SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549



                                    FORM 10-Q




(X)      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
         EXCHANGE ACT OF 1934

         For the quarterly period ended March 31, 1998


                                       OR

( )      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
         SECURITIES EXCHANGE ACT OF 1934

         For the transition period from _________  to  _________


                         Commission File Number 0-26574


                           DAMEN FINANCIAL CORPORATION
                           ---------------------------
             (Exact name of registrant as specified in its charter)


        Delaware                                               36-4029638
        --------                                               ----------
(State or other jurisdiction                                 I.R.S. Employer
   of incorporation or                                       Identification
     organization)                                                Number



200 West Higgins Road, Schaumburg, Illinois                      60195
-------------------------------------------                      -----
(Address of Principal executive offices)                       (Zip Code)

Registrant telephone number, including area code:            (847) 882-5320
                                                             --------------


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

         As of May 8, 1998  there  were  3,123,154  shares  of the  Registrant's
common stock issued and outstanding.

Transitional Small Business Disclosure Format(check one):   Yes [ ]   No  [X]


<PAGE>



                           DAMEN FINANCIAL CORPORATION

                                    FORM 10-Q

                                TABLE OF CONTENTS



Part I. FINANCIAL INFORMATION                                               PAGE
                                                                            ----

Item 1. Financial Statements

        Consolidated Statements of Financial Condition at
        March 31, 1998 (Unaudited) and September 30, 1997 .................    4

        Consolidated Statements of Earnings for the three and six
        months ended March 31, 1998 and 1997 (unaudited) ..................    5

        Consolidated Statements of Changes in
        Stockholders' Equity for the six months
        ended March 31, 1998 (unaudited) ..................................    6

        Consolidated Statements of Cash Flows for the six
        months ended March 31, 1998 and 1997 (unaudited) ..................    7

        Notes to Unaudited Consolidated Financial Statements ..............  8-9


Item 2. Management's Discussion and Analysis of Financial
        Condition and Results of Operations ...............................10-14


Part II. OTHER INFORMATION 15


         Signatures .......................................................   16

         Index to Exhibits ................................................   17

         Earnings Per Share Analysis (Exhibit 11) .........................   18

         Financial Data Schedule (Exhibit 27) .............................   19


                                       -2-

<PAGE>








                         PART I - FINANCIAL INFORMATION










                                       -3-

<PAGE>


                           DAMEN FINANCIAL CORPORATION
                                AND SUBSIDIARIES

                 Consolidated Statements of Financial Condition


                                                     March 31,     September 30,
                                                      1998             1997
                                                      ----             ----
Assets                                             (unaudited)
Cash and amounts due from depository
  institutions ...............................   $     514,775          500,455
Interest-bearing deposits ....................       1,184,687        1,590,529
                                                 -------------    -------------
   Total cash and cash equivalents ...........       1,699,462        2,090,984
Investment securities (fair value:
  $1,800,000 at March 31, 1998 and
  $1,845,400 at September 30, 1997) ..........       1,799,982        1,845,383
Investment securities, available for
  sale, at fair value ........................      42,034,054       35,874,298
Mortgage-backed securities
  (fair value: $23,079,700 at March 31, 1998
  and $27,548,700 at September 30, 1997) .....      23,200,973       27,869,570
Mortgage-backed securities, available
  for sale, at fair value ....................      55,645,038       56,740,190
Loans receivable (net of allowance for
  loan losses: $369,000 at March 31, 1998
  and $332,000 at September 30, 1997) ........     100,880,095       97,244,031
Foreclosed real estate .......................          79,000           79,000
Stock in Federal Home Loan Bank and
  Federal Reserve Bank of Chicago ............       3,803,500        3,698,500
Accrued interest receivable ..................       1,678,173        1,551,284
Office properties and equipment - net ........       3,432,682        3,473,326
Prepaid expenses and other assets ............         255,800          642,654
                                                 -------------    -------------

   Total assets ..............................     234,508,759      231,109,220
                                                 =============    =============

Liabilities and Stockholders' Equity

Liabilities

Deposits .....................................     125,462,600      125,746,001
Borrowed money ...............................      59,000,000       56,500,000
Advance payments by borrowers for
  taxes and insurance ........................         899,294          722,141
Other liabilities ............................       2,103,504        2,202,115
                                                 -------------    -------------
   Total liabilities .........................     187,465,398      185,170,257
                                                 -------------    -------------

Stockholders' Equity

Preferred stock, $.01 par value; authorized
  100,000 shares; none outstanding ...........              --               --
Common stock, $.01 par value; authorized
  4,500,000 shares;  3,981,434 shares issued
  and 3,123,154 shares outstanding at
  March 31, 1998 and 3,109,220 shares
  outstanding at September 30, 1997 ..........          39,814           39,675
Additional paid-in capital ...................      38,704,741       38,452,948
Retained earnings, substantially restricted ..      22,658,340       22,100,190
Unrealized gain on securities available
  for sale, net of income taxes ..............       1,384,560        1,382,560
Treasury stock, at cost (858,280 shares at
  March 31, 1998 and September 30, 1997) .....     (12,117,799)     (12,117,799)
Common stock acquired by Employee Stock
  Ownership Plan .............................      (2,445,000)      (2,550,800)
Common stock awarded by Recognition and
  Retention Plan .............................      (1,181,295)      (1,367,811)
                                                    ----------       ---------- 
   Total stockholders' equity ................      47,043,361       45,938,963
                                                 -------------    -------------

   Total liabilities and stockholders' equity    $ 234,508,759      231,109,220
                                                 =============    =============



See accompanying notes to consolidated financial statements.

                                       -4-

<PAGE>

                           DAMEN FINANCIAL CORPORATION
                                AND SUBSIDIARIES

                       Consolidated Statement of Earnings
<TABLE>
<CAPTION>
                                             Three Months Ended           Six Months Ended
                                                  March 31,                    March 31,
                                          ------------------------     ---------------------
                                             1998           1997          1998          1997
                                             ----           ----          ----          ----
                                                 (unaudited)                  (unaudited)
Interest income:
<S>                                    <C>               <C>           <C>           <C>      
  Loans                                $  2,067,464      1,861,564     4,113,487     3,735,641
  Mortgage-backed securities              1,386,650      1,555,562     2,811,219     3,075,077
  Tax-exempt securities                     340,367        362,726       672,904       752,494
  Interest and dividends on
   other investments                        372,841        319,466       650,301       638,121
  Dividends on FHLB and FRB stock            60,354         54,915       124,082       109,646
                                          ---------      ---------     ---------     ---------
     Total interest income                4,227,676      4,154,233     8,371,993     8,310,979
                                          ---------      ---------     ---------     ---------
Interest expense:
  Deposits                                1,604,654      1,502,993     3,254,957     3,034,163
  Borrowings                                930,174        898,611     1,826,284     1,809,740
                                          ---------      ---------     ---------     ---------
     Total interest expense               2,534,828      2,401,604     5,081,241     4,843,903
                                          ---------      ---------     ---------     ---------
     Net interest income before
      provision for loan losses           1,692,848      1,752,629     3,290,752     3,467,076
Provision for loan losses                    18,170          2,000        39,170         6,618
                                          ---------      ---------     ---------     ---------
     Net interest income after
      provision for loan losses           1,674,678      1,750,629     3,251,582     3,460,458
                                          ---------      ---------     ---------     ---------
Non-interest income:
  Loan fees and service charges              66,551         11,709        79,598        30,380
  Gain (loss) on sale of:
     Mortgage-backed securities,
      available for sale                        --         (17,365)          --        (17,365)
     Investment securities,
      available for sale                    143,398        157,083       274,635       157,083
  Other income                               43,686         18,342        75,864        36,838
                                          ---------      ---------     ---------     ---------
     Total non-interest income              253,635        169,769       430,097       206,936
                                          ---------      ---------     ---------     ---------
Non-interest expense:
  Compensation, employee benefits, and
   related expenses                         693,050        636,246     1,354,906     1,364,072
  Advertising and promotion                  39,280        136,095       182,706       219,859
  Occupancy and equipment expense           169,499        199,638       355,458       395,671
  Data processing                            33,324         33,426        65,622        62,716
  Insurance expense                          18,288         17,313        36,526        34,626
  Federal insurance premiums                 19,721         19,381        38,836        76,442
  Legal, audit, and examination services    148,046         63,315       210,238       152,037
  Other operating expenses                  102,626         87,571       176,790       179,337
                                          ---------      ---------     ---------     ---------
     Total non-interest expense           1,223,834      1,192,985     2,421,082     2,484,760
                                          ---------      ---------     ---------     ---------
Net income before income taxes              704,479        727,413     1,260,597     1,182,634
Provision for federal and state
  income taxes                              146,534        169,121       243,862       232,001
                                          ---------      ---------     ---------     ---------
      Net income                       $    557,945        558,292     1,016,735       950,633
                                          =========      =========     =========     =========
Earnings per share - basic                    $ .19            .16           .35           .27
                                                ---            ---           ---           ---
Earnings per share - diluted                    .19            .16           .34           .27
                                                ---            ---           ---           ---
Dividends declared per common share           $ .10            .06           .16           .12
                                                ---            ---           ---           ---
</TABLE>


See accompanying notes to consolidated financial statements.

                                       -5-

<PAGE>



                           DAMEN FINANCIAL CORPORATION
                                AND SUBSIDIARIES

           Consolidated Statements of Changes in Stockholders' Equity

                                   (Unaudited)

<TABLE>
<CAPTION>

                                                                      Unrealized
                                                                       Gain on                     Common       Common
                                             Additional               Securities                   Stock        Stock
                                    Common    Paid-In      Retained    Available    Treasury      Acquired     Awarded
                                    Stock     Capital      Earnings    For Sale      Stock        by ESOP       by RRP        Total
                                    -----     -------      --------    --------      -----        -------       ------        -----
<S>                              <C>        <C>          <C>          <C>        <C>           <C>          <C>         <C>       
Balance at September 30, 1997     $ 39,675   38,452,948   22,100,190   1,382,560  (12,117,799)  (2,550,800)  (1,367,811) 45,938,963

  Additions (deductions) for the
    period ended March 31, 1998:

  Net income                                               1,016,735                                                      1,016,735

  Adjustment of
   securities to fair value,
   net of tax effect                                                       2,000                                              2,000

  Tax benefit related to
   employee stock plans                          18,630                                                                      18,630

  Exercise of stock
   options (13,934 shares)             139      161,844                                                                     161,983

  Amortization of award
   of RRP stock                                                                                                  186,516    186,516

  Contribution to fund ESOP loan                 71,319                                             105,800                 177,119

  Dividends declared on
   common stock                                             (458,585)                                                      (458,585)
                                    ------   ----------   ----------   ---------   ----------     ---------    ---------  ----------

Balance at March 31, 1998         $ 39,814   38,704,741   22,658,340   1,384,560  (12,117,799)   (2,445,000)  (1,181,295) 47,043,361
                                    ======   ==========   ==========   =========   ==========     =========    =========  ==========
</TABLE>









See accompanying notes to consolidated financial statements.


                                       -6-

<PAGE>

                           DAMEN FINANCIAL CORPORATION
                                AND SUBSIDIARIES
                      Consolidated Statements of Cash Flows

                                                          Six Months Ended
                                                             March 31,
                                                   ----------------------------
                                                        1998             1997
                                                        ----             ----
                                                              (unaudited)
Cash flows from operating activities:
  Net income ...................................   $  1,016,735         950,633
  Adjustments to reconcile net income to
   net cash from operating activities:
     Depreciation ..............................        118,825         100,229
     Amortization of cost of stock
       benefit plans ...........................        363,635         325,675
     Provision for loan losses .................         39,170           6,618
     Decrease in deferred loan income ..........       (181,149)       (125,716)
     (Increase) decrease in prepaid and
       deferred federal and state income taxes .        349,012         (66,274)
     Loss on sale of mortgage-backed securities,
      available for sale .......................             --          17,365
     Gain on sale of investment securities,
      available for sale .......................       (274,635)       (157,083)
     (Increase) decrease in accrued interest
        receivable .............................       (126,889)        155,455
     Increase in accrued interest payable ......         30,900          19,000
     Decrease in other assets ..................          5,211          45,952
     Decrease in other liabilities .............       (100,187)       (780,733)
                                                   ------------    ------------
Net cash provided by operating activities ......      1,240,628         491,121
                                                   ------------    ------------
Cash flows from investing activities:
     Purchase of investment securities,
       available for sale ......................     (9,844,976)     (1,993,697)
     Purchase of investment securities .........        (46,203)        (97,492)
     Purchase of mortgage-backed securities,
       available for sale ......................     (6,043,208)     (7,161,782)
     Proceeds from sales of investment
       securities, available for sale ..........        674,622       9,472,341
     Proceeds from sales of mortgage-backed
       securities, available for sale ..........             --       1,816,256
     Proceeds from maturities of investment
      securities, available for sale ...........      3,292,233       3,919,859
     Proceeds from maturities of investment
      securities ...............................         91,604          43,778
     Proceeds from maturities of mortgage-backed
      securities, available for sale ...........      7,134,349       3,884,312
     Proceeds from maturities of mortgage-backed
      securities ...............................      4,668,597       2,969,463
     Purchase of Federal Home Loan Bank and
      Federal Reserve Bank stock ...............       (105,000)       (628,000)
     Disbursements for loans ...................    (12,831,391)     (8,566,205)
     Loan repayments ...........................      9,337,306       8,195,411
     Property and equipment expenditures .......        (78,181)       (147,180)
                                                   ------------    ------------
Net cash provided by (for) investing activities      (3,750,248)     11,707,064
                                                   ------------    ------------
Cash flows from financing activities:
     Proceeds from exercise of stock options ...        161,983              --
     Deposit receipts ..........................     35,771,078      36,471,711
     Deposit withdrawals .......................    (38,289,269)    (40,069,872)
     Interest credited to deposit accounts .....      2,234,790       2,208,009
     Proceeds from borrowed money ..............     30,800,000      91,100,000
     Repayment of borrowed money ...............    (28,300,000)    (89,200,000)
     Increase in advance payments by borrowers
      for taxes and insurance ..................        177,153         192,919
     Purchase of treasury stock ................             --      (7,821,106)
     Dividends paid on common stock ............       (437,637)       (433,370)
                                                   ------------    ------------
Net cash provided by (for) financing activities       2,118,098      (7,551,709)
                                                   ------------    ------------
Increase (decrease) in cash and cash equivalents       (391,522)      4,646,476
Cash and cash equivalents at beginning of period      2,090,984       1,181,231
                                                   ------------    ------------
Cash and cash equivalents at end of period .....   $  1,699,462       5,827,707
                                                   ============    ============
Cash paid during the period for:
     Interest ..................................   $  5,050,341       4,824,903
     Income taxes ..............................         62,388         279,000
                                                   ============    ============

See accompanying notes to consolidated financial statements.

                                       -7-

<PAGE>

                           DAMEN FINANCIAL CORPORATION
                                AND SUBSIDIARIES


Notes to Consolidated Financial Statements

1. Statement of Information Furnished

         The accompanying  unaudited consolidated financial statements have been
prepared in accordance with Form 10-Q  instructions and Article 10 of Regulation
S-X, and in the opinion of management contains all adjustments (all of which are
normal and  recurring  in nature)  necessary  to  present  fairly the  financial
position as of March 31, 1998,  the results of operations  for the three and six
months  ended  March 31,  1998 and 1997 and cash flows for the six months  ended
March 31, 1998 and 1997.  These  results  have been  determined  on the basis of
generally  accepted   accounting   principles.   The  preparation  of  financial
statements in conformity with generally accepted accounting  principles requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities  and disclosures of contingent  assets and liabilities at
the date of the financial  statements  and the reported  amounts of revenues and
expenses  during the reporting  period.  Actual  results could differ from those
estimates.  The attached  consolidated  statements are those of Damen  Financial
Corporation  (the "Holding  Company") and its  consolidated  subsidiaries  Damen
National Bank (the"Bank") and Dasch Inc. The results of operations for the three
and six month periods ended March 31, 1998 are not necessarily indicative of the
results to be expected for the full year.

2. Mutual to Stock Conversion

         In April  1995,  the  Bank's  Board  of  Directors  approved  a Plan of
Conversion  (the  "Conversion"),  providing  for the  Bank's  conversion  from a
federally  chartered mutual bank for savings to a federally chartered stock bank
for savings  with the  concurrent  formation of a holding  company.  The Holding
Company  issued  3,967,500  shares of $.01 par value  common stock at $10.00 per
share, for an aggregate  purchase price of $39,675,000.  The Conversion and sale
of  3,967,500  shares of common  stock of the Holding  Company was  completed on
September  29, 1995.  Net proceeds to the Company,  after  conversion  expenses,
totaled approximately $38,320,000.

3. Earnings Per Share

         Earnings per share for the three and six month  periods ended March 31,
1998 and 1997 were  determined  by  dividing  net income for the  periods by the
weighted  average  number of both basic and diluted  shares of common  stock and
common stock  equivalents  outstanding (see Exhibit 11 attached).  Stock options
are regarded as common stock  equivalents and are considered in diluted earnings
per share calculations. Common stock equivalents are computed using the treasury
stock method.  ESOP shares not committed to be released to participants  are not
considered  outstanding  for purposes of computing  earnings per share  amounts.
Earnings per share data for the three and six month periods ended March 31, 1997
have been restated for  comparative  purposes to reflect the  implementation  of
Statement of Financial Accounting Standards No. 128.

                                       -8-

<PAGE>

4. Impact of New Accounting Standards

         Accounting  for  Transfers  and  Servicing  of  Financial   Assets  and
Extinguishments  of Liabilities.  In December 1996, the FASB issued Statement of
Financial  Accounting  Standards  No.  127 ("SFAS No.  127"),  "Deferral  of the
Effective  Date of Certain  Provisions of FASB Statement No. 125". The statement
delays for one year the  implementation  of SFAS No.  125,  as it relates to (1)
secured borrowings and collateral, and (2) for the transfers of financial assets
that are part of repurchase  agreements,  dollar-rolls,  securities  lending and
similar  transactions.  The Company has adopted  portions of SFAS No. 125 (those
not  deferred  by SFAS No.  127)  effective  January 1, 1997.  Adoption of these
portions did not have a significant effect on the Company's  financial condition
or results of operations.  Based on its review of SFAS No. 125,  management does
not  believe  that  adoption  of the  portions  of SFAS No.  125 which have been
deferred by SFAS No. 127 will have a material effect on the Company.

         Reporting Comprehensive Income. In June 1997, the FASB issued Statement
of Financial  Accounting  Standards No. 130,  "Reporting  Comprehensive  Income"
("SFAS No. 130").  This  statement  establishes  standards for reporting and the
display of comprehensive income and its components (revenues,  expenses,  gains,
losses) in a full set of general-purpose  financial statements.  SFAS No. 130 is
effective for fiscal years  beginning  after  December 15, 1997. The Company has
not yet determined the impact of adopting this statement.

         Disclosures about Segments of an Enterprise and Related Information. In
June 1997, the FASB issued Statement of Financial  Accounting Standards No. 131,
"Disclosures about Segments of an Enterprise and Related Information" ("SFAS No.
131") which becomes  effective  for fiscal years  beginning  after  December 15,
1997.  SFAS No.  131  establishes  standards  for the way that  public  business
enterprises report information about operating segments and requires enterprises
to report selected  information  about operating  segments in interim  financial
reports.  The  Company  has not yet  determined  the  impact  of  adopting  this
statement.

         Employers'  Disclosures about Pension and Other Employee  Benefits.  In
February 1998, the FASB issued Statement of Financial  Accounting  Standards No.
132, "Employers'  Disclosures about Pensions and Other Postretirement  Benefits"
("SFAS No. 132"). SFAS No. 132 alters current disclosure  requirements regarding
pensions  and other  postretirement  benefits  in the  financial  statements  of
employers who sponsor such benefit plans.  The revised  disclosure  requirements
are designed to provide  additional  information to assist readers in evaluating
future costs related to such plans.  Additionally,  the revised  disclosures are
designed to provide  changes in the  components  of pension and benefit costs in
addition to the year end  components of those factors in the resulting  asset or
liability  related to such plans.  The  statement is effective  for fiscal years
beginning  after  December  15, 1997 with  earlier  application  available.  The
Company has not yet determined the impact of adopting this statement.

         The  foregoing  does not  constitute  a  comprehensive  summary  of all
material changes or developments affecting the manner in which the Company keeps
its books and records and performs its financial accounting responsibilities. It
is intended only as a summary of some of the recent  pronouncements  made by the
FASB which are of particular interest to financial institutions.

                                       -9-

<PAGE>



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

                               FINANCIAL CONDITION

                  March 31, 1998 compared to September 30, 1997


Total assets  increased $3.4 million to $234.5 million as of March 31, 1998 from
$231.1  million as of September 30, 1997.  Interest-bearing  deposits  decreased
$406,000 to $1.2  million as of March 31,  1998 as  compared to $1.6  million at
September 30, 1997.  Investment  securities  available-for-sale  increased  $6.1
million to $42.0  million at March 31, 1998 from $35.9  million at September 30,
1997 due primarily to purchases of $9.8 million  exceeding  sales and maturities
of $3.7 million.  Purchases were  primarily  callable  government  agency notes.
Mortgage-backed  securities  held to maturity  decreased  $4.7  million to $23.2
million at March 31, 1998 from $27.9 million at September 30, 1997 due primarily
to  repayments.  Mortgage-backed  securities  available-for-sale  decreased $1.1
million to $55.6  million at March 31, 1998 from $56.7  million at September 30,
1997 due  primarily to purchases of $6.0 million  exceeded by repayments of $7.1
million.  Loans receivable increased $3.6 million to $100.9 million at March 31,
1998  from  $97.2  million  at  September  30,  1997 due  primarily  to new loan
originations  of  $12.1  million  and  loan  purchases  of  $700,000   exceeding
repayments of $9.3 million.

Total  deposits  decreased  $283,000  to $125.5  million at March 31,  1998 from
$125.7  million at September 30, 1997 due to savers  seeking  higher  returns in
alternative investments.  Federal Home Loan Bank advances increased $2.5 million
to $59.0 million at March 31, 1998 from $56.5 million at September 30, 1997. The
additional advances were used primarily to fund loan growth.

Stockholders'  equity  increased $1.1 million to $47.0 million at March 31, 1998
from $45.9  million at  September  30, 1997 due  primarily to net income of $1.0
million, proceeds of exercised stock options of $162,000 and reductions in stock
acquired  by the RRP and  ESOP  plans  of  $364,000,  partially  offset  by cash
dividends  paid  totaling  $459,000.  At March 31, 1998 book value per share was
$15.06,  an increase of $.28 from $14.78 at September 30, 1997.  The Company had
paid a cash  dividend of $.06 per share each quarter  starting  with the quarter
ended  September  30, 1996 and  increased the dividend to $.10 per share for the
quarter ended December 31, 1997. At March 31, 1998,  there were 3,123,154 shares
of common stock outstanding.

                              Results of Operations

The  Company's  results of  operations  depend  primarily  upon the level of net
interest income,  which is the difference  between the interest income earned on
its interest-earning assets such as loans and investments,  and the costs of the
Company's interest-bearing  liabilities,  primarily deposits and borrowings. Net
interest  income  depends  upon  the  volume  of  interest-earning   assets  and
interest-bearing  liabilities  and the  interest  rate  earned  or paid on them,
respectively.  Results of operations  are also  dependent  upon the level of the
Company's  non-interest  income,  including fee income and service charges,  and
affected by the level of its  non-interest  expenses,  including its general and
administrative expenses.

                     Comparison of Operating Results for the
                     Quarters Ended March 31, 1998 and 1997

Net Income.  The  Company's net income for the three months ended March 31, 1998
was  $558,000 as compared to $559,000 for the same period in 1997, a decrease of
$1,000.

Interest  Income.  Total  interest  income for the quarter  ended March 31, 1998
increased  $74,000  to $4.2  million  from  $4.1  million  a year  ago due to an
increase  in the yield on average  interest-earning  assets to 7.46% from 7.31%,
partially offset by a decrease in average interest-earning assets of $776,000 to
$226.6 million from $227.3 million.

                                      -10-

<PAGE>


Interest Expense. The Company's interest expense for the quarter ended March 31,
1998  increased by $133,000 to $2.5 million  compared to $2.4 million a year ago
due to an increase in average interest-bearing  liabilities to $185.5 million at
March 31,  1998 from  $177.3  million a year ago and an  increase in the average
rate to 5.47% from  5.42%.  The  increase in rates was  primarily  the result of
certificates  of deposits and  borrowings  being  renewed at higher  rates.  The
increase in average  interest-bearing  liabilities  resulted from an increase in
the  average  balance of borrowed  money of $1.9  million and an increase in the
average balance of savings deposits of $6.4 million.

Provision for Loan Losses.  The  determination  of the allowance for loan losses
involves  material  estimates that are susceptible to significant  change in the
near  term.  The  allowance  for loan  losses is  maintained  at a level  deemed
adequate  to  provide  for losses  through  charges to  operating  expense.  The
allowance  is based  upon  past loss  experience  and other  factors  which,  in
management's  judgement,  deserve current recognition in estimation losses. Such
other factors  considered by management  include  growth and  composition of the
loan  portfolio,  the  relationship  of the allowance for losses to  outstanding
loans, and economic conditions.

The Company's  provision for loan losses was $18,000 for the quarter ended March
31, 1998 compared to $2,000 for the same quarter the prior year.  Non-performing
loans  decreased  to  $184,000  from  $275,000 at December  31,  1997,  however,
mortgage loans on commercial properties increased $1.2 million and secured lines
of credit increased $600,000.

The Company  will  continue to monitor  its  allowance  for loan losses and make
future  additions to the  allowance  through the  provisions  for loan losses in
light of its level of loans and as economic conditions dictate.  There can be no
assurance that the Company will not make future provisions in an amount equal to
or greater than the amount provided during recent periods, or that future losses
will not exceed estimated amounts.

Non-Interest  Income.  The  Company's  non-interest  income was $254,000 for the
quarter  ended March 31, 1998  compared to $170,000  for the same quarter a year
ago. The increase of $84,000 was due primarily to an increase of $55,000 in loan
fees due to increased  lending activity and increased  prepayments as well as an
increase in other  non-interest  income of $25,000 due  primarily  to  increased
rental income from previously vacant office space.

Non-Interest  Expense. The Company's  non-interest expense increased $31,000 for
the quarter ended March 31, 1998 to $1.2 million due primarily to an increase of
$85,000 in  professional  fees,  an  increase  of $57,000  in  compensation  and
benefits  and an increase  in other  operating  expenses  of $15,000,  partially
offset by a decrease in advertising  and promotions of $97,000 and occupancy and
equipment expense of $30,000.

Provision for Income Taxes. Tax expense for the quarter ended March 31, 1998 was
$147,000  compared to $169,000  for the same  quarter in 1997.  The  decrease of
$22,000 was due primarily to a lower effective tax rate caused by an increase in
low-income housing tax credits and state income tax-exempt securities.

                     Comparison of Operation Results for the
                    Six Months Ended March 31, 1998 and 1997

Net Income. The Company's net income for the six months ended March 31, 1998 was
$1,017,000  as compared to $951,000 for the same period in 1997,  or an increase
of   $66,000.   An   increase   in  net   gains  on  the  sale  of   investments
available-for-sale  of  $135,000,  and an  increase  of $88,000 in loan fees and
other  income as well as a decrease  in  non-interest  expense of  $63,000,  was
partially  offset by a decrease in net interest income of $176,000,  an increase
in the  provision  for loan losses of $33,000 and an increase in income taxes of
$12,000.

Interest  Income.  Total interest income for the six months ended March 31, 1998
increased  $61,000  to $8.4  million  from  $8.3  million  a year  ago due to an
increase in the yield on average  interest-earning  assets of .12% to 7.46% from
7.32% partially offset by a decrease in average  interest-earning assets of $2.6
million.

                                      -11-

<PAGE>



Interest  Expense.  The Company's  interest expense  increased  $237,000 to $5.1
million for the six months  ended  March 31, 1998 from $4.8  million a year ago.
The increase was due to an increase in average  interest-bearing  liabilities of
$6.8 million to $183.6  million at March 31, 1998 from $176.8 million a year ago
and an increase in the  average  rate to 5.53% from 5.48% The  increase in rates
was primarily the result of  certificates  of deposits and borrowed  money being
renewed at higher rates.  The increase in average  interest-bearing  liabilities
resulted  from an increase in the  average  balance of savings  deposits of $6.8
million.

Provision for Loan Losses.  The  determination  of the allowance for loan losses
involves  material  estimates that are susceptible to significant  change in the
near  term.  The  allowance  for loan  losses is  maintained  at a level  deemed
adequate  to  provide  for losses  through  charges to  operating  expense.  The
allowance  is based  upon  past loss  experience  and other  factors  which,  in
management's  judgement,  deserve current recognition in estimating losses. Such
other factors  considered by management  include  growth and  composition of the
loan  portfolio,  the  relationship  of the allowance for losses to  outstanding
loans, and economic conditions.

The  Company's  provision  for loan losses was $39,000 for the six months  ended
March 31, 1998  compared  to $7,000 for the same period in the prior year.  This
year's provision was due primarily to an increase in mortgage loans, home equity
line of credit loans and commercial loans.

The Company  will  continue to monitor  its  allowance  for loan losses and make
future  additions to the  allowance  through the  provisions  for loan losses in
light of its level of loans and as economic conditions dictate.  There can be no
assurance that the Company will not make future provisions in an amount equal to
or greater than the amount provided during recent periods, or that future losses
will not exceed estimated amounts.

Non-Interest  Income. The Company's  non-interest  income increased $223,000 for
the six months  ended  March 31,  1998 to $430,000  from  $207,000  for the same
period one year ago. The  increase was due  primarily to an increase of $135,000
in net  gains on the sale of  investments  available-for-sale,  an  increase  of
$49,000 in loan fees and an increase of $39,000 in other income due primarily to
rental income from previously vacant office space.

Non-Interest  Expense. The Company's  non-interest expense decreased $65,000 for
the six months  ended March 31, 1998 to $2.4  million  from $2.5 million for the
same period one year ago.  The decrease  resulted  primarily  from  decreases of
$9,000 in compensation  and benefits,  $37,000 from  advertising and promotions,
$40,000  from  occupancy  and  equipment  and  $37,000  from  Federal  insurance
premiums, partially offset by an increase of $58,000 in professional fees.

Provision for Income Taxes.  Tax expense for the six months ended March 31, 1998
increased  $12,000 to $244,000 compared to $232,000 for the comparable period in
1997. The increased expense was due to an increase in pre-tax income.

                                      -12-

<PAGE>


                         Liquidity and Capital Resources


The  Company's   principal   sources  of  funds  are  deposits  and  borrowings,
amortization and prepayments of loan principal and  mortgage-backed  securities,
maturities of investment securities and income from operations.  While scheduled
loan  repayments and maturing  investments are relatively  predictable,  deposit
flows and early loan repayments are more  influenced by interest  rates,  floors
and caps on loan rates, general economic conditions and competition. The Company
generally  manages the pricing of its deposits to be competitive and to increase
core deposit relationships, where practicable.

The Company's most liquid assets are cash and cash equivalents, which consist of
interest bearing deposits and short term highly liquid investments with original
maturities  of less than three  months  that are  readily  convertible  to known
amounts  of cash.  The  level of these  assets  is  dependent  on the  Company's
operating,  financing and investing activities during any given period. At March
31, 1998 and September 30, 1997, cash and cash equivalents  totaled $1.7 million
and $2.1 million respectively.

The primary financing activities of the Company are deposits and borrowings. For
the six months ended March 31, 1998,  deposits decreased $283,000 and the Bank's
net (proceeds less repayments)  financing  activity with the FHLB increased $2.5
million.

The Company  anticipates  that it will have  sufficient  funds available to meet
current  commitments.  At  March  31,  1998 the  Company  has  outstanding  loan
commitments  totaling  $1,616,000,  and unused lines of credit granted  totaling
$1,179,000.

The Bank is subject to the capital  regulations of the Office of the Comptroller
of the Currency ("OCC").  The OCC's regulations  establish two capital standards
for national banks: a leverage requirement and a risk-based capital requirement.
In addition,  the OCC may, on a case-by-case basis, establish individual minimum
capital  requirements for a national bank that vary from the requirements  which
would  otherwise  apply  under OCC  regulations.  A national  bank that fails to
satisfy the capital requirements established under the OCC's regulations will be
subject to such administrative action or sanctions as the OCC deems appropriate.

The  leverage  ratio  adopted  by the OCC  requires  a minimum  ratio of "Tier 1
capital" to adjusted  total  assets of 3% for national  banks rated  composite 1
under the CAMEL rating system for banks.  National  banks not rated  composite 1
under the CAMEL rating system for banks are required to maintain a minimum ratio
of Tier 1 capital to adjusted total assets of 4% to 5%, depending upon the level
and nature of risks of their  operations.  For  purposes  of the OCC's  leverage
requirement,  Tier 1 capital generally consists of common  stockholders'  equity
and retained  income and certain  non-cumulative  perpetual  preferred stock and
related  income,  except  that no  intangibles  and certain  purchased  mortgage
servicing  rights and  purchased  credit card  relationships  may be included in
capital.

The risk-based capital requirements established by the OCC's regulations require
national  banks  to  maintain  "total  capital"  equal  to at  least 8% of total
risk-weighted assets. For purposes of the risk-based capital requirement, "total
capital"  means Tier 1 capital  (as  described  above)  plus  "Tier 2  capital",
provided  that the amount of Tier 2 capital  may not exceed the amount of Tier 1
capital,  less certain assets.  The components of Tier 2 capital include certain
permanent and maturing  capital  instruments that do not qualify as core capital
and general valuation loan and lease loss allowances up to a maximum of 1.25% of
risk-weighted assets.

The OCC has revised its  risk-based  capital  requirements  to permit the OCC to
require  higher  levels of capital for an  institution  in light of its interest
rate risk. In addition,  the OCC has proposed  that a bank's  interest rate risk
exposure would be quantified  using either the  measurement  system set forth in
the proposal or the institution's internal model for measuring such exposure, if
such  model  is  determined  to  be  adequate  by  the  institution's  examiner.
Management  of the  Bank has not  determined  what  effect,  if any,  the  OCC's
proposed  interest  rate  risk  component  would  have  on  the  Bank's  capital
requirement if adopted as proposed.

At March 31,  1998,  the Bank had Tier 1 capital  of $40.5  million  or 17.3% of
adjusted  total  assets  and Tier 2 capital  of $40.9  million or 46.8% of total
risk-weighted assets.

                                      -13-

<PAGE>


                              Non-Performing Assets

The  following  table sets forth the amounts and  categories  of  non-performing
assets in the Company's portfolio. Loans are reviewed monthly and any loan whose
collectibility is doubtful is placed on non-accrual status.  Loans are placed on
non-accrual  status  when  principal  and  interest is 90 days or more past due,
unless, in the judgement of management, the loan is well collaterized and in the
process of collection.  Interest accrued and unpaid at the time a loan is placed
on non-accrual  status is charged against interest income.  Subsequent  payments
are either applied to the outstanding  principal balance or recorded as interest
income,  depending on the assessment of the ultimate collectibility of the loan.
Restructured loans include troubled debt restructuring (which involved forgiving
a portion  of  interest  or  principal  on any  loans or making  loans at a rate
materially less than the market rate).

                                                     March 31,     September 30,
                                                       1998            1997
                                                   ------------     ------------
                                                       (Dollars in Thousands)
Non-accruing loans:
 One-to-four family..........................       $   99             $  197
 Multi-family................................           85                 --
 Commercial real estate. ....................           --                 --
 Consumer....................................           --                 --
                                                      ----                ---
   Total.....................................          184                197
                                                      ----               ----
Foreclosed assets:
 Commercial and multi-family real estate.....           79                 79
                                                      ----               ----

Total non-performing assets..................       $  263             $  276
                                                      ====               ====

Total as a percentage of total assets........          .11%               .12%
                                                       ===                ===

For the six months ended March 31, 1998,  gross interest income which would have
been recorded had the  non-accruing  loans been current in accordance with their
original terms amounted to $7,400.

In addition to the  non-performing  assets set forth in the table  above,  as of
March 31,  1998,  there were no loans with  respect to which  known  information
about the  possible  credit  problems of the  borrowers or the cash flows of the
security properties have caused management to have concerns as to the ability of
the borrowers to comply with present loan  repayment  terms and which may result
in the future inclusion of such items in the non-performing asset categories.

Management has considered the Company's  non-performing  and "of concern" assets
in establishing its allowance for loan losses.

                     Impact of Inflation and Changing Prices

The  consolidated  financial  statements and related data presented  herein have
been prepared in accordance with generally accepted accounting  principles which
require the measurement of financial  position and operating results in terms of
historical dollars without  considering changes in the relative purchasing power
of money over time due to  inflation.  The primary  impact of  inflation  on the
operations of the Company is reflected in increased operating costs. Unlike most
industrial companies, virtually all of the assets and liabilities of a financial
institution are monetary in nature. As a result, interest rates, generally, have
a more  significant  impact on a financial  institution's  performance than does
inflation.  Interest rates do not  necessarily  move in the same direction or to
the same extent as the prices of goods and services.

                               Recent Developments

On April 21, 1998 the Board of  Directors  approved a cash  dividend of $.12 per
share to be payable May 15, 1998 to shareholders of record on May 1, 1998.

                                      -14-

<PAGE>


                           PART II - OTHER INFORMATION


Item 1. LEGAL PROCEEDINGS

         None.

Item 2. CHANGES IN SECURITIES

         None.

Item 3. DEFAULTS UPON SENIOR SECURITIES

         None.

Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     (a)  The Annual Meeting of Stockholders  (the "Meeting") of Damen Financial
          Corporation  was held  January 27, 1998 at 10:30 AM at the Holiday Inn
          located at 3405 Algonquin Road, Rolling Meadows, Illinois.

     (b)  Proxies for the meeting were  solicited  pursuant to Section 14 of the
          Securities and Exchange Act; there was no  solicitation  in opposition
          and all nominees were elected.

     (c)  The  following  are the  results  of  each  matter  voted  upon at the
          Meeting:

          (i)  The election of Directors:

                                                                     Broker
                                             For       Withheld     Non-Vote
                                             ---       --------     --------
             Carol A. Diver               2,163,727     762,596        0
             Nicholas J. Raino            2,160,178     766,145        0

             The continuing Directors are:

                                                      Expiration
                                                      of Term as
                                                        Director
                                                        --------

             Edward R. Tybor                             1999
             Charles J. Caputo                           1999
             Janine M. Poronsky                          1999
             Mary Beth Poronsky Stull                    2000
             Albert C. Baldermann                        2000


          (ii) The  ratification  of the  appointment  of Cobitz,  VandenBerg  &
               Fennessy  as auditor  for the  Company  for the fiscal year ended
               September 30, 1998:

                  Votes For:               2,820,280
                                           ---------
                  Votes Against:              75,693
                                           ---------
                  Abstentions:                30,350
                                           ---------


        (iii)  A proposal by a stockholder of the Company  recommending that the
               Board of  Directors  of Damen  Financial  Corporation  engage the
               services of a leading  banking  firm  specializing  in  financial
               institutions to make recommendations to the Board of Directors as
               to specific actions to be taken to enhance shareholder value.

                  Votes For:               1,129,217
                                           ---------
                  Votes Against:           1,167,103
                                           ---------
                  Abstentions:                42,198
                                           ---------
                  Non-Votes:                 587,805
                                           ---------


                                      -15-

<PAGE>



                           PART II - OTHER INFORMATION
                                   (continued)


Item 5. OTHER INFORMATION

         Not applicable.

Item 6. EXHIBITS AND REPORTS ON FORM 8-K

          (a)  Computation of earnings per share (Exhibit 11 filed herewith)

          (b)  No reports on Form 8-K were filed during the quarter  ended March
               31, 1998.

                                      -16-

<PAGE>




                                   SIGNATURES


         Pursuant to the  requirements of Section 13 or 15 (d) of the Securities
and  Exchange  Act of 1934,  the  Registrant  has duly  caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.


                           DAMEN FINANCIAL CORPORATION
                                   Registrant



DATE:  May 8, 1998


BY: /s/ Mary Beth Poronsky Stull
    -----------------------------------
    Mary Beth Poronsky Stull
    President, Chief Executive Officer and Director
    (Duly Authorized Representative)




BY: /s/ Gerald J. Gartner
---------------------------------------
    Gerald J. Gartner
    Chief Financial Officer and Treasurer
    (Principal Financial and Accounting Officer)





                                      -17-

<PAGE>



                                INDEX TO EXHIBITS


Exhibit No.                                                            Page
-----------                                                            ----


   11       Statement regarding Computation of Earnings Per Share       19

   27       Financial Data Schedule                                     20



                                      -18-