to $245,000 for the fiscal year ended September 30, 1997.

         Return on average  assets (ROA) for the year ended  September  30, 1998
was .73% as compared to .51% for the year ended  September  30, 1997.  The cause
for the increase in ROA was due to a decrease in  professional  fees relating to
regulatory reporting and compensation  expenses related to the Company's benefit
plans.

         Return on average  equity (ROE) for the year ended  September  30, 1998
was 3.24% as compared to 2.05% for the year ended  September 30, 1997. The cause
for the  increase in ROE was due to  increased  net income and stock  repurchase
programs  implemented  by the  Company.  During the  fiscal  year,  the  Company
purchased 169,305 shares of its common stock from the open market.

         The average equity to average assets ratio as of September 30, 1998 was
22.4% as compared to 24.9% as of September  30, 1997.  The primary cause for the
decrease was the repurchase of the Company's common stock.
<PAGE>


Average Balance Sheet

         The following  table presents the average balance sheet for the Company
for the years  ended  September  30,  1998 and 1997,  the  interest  on interest
earning assets and interest bearing liabilities and the related average yield or
cost.  The yields and costs are  derived  by  dividing  income or expense by the
average balance of the related asset or liability for the periods shown. Average
balances were determined from averaging month-end balances.
<TABLE>

                                                          For the Fiscal Year Ended September 30,
                                         --------------------------------------------------------------------------
                                                         1998                                 1997
                                         --------------------------------------------------------------------------
                                                                      (In Thousands)

                                           Average     Interest &    Yield/     Average     Interest &    Yield/
                                           Balance     Dividends      Cost      Balance     Dividends      Cost
                                         --------------------------------------------------------------------------
<S>                                      <C>          <C>            <C>      <C>          <C>            <C>
Interest-earning assets:
  Mortgage loans (5)                     $     20,201 $      1,630      8.07% $     20,122 $      1,544      7.67%
  Commercial loans (5)                            961           96      9.99%        1,139           99      8.69%
  Consumer loans (5)                            5,736          461      8.04%        5,949          521      8.76%
                                         --------------------------           --------------------------
        Total loans, net                 $     26,898 $      2,187      8.13% $     27,210 $      2,164      7.95%

  Mortgage-backed securities             $      1,048 $         98      9.35% $      1,412 $        135      9.56%
  Investment securities (2)(3)(6)              15,712          943      6.00%       14,192          823      5.80%
  Daily interest-bearing deposits                 706           62      8.78%        2,285          118      5.16%
  FHLB stock (3)                                  213           14      6.57%          187           13      6.95%
                                         --------------------------           --------------------------
        Total interest-earning assets    $     44,577 $      3,304      7.41% $     45,286 $      3,253      7.18%

Non-interest earning assets:
  Office properties and equipment, net   $        603                         $        607
  Real estate, net                                  5                                    5
  Other non-interest earning assets             2,377                                2,145
                                         -------------                        -------------
        Total assets                     $     47,562                         $     48,043
                                         =============                        =============

Interest-bearing liabilities:
  Passbook accounts                      $      3,435 $         82      2.39% $      3,590 $         92      2.56%
  NOW accounts                                  3,712           69      1.86%        5,098           95      1.86%
  Money market accounts                         3,550          134      3.77%        3,818          121      3.17%
  Certificates of deposit                      23,892        1,353      5.66%       22,213        1,334      6.01%
                                         --------------------------           --------------------------
        Total interest-bearing           $     34,589 $      1,638      4.74% $     34,719 $      1,642      4.73%
liabilities

Non-interest bearing liabilities:
  Non-interest bearing deposits          $      1,451                         $      1,001
  Other liabilities                               890                                  355
                                         -------------                        -------------
        Total liabilities                $     36,930                         $     36,075
Stockholders' equity                           10,632                               11,968
                                         -------------                        -------------
        Total liabilities and
            stockholders' equity         $     47,562                         $     48,043
                                         =============                        =============

Net interest income                                   $      1,666                         $      1,611
                                                      =============                        =============
Interest rate spread (4)                                                2.67%                                2.45%
Net interest margin (1)                                                 3.74%                                3.56%
Ratio of average interest-earning 
  assets to average interest-bearing 
  liabilities                                 128.88%                              130.44%
<FN>
(1)      Net interest income as a percentage of average interest-earning assets.
(2)      Includes available for sale and held to maturity investment securities.
(3)      Interest is classified as interest income on investments in the 
         Consolidated Statement of Income.
(4)      Difference between weighted average yield on interest-earning assets 
         and weighted average cost of interest-bearing liabilities.
(5)      Average volume includes nonaccrual loans.
(6)      Includes securities purchased under agreements to resell.
</FN>
</TABLE>
<PAGE>


Rate and Volume Analysis

         The following  table sets forth the effects of changing  interest rates
and volumes of interest earning assets and interest  bearing  liabilities on net
interest income for the Company. The combined rate-volume variances are included
in the total volume variance.  In addition to this schedule,  a two year average
balance sheet and an analysis of net interest  income  setting forth (i) average
assets,  liabilities and  stockholder's  equity;  (ii) interest income earned on
interest  earning  assets and  interest  expense  incurred  on  interest-bearing
liabilities;  (iii) average yields earned on interest-earning assets and average
rates incurred on  interest-bearing  liabilities;  (iv) the net interest  margin
(i.e. the average yield earned on interest  earning assets less the average rate
incurred   on   interest-bearing   liabilities);   and  (v)  the  net  yield  on
interest-earning   assets  (i.e.   net  interest   income   divided  by  average
interest-earning assets).
<TABLE>
                                 1998 Compared to 1997   1997 Compared to 1996
                                   Increase (Decrease)    Increase (Decrease)
                                         Due To                  Due To
                                  Rate   Volume    Net   Rate    Volume   Net
                                ----------------------   ---------------------
                                    (In Thousands)           (In Thousands)
<S>                             <C>      <C>     <C>     <C>     <C>     <C>
Interest-earning assets:
  Mortgage loans .............. $   80   $   6   $  86   $  47   $ 275   $ 322
  Commercial loans ............     15     (18)     (3)      2     (10)     (8)
  Consumer loans ..............    (43)    (17)    (60)     30     128     158
                                ----------------------------------------------
        Total loans ...........     52     (29)     23      79     393     472

  Mortgage-backed securities ..     (3)    (34)    (37)      3     (65)    (62)
  Investment and other
    securities ................     29      91     120     (29)     10     (19)
  Interest-bearing deposits ...     83    (139)    (56)     (9)    (23)    (32)
  FHLB stock ..................     (1)      2       1      - -      1       1
                                ----------------------------------------------
        Total net change income
          on interest-earning
          assets ..............    160    (109)     51      44     316     360
                                ----------------------------------------------
Interest-bearing liabilities:
  Passbook ....................     (6)     (4)    (10)    (15)     16       1
  Interest-bearing demand
    (NOW) accounts ............    - -     (26)    (26)      6      13      19
  Money market deposit
    accounts ..................     23     (10)     13      35      22      57
  Certificates of deposit .....    (76)     95      19      76     188     264
                                ----------------------------------------------
        Total net change in
          expense on interest-
          bearing liabilities .    (59)     55      (4)    102     239     341
                                ----------------------------------------------
        Net change in net
          interest income ..... $  219   $(164)  $  55  $  (58) $   77  $   19
                                ==============================================
</TABLE>

Asset and Liability Management

         The matching of assets and liabilities may be analyzed by examining the
extent to which such assets and liabilities are "interest-rate  sensitive",  and
by  monitoring  an  institution's  interest-rate  sensitivity  gap.  An asset or
liability can be considered to be interest-rate sensitive within a specific time
period if it will mature or reprice within that time period.  The  interest-rate
sensitivity   gap  is  defined  as  the   difference   between   the  amount  of
interest-earning assets anticipated,  based upon certain assumptions,  to mature
or reprice  within a specific  time period,  and the amount of  interest-bearing
liabilities  anticipated,  based upon certain assumptions,  to mature or reprice
within that same time period.  A gap is  considered  positive when the amount of
interest-rate  sensitive  assets exceeds the amount of  interest-rate  sensitive
liabilities.  A gap is  considered  negative  when the  amount of  interest-rate
sensitive liabilities exceeds the amount of interest-rate sensitive assets.

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


         At  September  30, 1998,  the  Company's  interest-bearing  liabilities
either  maturing or  repricing  within one year  exceeded  its  interest-earning
assets  either   maturing  or  repricing   within  one  year  by  $6.6  million,
representing a cumulative  one-year  interest-rate  sensitivity  gap of negative
14.17%.  During periods of rising  interest rates, it is expected that the yield
on the Company's interest-earning assets would rise more slowly than the cost on
its  interest-bearing  liabilities,  which  would be expected to have a negative
effect on net  interest  income.  A decrease  in  interest  rates would have the
opposite  effect  on  net  interest  income,  as  the  interest  rates  paid  on
interest-bearing  liabilities  would fall more  rapidly  than would the interest
rates earned on interest-earning assets.

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

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

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

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

         The Company's  investment  securities portfolio had an average maturity
of 4.6 years, excluding  mortgage-backed  securities,  as of September 30, 1998.
Accordingly,  the Company's  investment  securities portfolio could be made less
interest-rate sensitive by increasing the average maturity of the portfolio.

Liquidity and Capital Resources

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

         The primary  investing  activity of the Company is the  origination  of
one-to-four-family  residential  mortgage loans. During each of the fiscal years
ended  September 30, 1998 and 1997,  the Company  originated  one-to-four-family
residential  mortgage  loans in the  amount of $5.2  million  and $2.1  million,
respectively.  These activities were funded primarily by principal repayments on
loans,  payments on  mortgage-backed  securities  and  maturities  of investment
securities.
<PAGE>


         The net cash provided by investing activities for the fiscal year ended
September 30, 1998 totaled $858,000. Investment activities included the purchase
of investment  securities  which totaled $13.0 million and $10.0 million for the
fiscal year ended September 30, 1998 and 1997, respectively. Sources of cash for
investing activities was provided by operating activities,  maturities and sales
of securities, and cash and cash equivalents held at the beginning of the fiscal
year.  Investment  activities  included the sale of investment  securities which
totaled $5.2 million and $2.7 million for the fiscal years ended  September  30,
1998 and 1997, respectively.  Investment activities also included maturities and
paydowns on  investment  securities  which totaled $7.8 million and $6.6 million
for the fiscal years ended September 30, 1998 and 1997, respectively.

         The Company must maintain an adequate  level of liquidity to ensure the
availability of sufficient funds to support loan growth and deposit withdrawals,
satisfy  financial  commitments and take advantage of investment  opportunities.
During the fiscal year ended  September 30, 1998 and 1997,  the Company used its
sources of funds primarily to fund loan commitments,  pay maturing  certificates
of deposits and satisfy deposit withdrawals.  At September 30, 1998, the Company
had  commitments  to  extend  credit  in  the  amount  of  $1.3  million.  These
commitments  were comprised of variable-rate  and fixed-rate  commitments in the
amounts  of  $275,000  and  $1,008,000,  respectively.  The  range  of  rates on
fixed-rate commitments was 8.25% to 11.50%.

         At September 30, 1998,  certificates of deposits totaled $23.9 million,
or 66.7% of total  deposits,  as  compared to $24.1  million,  or 65.9% of total
deposits for fiscal year ended  September 30, 1997.  Time deposits over $100,000
accounted for $1.7 million and $1.1 million, respectively, of the certificate of
deposit totals. Historically,  the Company has been able to retain a significant
amount of its maturing  deposits by increasing  the interest rates earned by the
certificates of deposit.  Because deposit insurance  premiums paid by commercial
banks on BIF-insured  deposits have been  drastically  reduced,  the Company may
find it more difficult to retain such deposits. Management believes it will have
adequate  resources to fund maturing  deposits and  withdrawals  from additional
deposits,  proceeds of scheduled  repayments  of loans as well as from  payments
received on investment and mortgage-backed securities.

         Capital.  The  Company is  required  to  maintain a specific  amount of
capital  pursuant  to  the  regulations  of  the  Commissioner  of  Savings  and
Residential Finance and the Federal Deposit Insurance  Corporation (FDIC). As of
September 30, 1998, the Company was in compliance  with all  regulatory  capital
requirements  with a Tier 1  capital  to  risk-weighted  assets  ratio of 45.3%,
compared to the minimum ratio required of 4.0%,  total capital to  risk-weighted
assets ratio of 46.2%  compared to the minimum ratio required of 8.0% and a Tier
1 capital  to  average  assets  ratio of 19.8%  compared  to the  minimum  ratio
required of 4.0%.

         The Company  continues to maintain a strong capital position to support
its capital  requirements.  Stockholders' equity decreased $1.5 million to $10.1
million as of September 30, 1998. This decrease was due to the repurchase of the
Company's  common  stock which  totaled  $2.0  million,  offset by net income of
$345,000 and employee benefit plan items totaling $70,000 and a $44,000 increase
in unrealized gain on securities available for sale.

Impact of New Accounting Pronouncements

         Reporting   Comprehensive  Income  Statement  of  Financial  Accounting
Standard No. 130, "Reporting Comprehensive Income" (FAS 130), was issued in July
1997 by the  Financial  Accounting  Standards  Board.  The standard  establishes
reporting of  comprehensive  income for general  purpose  financial  statements.
Comprehensive income is defined as the change in equity of a business enterprise
during a period and all other events and  circumstances  from nonowner  sources.
The  Standard is effective  for  financial  statement  periods  beginning  after
December  15,  1997.  The Company  does not believe the adoption of the Standard
will have a material impact on the consolidated financial statements.

         Disclosures  about  Segments of an Enterprise  and Related  Information
Statement of Financial Accounting Standard No. 131,  "Disclosures about Segments
of an Enterprise and Related  Information" (FAS 131), was issued in July 1997 by
the Financial  Accounting Standards Board. The standard requires the Corporation
to disclose the factors used to identify reportable segments including the basis
of  organization,  differences in products and services,  geographic  areas, and
regulatory  environments.  FAS 131 additionally requires financial results to be
reported in the financial  statements for each reportable segment.  The Standard
is effective for financial  statement periods beginning after December 15, 1997.
The Company does not believe the  adoption of the Standard  will have a material
impact on the consolidated financial statements.
<PAGE>


         Accounting for Derivative  Instruments and Hedging Activities Statement
of Financial Accounting Standard No. 133, "Accounting for Derivative Instruments
and Hedging Activities" (FAS 133) establishes accounting and reporting standards
for derivative instruments, including certain derivative instruments embedded in
other contracts and for hedging activities. It requires that an entity recognize
all  derivatives  as either assets or  liabilities in the statement of financial
position and measure those instruments at fair value. The accounting for changes
in the fair value of a derivative  depends on the intended use of the derivative
and the resulting  designation.  This statement applies to all entities. FAS 133
is effective for all fiscal  quarters of fiscal years  beginning  after June 15,
1999.  Earlier  application  is  encouraged.  The statement is not to be applied
retroactively  to financial  statements of prior  periods.  The Company does not
believe the adoption of FAS 133 will have a material impact on the  consolidated
financial statements.

Recent Regulatory Developments

         Deposit Insurance Premiums.  Deposits of the Bank are currently insured
by the FDIC under the SAIF. The FDIC also maintains  another insurance fund, the
BIF,  which  primarily  insures  commercial  bank and some  state  savings  bank
deposits.  Applicable  law requires that the SAIF and BIF funds each achieve and
maintain a ratio of insurance reserves to total insured deposits equal to 1.25%.
In 1995,  the BIF reached this 1.25%  reserve  level,  and the FDIC  announced a
reduction in BIF premiums for most banks.  Based on this reduction,  the highest
rated  institutions  (approximately 92 percent of the nearly 11,000  BIF-insured
banks) will pay the statutory annual minimum of $2,000 for FDIC insurance. Rates
for all other  institutions  were  reduced  to $.04 per $100 as well,  leaving a
premium  range of $.03 to $.27 per $100 instead of the previous $.04 to $.31 per
$100. Currently,  SAIF-member  institutions pay deposit insurance premiums based
on a schedule of $0.00 to $0.27 per $100 of deposits.

         The assessment for the Bank was $22,000 as of September 30, 1998.

         FICO Assessment.  The Financing Corporation (FICO),  established by the
Competitive  Equality  Banking  Act of  1987,  is a  mixed-ownership  government
corporation  whose sole  purpose was to function as a financing  vehicle for the
Federal Savings & Loan Insurance  Corporation  (FSLIC).  Effective  December 12,
1991, as provided by the Resolution Trust Corporation Refinancing, Restructuring
and  Improvement  Act of  1991,  the  FICO's  ability  to  issue  new  debt  was
terminated.  Outstanding FICO bonds, which are 30-year  noncallable bonds with a
principal amount of approximately $8.1 billion, mature in 2017 through 2019.

         The FICO has assessment  authority,  separate from the FDIC's authority
to assess  risk-based  premiums  for deposit  insurance,  to collect  funds from
FDIC-insured  institutions  sufficient  to pay interest on FICO bonds.  The FDIC
acts as  collection  agent for the FICO.  The Deposit  Insurance  Funds Act 1996
(DIFA)  authorized the FICO to assess both BIF- and SAIF-insured  deposits,  and
required the BIF rate to equal one-fifth the SAIF rate through year-end 1999, or
until the insurance funds are merged, whichever occurs first.  Thereafter,  BIF-
and SAIF-insured deposits will be assessed at the same rate by FICO.

         The FICO  assessment  rate is adjusted  quarterly to reflect changes in
the assessment  bases of the respective funds based on quarterly Call Report and
Thrift Financial Report submissions. The quarterly FICO rates since enactment of
DIFA have ranged from 1.164 to 1.30 basis points for BIF  institutions  and 5.82
to 6.50 basis points for SAIF institutions.

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

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


Effect of Inflation and Changing Prices

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

Year 2000 Compliance

         The year 2000 has posed a unique set of challenges to those  industries
reliant on  information  technology.  As a result of methods  employed  by early
programmers,  many software  applications and operational programs may be unable
to distinguish the year 2000 from the year 1900. If not  effectively  addressed,
this problem could result in the production of inaccurate data, or, in the worst
cases,  the  inability  of the  systems  to  continue  to  function  altogether.
Financial  institutions  are  particularly  vulnerable  due  to  the  industry's
dependence on electronic data processing  systems.  In 1997, the Company started
the process of  identifying  the  hardware and  software  issues  required to be
addressed to assure year 2000  compliance.  The Company  began by assessing  the
issues  related to the year 2000 and the potential for those issues to adversely
affect the Company's operations and those of its subsidiaries.

         Since that time,  the Company has  established  a Year 2000  Compliance
Team (the  Team)  composed  of  representatives  from key areas  throughout  the
organization.  It is the  mission  of this Team to  identify  areas  subject  to
complications  related  to the  year  2000  and to  initiate  remedial  measures
designed to eliminate any adverse effects on the Company's operations.  The Team
has identified all mission-critical  software and hardware that may be adversely
affected by the year 2000 and has required vendors to represent that the systems
and products provided are or will be year 2000 compliant.

         The Company expects that all mission critical software will be upgraded
to achieve year 2000  compliance  and tested by December 31, 1998.  In addition,
the Team is developing  contingency plans to address systems which do not become
year 2000 compliant by December 31, 1998.

         Management has determined  that if a business  interruption as a result
of Year 2000 issue occurred, such an interruption could be material. The primary
effort  required to prevent a potential  business  interruption is to assure the
Company's  third  party  processor  is year  2000  compliant.  As a cost  saving
measure,  management has contracted  with a different  third party  processor to
convert data before June 30, 1999.  This third party  processor  has stated that
Year 2000 remediation and testing efforts have been successfully completed.

         The Company is committed to a plan for achieving  compliance,  focusing
not only on its own data processing systems, but also on its loan customers. The
Team has taken steps to educate and assist its customers with identifying  their
year 2000  compliance  problems.  In addition,  the Team has proposed policy and
procedure changes to help identify potential risks to the Company and to gain an
understanding  of how customers are managing the risks  associated with the year
2000.

         Management  believes that the  organization  has an effective year 2000
compliance program in place and that additional  expenditures  required to bring
its systems into  compliance  will not have a materially  adverse  effect on the
Company's  operations,  cash flow, or financial  condition.  Management  expects
total additional  out-of-pocket  expenditures to be approximately $131,000. This
includes costs to upgrade  equipment  specifically  for the purpose of year 2000
compliance  and  certain  administrative  expenditures.  However,  the year 2000
problem is  pervasive  and  complex  and can  potentially  affect  any  computer
process. Accordingly, no assurance can be given that year 2000 compliance can be
achieved without  additional  unanticipated  expenditures and uncertainties that
might affect future financial results.

         The Federal banking regulators have established standards for achieving
year 2000  compliance  for  federally  insured  depository  institutions.  If an
institution  fails  to  meet  any  of the  established  standards,  its  primary
regulator may issue an order  directing the  institution to cure the deficiency.
Until the deficiency cited in the regulator's  order is cured, the regulator may
restrict the  institution's  growth rate and take any action the regulator deems
appropriate.
<PAGE>

                              ---------------------
                              CORPORATE INFORMATION
                              ---------------------
<TABLE>
<S>                                                           <C>  

Holding Company                                               Form 10-KSB Annual Report
CSB Financial Group, Inc.                                     Copies of CSB Financial Group, Inc.'s Form
200 South Poplar Street                                       10-KSB annual report as filed with the
Centralia, Illinois 62801                                     Securities and Exchange Commission and other
                                                              published reports may be obtained without
Subsidiaries                                                  charge by writing our corporate headquarters:
Centralia Savings Bank
200 South Poplar Street                                                    CSB Financial Group, Inc.
Centralia, Illinois 62801                                                   200 South Poplar Street
                                                                           Centralia, Illinois 62801
Centralia SLA, Inc.                                                       Attention: K. Gary Reynolds
200 South Poplar Street
Centralia, Illinois 62801                                     Registrar and Transfer Agent
                                                              The Registrar and Transfer Company
Stock Information                                             ("Registrar")  maintains all stockholder records. 
The Common Stock of the Holding Company is                    Registrar handles stock transfer and registration,  
quoted on the Nasdaq  "SmallCap"  market under                address  changes, corrections/changes  in  
the  symbol  "CSBF"  since  its  subsidiary,                  taxpayer identification numbers, and Form 1099 
Centralia Savings Bank, converted to stock form               tax  reporting  questions.  If you  require  assistance 
in  October  1995.                                            assistance or have any questions, please contact
                                                              Registrar by mail or phone:
On October 5, 1995, the Company issued
1,035,000 shares of its Common Stock at a                                Registrar and Transfer Company
purchase price of $8.00 per share in connection                                10 Commerce Drive
with the conversion of the Savings Bank from a                             Cranford, New Jersey 07016
state chartered mutual savings bank to a state
chartered capital stock savings bank.  The closing            Annual Meeting
price per share for the Holding Company's                     The annual meeting of stockholders of CSB
Common Stock as reported on the Nasdaq                        Financial Group, Inc. will be held on January 8,
"SmallCap" market on November 23, 1998 was                    1999 at 10:00 a.m. at 801 12th Street, Carlyle,
$9.875.  The Holding Company has not paid                     Illinois.
cash dividends on its Common Stock.
                                                              Independent Auditors
Stock Pricing History                                         McGladrey & Pullen, LLP 
The following table sets forth the high and low               1806 Fox Drive 
sales  prices as  reported on the Nasdaq                      Champaign, Illinois 61820 
"SmallCap" market during the past year.

                                                              Special Counsel
Fiscal 1998                    High           Low             Schiff Hardin & Waite
--------------------------------------------------            7200 Sears Tower   
First Quarter                $ 14.00       $ 12.25            Chicago, Illinois 60606
Second Quarter               $13.625       $12.875                
Third Quarter                $ 14.00       $ 13.00
Fourth Quarter               $ 12.75       $  9.00
</TABLE>

<PAGE>


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

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

                                  A. John Byrne
                                     Retired

                                Michael Donnewald
                      President, Donnewald Distributing Co.

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

                                W. Harold Monken
                        Auto Dealer, Centralia, Illinois

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


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

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

                                K. Gary Reynolds
                      President and Chief Executive Officer

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

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

                                K. Gary Reynolds
                      President and Chief Executive Officer

                                Stephen J. Greene
                                 Vice President

                                Joanne S. Ticknor
                             Secretary and Treasurer


<PAGE>
                                                             


                            CSB FINANCIAL GROUP, INC.

                        Consolidated Financial Statements
                        With Independent Auditor's Report

                     Years Ended September 30, 1998 and 1997




<PAGE>


                            CSB FINANCIAL GROUP, INC.


                                    Contents


--------------------------------------------------------------------------------
INDEPENDENT AUDITOR'S REPORT                                                  
--------------------------------------------------------------------------------

CONSOLIDATED FINANCIAL STATEMENTS

   Consolidated balance sheets                                   

   Consolidated statements of income                                   

   Consolidated statements of stockholders' equity                          

   Consolidated statements of cash flows                              

   Notes to consolidated financial statements                       

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






<PAGE>










                          Independent Auditor's Report


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


We have audited the  accompanying  consolidated  balance sheets of CSB Financial
Group,  Inc. and  subsidiary as of September 30, 1998 and 1997,  and the related
consolidated statements of income,  stockholders' equity, and cash flows for the
years then ended. These consolidated financial statements are the responsibility
of the  Company's  management.  Our  responsibility  is to express an opinion on
these consolidated financial statements based on our audits.

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

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material  respects,  the consolidated  financial  position of CSB
Financial Group,  Inc. and subsidiary as of September 30, 1998 and 1997, and the
results  of their  operations  and their  cash flows for the years then ended in
conformity with generally accepted accounting principles.


/s/ McGladrey & Pullen, LLP



Champaign, Illinois
October 30, 1998
<PAGE>


CSB FINANCIAL GROUP, INC. and SUBSIDIARY
Consolidated Balance Sheets
September 30, 1998 and 1997
(in thousands, except share data)
<TABLE>

                                                                      1998       1997
---------------------------------------------------------------------------------------
<S>                                                                  <C>        <C>  
ASSETS
Cash and due from banks ..........................................   $   763    $ 1,687
Interest-bearing deposits ........................................       779        988
                                                                     ------------------
              Cash and cash equivalents ..........................     1,542      2,675
Securities:
   Available for sale ............................................    16,931     16,777
   Nonmarketable equity securities ...............................       215        210
Loans, net of allowance for loan losses of $171 in 1998 and
   $165 in 1997 ..................................................    26,111     27,134
Premises and equipment ...........................................       607        602
Accrued interest receivable ......................................       304        290
Intangible assets ................................................       600        660
Other assets .....................................................       113        186
                                                                     ------------------
         Total assets ............................................   $46,423    $48,534
                                                                     ==================

LIABILITIES AND STOCKHOLDERS'  EQUITY
LIABILITIES:
   Deposits:
      Demand .....................................................   $ 8,543    $ 9,073
      Savings ....................................................     3,387      3,395
      Time deposits > $100,000 ...................................     1,680      1,085
      Other time deposits ........................................    22,245     23,033
                                                                     ------------------
              Total deposits .....................................    35,855     36,586
   Other liabilities .............................................       169         52
   Deferred income taxes .........................................       270        244
                                                                     ------------------
              Total liabilities ..................................    36,294     36,882
                                                                     ------------------

COMMITMENTS, CONTINGENCIES AND CREDIT RISK

STOCKHOLDERS' EQUITY
   Preferred stock, $0.01 par value; 100,000 shares authorized;
      none issued and outstanding
   Common stock, $0.01 par value; authorized 2,000,000 shares;
      1,035,000 shares issued ....................................        10         10
   Paid-in capital ...............................................     7,823      7,813
   Retained earnings .............................................     6,384      6,039
   Unrealized gain on securities available for sale, net of income
      tax effect .................................................       154        110
   Unearned employee stock ownership plan shares .................      (180)      (202)
   Management recognition plan ...................................      (551)      (589)
                                                                     ------------------
                                                                      13,640     13,181
   Less cost of treasury stock; 1998 302,080 shares;
      1997 132,775 shares ........................................    (3,511)    (1,529)
                                                                     ------------------
              Total stockholders' equity .........................    10,129     11,652
                                                                     ------------------
              Total liabilities and stockholders' equity .........   $46,423    $48,534
                                                                     ==================
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>


CSB FINANCIAL GROUP, INC. and SUBSIDIARY
CONSOLIDATED Statements of Income
Years Ended September 30, 1998 and 1997
(in thousands, except share data)
<TABLE>


                                                                     1998    1997
----------------------------------------------------------------------------------
<S>                                                                 <C>     <C>  
Interest income:
   Loans and fees on loans .......................................  $2,187  $2,164
   Securities:
      Taxable ....................................................     988     936
      Nontaxable .................................................      53      35
   Other .........................................................      76     118
                                                                    --------------
                                                                     3,304   3,253
                                                                    --------------
Interest expense:
   Deposits ......................................................   1,638   1,642
                                                                    --------------
              Net interest income ................................   1,666   1,611

Provision for loan losses ........................................      63      90
                                                                    --------------
              Net interest income after  provision for loan losses   1,603   1,521
                                                                    --------------

Noninterest income:
   Service charges on deposits ...................................      81      72
   Gain on sale of securities ....................................       5      54
   Other .........................................................      48      28
                                                                    --------------
                                                                       134     154
                                                                    --------------
Noninterest expense:
   Compensation and employee benefits ............................     631     628
   Occupancy and equipment .......................................      89      91
   Data processing ...............................................     103      95
   SAIF deposit insurance ........................................      22      20
   Professional fees .............................................      83     128
   Other .........................................................     345     357
                                                                    --------------
                                                                     1,273   1,319
                                                                    --------------

              Income before income taxes .........................     464     356
Income taxes .....................................................     119     111
                                                                    --------------
              Net income .........................................  $  345  $  245
                                                                    ==============
Earnings per share:
   Basic .........................................................  $ 0.43  $ 0.28
                                                                    ==============

   Diluted .......................................................  $ 0.42  $ 0.27
                                                                    ==============
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>


CSB FINANCIAL GROUP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Years Ended September 30, 1998 and 1997
(In thousands, except share data)

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

                                                      Preferred Common   Paid-In
                                                        Stock    Stock   Capital
                                                       -------------------------

Balance at September 30, 1996 .......................  $  - -   $   10   $ 7,586

   Employee stock ownership plan shares allocated ...     - -      - -        20
   Purchase of treasury stock .......................     - -      - -       - -
   Grant of 62,100 shares for management
      recognition plan ..............................     - -      - -       207
   Management recognition plan shares allocated
   Change in unrealized gain (loss) on securities
      available for sale ............................     - -      - -       - -
   Net income .......................................     - -      - -       - -
                                                       -------------------------

Balance at September 30, 1997 .......................     - -       10     7,813

   Employee stock ownership plan shares allocated ...     - -      - -        10
   Purchase of treasury stock .......................     - -      - -       - -
   Management recognition plan shares allocated .....     - -      - -       - -
   Change in unrealized gain (loss) on securities
      available for sale ............................     - -      - -       - -
   Net income .......................................     - -      - -       - -
                                                       -------------------------

Balance at September 30, 1998 .......................  $  - -   $   10 $   7,823
                                                       =========================
See Notes to Consolidated Financial Statements.
<PAGE>





--------------------------------------------------------------------------------
          Unrealized    Unearned
          Gain (Loss)   Employee
         on Securities   Stock       Management
Retained   Available    Ownership    Recognition   Treasury
Earnings   for Sale    Plan Shares      Plan         Stock       Total
--------------------------------------------------------------------------------

$  5,794    $   (24)   $    (582)    $     - -     $     - -    $ 12,784

     - -        - -           49           - -           - -          69
     - -        - -          331           - -        (1,943)     (1,612)

     - -        - -          - -          (621)          414         - -
     - -        - -          - -            32           - -          32

     - -        134          - -           - -           - -         134
     245        - -          - -           - -           - -         245
------------------------------------------------------------------------

   6,039         110        (202)         (589)       (1,529)     11,652

     - -         - -          22           - -           - -          32
     - -         - -         - -           - -        (1,982)     (1,982)
     - -         - -         - -            38           - -          38

     - -          44         - -           - -           - -          44
     345         - -         - -           - -           - -         345
------------------------------------------------------------------------

$  6,384     $   154     $  (180)      $  (551)     $ (3,511)   $ 10,129
========================================================================
<PAGE>

                                                                  
CSB FINANCIAL GROUP, INC. and SUBSIDIARY
CONSOLIDATED Statements of Cash Flows
Years Ended September 30, 1998 and 1997
(in thousands)
<TABLE>
                                                                         1998        1997
-------------------------------------------------------------------------------------------
<S>                                                                     <C>         <C>  
Cash Flows from Operating Activities
   Net income ......................................................    $   345     $   245
   Adjustments to reconcile net income to net cash provided by
      operating activities:
      Provision for loan losses ....................................         63          90
      Provision for depreciation ...................................         38          40
      Amortization of intangible assets ............................         60          62
      Employee stock ownership plan compensation expense ...........         32          69
      Management recognition plan compensation expense .............         38          32
      Deferred income taxes ........................................        - -          80
      Gain on sale of securities ...................................         (5)        (54)
      Loss on sale of other real estate owned ......................          3         - - 
      Amortization and accretion of securities .....................         (1)        (36)
      Change in assets and liabilities:
        (Increase) decrease in accrued interest receivable .........        (14)         41
        Decrease in other assets ...................................         46          18
        Increase (decrease) in other liabilities ...................        117        (245)
                                                                        -------------------
              Net cash flows from operating activities .............        722         342
                                                                        -------------------
Cash Flows from Investing Activities
   Securities available for sale:
      Purchases ....................................................    (13,004)    (10,124)
      Proceeds from sales ..........................................      5,154       2,726
      Proceeds from maturities and paydowns ........................      7,772       6,600
   Securities held to maturity:
      Proceeds from sales ..........................................        - -         359 
   Nonmarketable equity securities:
      Purchases of nonmarketable equity securities .................         (5)        (45)
   (Increase) decrease in securities purchased under agreements
      to resell ....................................................        - -         300
   Loan originations, net of principal payments on loans ...........        981        (321)
   Proceeds from the sale of other real estate owned ...............          3
   Purchases of premises and equipment .............................        (43)        (48)
                                                                        -------------------
              Net cash flows from investing activities .............        858        (553)
                                                                        -------------------
Cash Flows from Financing Activities
   Net (decrease) in demand deposits, NOW accounts
      passbook savings accounts ....................................    $  (538)    $   (65)
   Net (decrease) in time deposits .................................       (193)       (203)
   Purchase of treasury stock ......................................     (1,982)     (1,612)
                                                                        -------------------
              Net cash flows from financing activities .............     (2,713)     (1,880)
                                                                        -------------------

              Net decrease in cash and cash equivalents ............     (1,133)     (2,091)
Cash and cash equivalents, beginning of year .......................      2,675       4,766
                                                                        -------------------
Cash and cash equivalents, end of year .............................    $ 1,542     $ 2,675
                                                                        ===================
Cash paid during the year for:
   Interest ........................................................    $ 1,626     $ 1,643
                                                                        ===================
   Income taxes, net of refunds ....................................    $    15     $    47
                                                                        ===================
Supplemental Disclosures of Investing and Financing Activities:
   Change in unrealized gain (loss) on securities available for sale    $    70     $   217
                                                                        ===================
   Change in deferred income taxes attributable to the unrealized
      gain (loss) on securities available for sale .................    $    26     $    83
                                                                        ===================

Transfer of securities from held to maturity to available for sale .    $   - -     $ 1,657
                                                                        ===================

Transfer to other real estate owned ................................    $   - -     $    28
                                                                        ===================

Loans originated to facilitate sale of other real estate owned .....    $    21     $   - -
                                                                        ===================
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>


CSB FINANCIAL GROUP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)
--------------------------------------------------------------------------------

                            
Note 1.  Summary of Significant Accounting Policies

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

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

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

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

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

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

Nonmarketable  equity securities  Nonmarketable equity securities consist of the
Banks'  required  investment in the capital stock of the Federal Home Loan Bank.
This   investment  is  carried  at  cost  as  the  fair  value  is  not  readily
determinable.

Loans  Loans are  stated  at the  principal  amount  outstanding  less  unearned
interest income and an allowance for loan losses. Interest income on principally
all loans is credited to income based on the principal balance outstanding.

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


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

Loans are considered  impaired when, based on current information and events, it
is probable the Company will not be able to collect all amounts due. The portion
of the allowance for loans losses applicable to impaired loans would be computed
based on the present  value of the  estimated  future cash flows of interest and
principal  discounted at the loan's effective interest rate or on the fair value
of the collateral for collateral  dependent  loans. The entire change in present
value of  expected  cash  flows of  impaired  loans  or of  collateral  value is
reported as bad debt  expense in the same manner in which  impairment  initially
was  recognized  or as a  reduction  in the  amount  of bad  debt  expense  that
otherwise would be reported. Management had not classified any loans as impaired
as of September 30, 1998 or 1997.

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

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

Intangible assets Core deposit  intangible and goodwill were recorded as part of
the acquisition of the Carlyle branch in 1996. Core deposit  intangible is being
amortized by the straight line method over a ten year period.  Goodwill is being
amortized by the straight line method over a fifteen year period.

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

Earnings per common share In 1997,  the  Financial  Accounting  Standards  Board
issued  Statement No. 128,  "Earnings per Share" (FAS 128). FAS 128 replaced the
calculation  of  primary  and fully  diluted  earnings  per share with basic and
diluted earnings per share.  Unlike primary  earnings per share,  basic earnings
per share  excludes any dilutive  effects of options,  warrants and  convertible
securities.  Diluted  earnings  per  share  is very  similar  to the  previously
reported  fully diluted  earnings per share.  All earnings per share amounts for
all periods have been presented,  and where appropriate,  restated to conform to
the FAS 128  requirements.  Basic earnings per share is computed by dividing net
income for the year by the  weighted  average  number of shares  outstanding  of
797,237 and 874,661 for 1998 and 1997, respectively.  Diluted earnings per share
is determined by dividing net income for the year by the weighted average number
of shares of common stock and common stock equivalents outstanding. Common stock
equivalents  assume  exercise  of stock  options and use of proceeds to purchase
treasury stock at the average market price for the period. Unallocated shares of
the ESOP are not considered outstanding. The weighted average shares outstanding
for  purposes of computing  diluted  earnings per share were 824,296 and 900,784
for 1998 and 1997, respectively.

Reclassifications Certain reclassifications have been made to the balances as of
September  30, 1997,  with no effect on net income,  to be  consistent  with the
classifications adopted for September 30, 1998.
<PAGE>


Effect of New Accounting Standards

   Reporting Comprehensive Income Statement of Financial Accounting Standard No.
   130, "Reporting  Comprehensive  Income" (FAS 130), was issued in July 1997 by
   the Financial Accounting Standards Board. The standard establishes  reporting
   of   comprehensive   income  for  general   purpose   financial   statements.
   Comprehensive  income is  defined  as the  change  in  equity  of a  business
   enterprise  during a period  and all  other  events  and  circumstances  from
   nonowner sources.  The Standard is effective for financial  statement periods
   beginning  after December 15, 1997. The Company does not believe the adoption
   of the Standard  will have a material  impact on the  consolidated  financial
   statements.

   Disclosures about Segments of an Enterprise and Related Information Statement
   of Financial  Accounting Standard No. 131,  "Disclosures about Segments of an
   Enterprise and Related Information" (FAS 131), was issued in July 1997 by the
   Financial  Accounting  Standards Board. The standard requires the Corporation
   to disclose the factors used to identify  reportable  segments  including the
   basis of  organization,  differences  in products  and  services,  geographic
   areas, and regulatory  environments.  FAS 131 additionally requires financial
   results  to be  reported  in the  financial  statements  for each  reportable
   segment.  The Standard is effective for financial statement periods beginning
   after  December  15, 1997.  The Company only has one segment and,  therefore,
   this Standard will have no effect on the consolidated financial statements.

   Accounting for Derivative  Instruments  and Hedging  Activities  Statement of
   Financial Accounting Standard No. 133, "Accounting for Derivative Instruments
   and  Hedging  Activities"  (FAS 133)  establishes  accounting  and  reporting
   standards  for   derivative   instruments,   including   certain   derivative
   instruments  embedded  in other  contracts  and for  hedging  activities.  It
   requires  that an  entity  recognize  all  derivatives  as  either  assets or
   liabilities  in  the  statement  of  financial  position  and  measure  those
   instruments at fair value.  The accounting for changes in the fair value of a
   derivative  depends on the intended use of the  derivative  and the resulting
   designation. This statement applies to all entities. FAS 133 is effective for
   all fiscal quarters of fiscal years  beginning  after June 15, 1999.  Earlier
   application is encouraged.  The statement is not to be applied  retroactively
   to financial  statements of prior  periods.  The Company does not believe the
   adoption of FAS 133 will have a material impact on the consolidated financial
   statements.

Note 2.  Securities

Amortized cost and fair values of securities available for sale are as follows:
<TABLE>

                                                            Gross       Gross
                                                 Amortized Unrealized Unrealized  Fair
September 30, 1998                                  Cost     Gains     Losses     Value
                                                 ---------------------------------------
<S>                                              <C>       <C>        <C>        <C>   


Obligations of states and political
   subdivisions ...............................   $ 1,643   $    44   $     3    $ 1,684
U.S. Government and agency ....................     9,752       123       - -      9,875
U.S. Treasury .................................     4,000        16       - -      4,016
Mortgage backed securities ....................     1,288        73         5      1,356
                                                  --------------------------------------
                                                  $16,683   $   256   $     8    $16,931
                                                  ======================================

September 30, 1997

Obligations of states and political
   subdivisions ...............................   $   748   $    22   $   - -    $   770
U.S. Government and agency ....................     8,906        61       - -      8,967
U.S. Treasury .................................     5,713         4        15      5,702
Mortgage backed securities ....................     1,232       106       - -      1,338
                                                  --------------------------------------
                                                  $16,599   $   193   $    15    $16,777
                                                  ======================================
</TABLE>
<PAGE>


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

                                                        As of September 30, 1998
                                                        ------------------------
                                                          Available for Sale
                                                          ------------------
                                                          Amortized   Fair
                                                             Cost     Value
                                                          ------------------

Less than one year ......................................  $ 2,999   $ 3,008
Due after one year through five years ...................    7,547     7,613
Due after five years through ten years ..................    4,645     4,749
Due after ten years .....................................      204       205
Mortgage-backed securities ..............................    1,288     1,356
                                                           -----------------
                                                           $16,683   $16,931
                                                           =================

During the first  quarter of the year ending  September  30,  1997,  the Company
transferred  $1,657  of  securities   classified  as   held-to-maturity  to  the
available-for-sale classification and recorded $27 as a component of equity, net
of $30 of deferred taxes.  In accordance  with the  requirements of Statement of
Financial  Accounting  Standards No. 115, these securities are now accounted for
at fair value.

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

The  Company  had  securities  with a  carrying  value of  $150,159  pledged  as
collateral for public deposits or for other purposes as required or permitted by
law for the years ended  September  30,  1998.  The  Company  had no  securities
pledged during 1997.

Gross realized  gains and losses from the sale of securities  available for sale
follow:

                                                   Years Ended
                                                  September 30,
                                                ----------------
                                                 1998      1997
                                                ----------------

Gross gains ...........................         $   6     $   54
Gross losses ..........................            (1)       - -           
                                                ----------------
              Net gain ................         $   5 $       54
                                                ================
<PAGE>


Note 3.  Loans

Loans are summarized as follows:

                                                      September 30,
                                                    ------------------
                                                     1998       1997
                                                    ------------------

Mortgage loans:
   One to four family ...........................   $19,295    $19,044
   Commercial real estate .......................     1,120        969
   Other loans secured by real estate ...........       283        444
                                                    ------------------
              Total mortgage loans ..............    20,698     20,457
                                                    ------------------

Commercial and consumer loans:
   Commercial loans .............................       625      1,013
   Consumer loans ...............................     4,095      4,771
   Home equity lines of credit ..................       678        816
   Share loans ..................................       193        266
                                                    ------------------
              Total commercial and consumer loans     5,591      6,866
                                                    ------------------

Less:
   Allowance for loan losses ....................      (171)      (165)
   Deferred loan fees ...........................        (6)       (15)
   Unearned income on consumer loans ............        (1)        (9)
                                                    ------------------
                                                       (178)      (189)
                                                    ------------------

              Loans, net ........................   $26,111    $27,134
                                                    ==================

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

At  September  30, 1998 and 1997,  the Company had  approximately  $410,000  and
$198,000 of loans for which the accrual of interest had been discontinued.

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

Balance as of October 1, 1997 ..............................            $   998
   New loans ...............................................                222
   Repayments ..............................................               (170)
                                                                        -------

Balance as of September 30, 1998 ...........................            $ 1,050
                                                                        =======
<PAGE>


Note 4.  Allowance for Loan Losses

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

                                                     Year Ended September 30,
                                                     ------------------------
                                                         1998       1997
                                                     ------------------------

Balance, beginning ..........................          $   165     $  117
   Provision charged to income ..............               63         90
   Charge-offs ..............................              (61)       (43)
   Recoveries ...............................                4          1
                                                       ------------------
Balance, ending .............................          $   171     $  165
                                                       ==================

Note 5.  Premises and Equipment

Premises and equipment consist of:

                                                                 September 30,
                                                              ------------------
                                                                1998      1997
                                                              ------------------

Land ......................................................   $   136   $   136
Office building ...........................................       479       476
Furniture and equipment ...................................       429       389
                                                              -----------------
                                                                1,044     1,001
Less accumulated depreciation .............................      (437)     (399)
                                                              -----------------

                                                              $   607   $   602
                                                              =================


Note 6.  Deposits

At September 30, 1998, the scheduled maturities of time deposits are as follows:

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

   1999                                                             $   17,583
   2000                                                                  3,773
   2001                                                                  1,057
   2002                                                                    877
   2003 and thereafter                                                     635
                                                                    ----------
                                                                    $   23,925
                                                                    ==========

Note 7.  Income Taxes

Income taxes consist of:

                                                     For the Year Ended
                                                         September 30,
                                                   ----------------------
                                                     1998          1997
                                                   ----------------------

Current .................................          $   119       $     31
Deferred ................................              - -             80
                                                   ----------------------

              Total .....................          $   119       $    111
                                                   ======================

The Company and its  subsidiary  file  consolidated  federal income tax returns.
Under  provisions  of the  Internal  Revenue  Code and  similar  sections of the
Illinois  income  tax  law for the  years  beginning  before  January  1,  1996,
qualifying thrifts could claim bad debt deductions based on the greater of (1) a
specified  percentage  of  taxable  income,  as  defined,  or  (2)  actual  loss
experience.
<PAGE>


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

Retained earnings at September 30, 1998 and 1997, includes approximately $867 of
the tax reserve which  accumulated  prior to 1988, for which no deferred federal
income tax liability has been recognized.  This amount  represents an allocation
of income to bad debt deductions for tax purposes only.  Reduction of amounts so
allocated  for purposes  other than tax bad debt losses or  adjustments  arising
from  carryback of net  operating  losses  would create  income for tax purposes
only, which would be subject to the then current  corporate income tax rate. The
unrecorded  deferred income tax liability on the above amounts was approximately
$336 as of September 30, 1998 and 1997.

Income tax expense differed as follows:

                                                                   Year Ended 
                                                                  September 30,
                                                                 ---------------
                                                                  1998     1997
                                                                 ---------------

Statutory rate applied to earnings before income tax ........... $  158  $  121
Increase in income taxes resulting from:
   Tax exempt interest income ..................................    (18)    (13)
   Other .......................................................    (21)      3
                                                                 --------------

                                                                 $  119  $  111
                                                                 ==============

The tax effects of  temporary  differences  that give rise to the  deferred  tax
assets and deferred tax liabilities are as follows:

                                                         Year Ended 
                                                        September 30,
                                                       ---------------
                                                         1998    1997
                                                       ---------------

Allowance for loan losses - book ....................  $   66   $   64
Illinois net operating loss carryforward ............      22       43
                                                       ---------------
              Total deferred tax assets .............      88      107
                                                       ---------------

Unrealized gain on securities available for sale ....     (94)     (68)
Allowance for loan losses - tax .....................     (92)     (76)
Cash basis adjustment ...............................     (95)     (96)
FHLB stock basis ....................................      (7)      (7)
Premises and equipment basis ........................     (23)     (24)
Other ...............................................     (47)     (80)
                                                       ---------------
              Total deferred tax liabilities ........    (358)    (351)
                                                       ---------------

              Net deferred tax liabilities ..........  $ (270) $  (244)
                                                       ===============

<PAGE>


Note 8.  Fair Value of Financial Instruments

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

The following table reflects a comparison of carrying values and the fair values
of the financial instruments:

                                   September 30, 1998  September 30, 1997
                                   ------------------ -------------------
                                    Carrying   Fair   Carrying  Fair
                                      Value    Value    Value    Value
                                     ----------------------------------

Assets:
   Cash and cash equivalents ......  $ 1,542 $  1,542 $  2,675 $  2,675
   Securities available for sale ..   16,931   16,931   16,777   16,777
   Nonmarketable equity securities       215      215      210      210
   Accrued interest receivable ....      304      304      290      290
   Loans ..........................   26,111   26,013   27,134   27,210
Liabilities:
   Deposits .......................   35,855   35,909   36,586   36,649
   Accrued interest payable .......       12       12       13       13

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

Cash and cash  equivalents The carrying values reported in the balance sheet for
cash and cash  equivalents,  including  cash and due  from  banks  and  interest
earning deposits approximate their fair values.

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

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

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

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


Note 9.  Capital Ratios

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

Quantitative  measures  established  by  regulation to ensure  capital  adequacy
require the Bank to maintain  minimum amounts and ratios (set forth in the table
below)  of  total  and  Tier  I  capital  (as  defined  in the  regulations)  to
risk-weighted assets (as defined), and of Tier I capital (as defined) to average
assets (as defined).  Management  believes,  as of September 30, 1998,  that the
Bank meets all capital adequacy requirements to which it is subject.

As of September 30, 1998, the most recent  notification from the Federal Deposit
Insurance  Corporation  categorized  the  Bank as  well  capitalized  under  the
regulatory  framework  for  prompt  corrective  action.  To  be  categorized  as
adequately capitalized,  the Bank must maintain minimum total risk-based, Tier I
risk-based,  and Tier I leverage ratios as set forth in the table.  There are no
conditions  or events since that  notification  that  management  believes  have
changed the Bank's category.
<TABLE>
                                                                                                To Be Well
                                                                                             Capitalized Under
                                                                        For Capital          Prompt Corrective
                                                  Actual             Adequacy Purposes       Action Provisions
                                          ------------------------------------------------------------------------
                                             Amount      Ratio       Amount      Ratio       Amount      Ratio
                                          ------------------------------------------------------------------------
<S>                                       <C>            <C>       <C>           <C>      <C>            <C>
As of September 30, 1998:
Total Capital (to Risk Weighted
   Assets)
      Consolidated                        $      9,546      46.2% $      1,655       8.0%       N/A
      Bank                                $      9,239      44.7% $      1,655       8.0% $      2,069      10.0%
Tier I Capital (to Risk Weighted
   Assets)
      Consolidated                        $      9,375      45.3% $        827       4.0%       N/A
      Bank                                $      9,067      43.8% $        827       4.0% $      1,241       6.0%
Tier I Capital (to Average
   Adjusted Assets)
      Consolidated                        $      9,375      19.8% $      1,899       4.0%       N/A
      Bank                                $      9,067      19.4% $      1,869       4.0% $      2,337       5.0%

As of September 30, 1997:
Total Capital (to Risk Weighted
   Assets)
      Consolidated                        $     11,047     51.17% $      1,727       8.0%       N/A
      Bank                                $      8,777     40.96% $      1,714       8.0% $      2,143      10.0%
Tier I Capital (to Risk Weighted
   Assets)
      Consolidated                        $     10,882     50.40% $        864       4.0%       N/A
      Bank                                $      8,612     40.19% $        857       4.0% $      1,286       6.0%
Tier I Capital (to Average
   Adjusted Assets)
      Consolidated                        $     10,882     22.94% $      1,897       4.0%       N/A
      Bank                                $      8,612     19.04% $      1,809       4.0% $      2,261       5.0%
</TABLE>
<PAGE>


Note 10. Officer, Director and Employee Benefit Plans

Employee Stock Ownership Plan (ESOP) In conjunction with the conversion, an ESOP
was created and 82,800 shares of the Company's  stock were  purchased for future
allocation to employees. The purchase was funded with a loan from the Company.

Shares are allocated to all eligible  employees as the debt is repaid based on a
prorata  share of total  eligible  compensation.  Employees  21 or older with at
least  1,000  hours  of  service  in a  twelve  month  period  are  eligible  to
participate.  Benefits  will vest over a five year period and in full after five
years of qualified service.

As shares  are  committed  to be  released  from  unallocated  shares,  the Bank
recognizes compensation expense equal to the current market price of the shares,
and the shares  become  outstanding  for  purposes of  calculating  earnings per
share. The Bank recognized  compensation expense for the ESOP of $32 and $69 for
the years ended September 30, 1998 and 1997, respectively.

Dividends  received,  if any, by the ESOP on unallocated shares will be used for
debt service.

In July 1997,  the Company  repurchased  41,400  shares of common stock from the
ESOP.  The ESOP  used  the  proceeds  received  from the  repurchase  to  reduce
outstanding debt to the Company. The balance in unearned ESOP shares was reduced
by the cost of the shares sold to the Company.

The following table reflects the shares held by the plan:

                                                                  September 30,
                                                                ----------------
                                                                  1998     1997
                                                                ----------------

Shares allocated ..............................................  17,029   11,968
Shared released to be allocated ...............................   1,842    4,324
Unreleased shares (Fair value as of September 30, 1998 and 1997
   $281 and $309) .............................................  22,529   25,108
                                                                ----------------

                                                                 41,400   41,400
                                                                ================

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

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

Profit  Sharing  Plan  The  Bank  has  a  noncontributory  defined  contribution
profit-sharing  plan for all  employees who have attained age 21 and one year of
service. Nondeductible voluntary contributions are permitted, but none have been
made to date. The Board of Directors  determines the annual  contribution to the
plan which is allocated to those employees who worked more than 500 hours during
the  plan  year or who are  employed  at the end of the plan  year  based on the
prorata share of eligible compensation for the plan year.
There have been no  contributions  for the years  ended  September  30, 1998 and
1997.

Management  Recognition  Plan (MRP) The MRP was approved as of October 10, 1996.
The MRP purchased, with funds provided by the Company, 62,100 shares in the open
market during January 1997. Directors,  officers, and employees become vested in
the shares of common stock awarded to them under the MRP at a rate of 20 percent
per year,  commencing  one year  after the grant  date,  and 20  percent on each
anniversary  date thereof for the following four years. As of September 30, 1998
and 1997,  18,009 shares and 18,630 shares,  respectively,  have been awarded to
officers,  directors,  and  employees.  Compensation  expense is recognized on a
straight line basis over the vesting period for shares awarded under the plan.
<PAGE>


Stock Rights In June 1997,  the Board of Directors  adopted a Rights  Agreement.
Under  the  Agreement,  the  Board  declared  a  dividend  of one right for each
outstanding  share of Common Stock to  stockholders  of record on June 23, 1997.
There was no fair  value  attached  to these  rights as of the grant  date.  The
rights are not exercisable  until the Distribution  date which is defined as the
earlier of the tenth business day after a public  announcement  that a person or
group of  affiliated or associated  persons  acquired,  or obtained the right to
acquire, beneficial ownership of 15% or more of the outstanding shares of Common
Stock of the  Company  or the  tenth  business  day after  the  commencement  or
announcement of an intention to make a tender offer or exchange offer that would
result in any person or group or affiliated or  associated  persons  becoming an
acquiring person.  Each right enables the registered holder to purchase from the
Company one share of Common Stock at a price of $36.

Stock  Option  Plans The  Company  has two stock  option  plans  which may grant
options to purchase  common  stock at the market price on the date of the grant.
The options will be granted by a committee comprised of directors.

Options for up to 103,500 shares may be granted to employees and directors under
the Stock Option Plan approved May 22, 1996 and options for up to 103,500 shares
may be granted to key employees and directors under the 1997 Nonqualified  Stock
Option Plan.

The  options  under the Stock  Option Plan  become  exercisable  at a rate of 20
percent per year commencing one year after the grant date. At September 30, 1998
and 1997, 35,875 and 25,875 options had been granted, respectively.

The  terms of the  options  under the  Nonqualified  Stock  Option  Plan and the
exercise schedule are at the discretion of the Committee.  At September 30, 1998
and 1997, 25,875 options had been granted.

A summary of the status of the  Company's  fixed  stock  option plan and changes
during the years ending on those dates is presented below:
<TABLE>
                                                                 September 30,
                                               --------------------------------------------
                                                        1998                  1997
                                               -------------------     --------------------
                                                          Weighted                Weighted
                                                           Average                 Average
                                                          Exercise                Exercise
                                                 Shares     Price      Shares      Price
                                               ------------------------------------------
<S>                                            <C>        <C>          <C>        <C>   
Options outstanding, beginning
   of the year                                   51,750    $  9.22     25,875    $     9.08
Options granted                                  10,000      12.51     25,875          9.36
Options exercised                                   - -        - -        - -           - -
                                               --------------------------------------------
Options outstanding, end of year                 61,750    $  9.75     51,750    $     9.22
                                               ============================================

Options exercisable                              15,525                 5,175
Weighted-average fair value of options
   granted during the year                     $   4.37              $   3.33
</TABLE>

The  fair  value  of each  grant  is  estimated  at the  grant  date  using  the
Black-Sholes   option-pricing   model   with  the   following   weighted-average
assumptions for grants in 1998 and 1997:  dividend rate of 0%; price  volatility
of 20.44% and a risk free interest rate of 4.59%.

Employee  Stock Plans At September  30, 1997,  the Company has three stock based
compensation  plans  which were  described  above.  As  permitted  by  generally
accepted  accounting  principles,  grants  under these plans are  accounted  for
following  APB  Opinion  No. 25 and  related  interpretations.  Accordingly,  no
compensation  expense was  recognized for grants under the Stock Option Plan and
$38 and $32 of compensation  expense was recognized  under the MRP for the years
ended September 30, 1998 and 1997, respectively.
<PAGE>


Had  compensation  cost for the  stock-based  compensation  plan been determined
based on the grant date fair  values of awards  (the  method  described  in FASB
Statement No. 123), reported net income and earnings per common share would have
been reduced to the proforma amounts shown below.

                                                  1998      1997
                                                 ----------------
Net income:
   As reported .........................         $  345    $  245
   Proforma ............................            302       193

Basic earnings per share:
   As reported .........................         $ 0.43    $ 0.28
   Proforma ............................           0.38      0.22

Diluted earning per share:
   As reported .........................         $ 0.42    $ 0.27
   Proforma ............................           0.37      0.21

The following table summarizes information about fixed stock options outstanding
at September 30, 1998:

                                                     Options
                        Options Outstanding        Exercisable
                   ----------------------------------------------
                                     Weighted
                                      Average
                                     Remaining
     Exercise          Number       Contractual       Number
      Price         Outstanding        Life        Exercisable
-----------------------------------------------------------------

$             9.08         25,875             7.7         10,350
              9.36         25,875             8.1          5,175
             12.51         10,000             9.0

                   ----------------------------------------------
                           61,750             8.1         15,525
                   ==============================================

Note 11. Commitments, Contingencies and Credit Risk

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

The Bank is a party to financial instruments with  off-balance-sheet risk in the
normal course of business to meet the financing  needs of its  customers.  These
financial  instruments  include commitments to extend credit and standby letters
of credit.  Those instruments  involve,  to varying degrees,  elements of credit
risk in excess of the amount  recognized in the balance sheet.  The  contractual
amounts of those  instruments  reflect the extent of involvement the Bank has in
particular classes of financial instruments.

The Bank's exposure to credit loss in the event of  nonperformance  by the other
party to the financial  instrument for  commitments to extend credit and standby
letters of credit  written is  represented  by the  contractual  amount of those
instruments.  The Bank uses the same credit  policies in making  commitments and
conditional obligations as it does for on-balance-sheet  instruments.  Financial
instruments  whose contract amounts  represent credit risk at September 30, 1998
follows:
<TABLE>
                                                                                                 Range of Rates
                                            Variable Rate      Fixed Rate          Total          on Fixed Rate
                                             Commitments      Commitments       Commitments        Commitments
                                           ------------------------------------------------------------------------
<S>                                        <C>              <C>              <C>                 <C>   
Commitment to extend credit:
   1998                                    $            275 $          1,008 $           1,283       8.25% - 11.5%
   1997                                                 330              933             1,263      8.25% - 11.25%
</TABLE>
<PAGE>


The Bank generally originates single-family residential loans within its primary
lending area, Marion County. The Bank's underwriting policies require such fixed
rate loans to be made at 80% loan-to-value and variable rate loans to be made at
85% loan-to-value  based upon appraised values unless private mortgage insurance
is obtained. These loans are secured by the underlying properties.

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