##### Table of Contents

---

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



---



FORM 10-K



---



Annual report pursuant to section 13 or 15(d) of

the Securities Exchange Act
of 1934



For the fiscal year ended December 31, 2003



Commission file number 0-18121



---



MAF Bancorp, Inc.

(Exact name of registrant as specified in its charter)



---



|                         |  |                                  
|------------------------ |  | ---------------------------------
|Delaware                 |  | 36-3664868                       
|(State of incorporation) |  | (IRS Employer identification No.)



55th Street &
Holmes Avenue, Clarendon Hills, Illinois 60514-1500

Telephone Number (630) 325-7300



---



Securities registered pursuant to Section 12(b) of the Act: None



Securities registered pursuant to Section 12(g) of the Act:



Common Stock, par value $.01 per share

(Title of Class)



---



Indicate by check mark whether the registrant (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 ̈



Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrants knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form
10-K. ̈



Indicate by checkmark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).    Yes  x    No ̈



Based upon the closing price of the registrants common stock as of June 30, 2003, the aggregate market value of the
voting stock held by non-affiliates of the registrant was $1,102,162,497.*



The number of shares of Common Stock outstanding as of March 8, 2004: 33,097,740



---



Documents Incorporated by Reference



PART III - Portions of the Proxy Statement for the Annual Meeting of
Shareholders to be held on April 28, 2004 are incorporated by reference into Part III hereof.



---



|* | Solely for purposes of this calculation, all executive officers and directors of the registrant are considered to be affiliates. Except to the extent shares have been allocated to
the plan accounts of directors and executive officers, the affiliate holdings do not include shares held in certain employee benefit plans administered by plan committees that include executive officers.
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



---



---

##### Table of Contents

MAF BANCORP, INC. AND SUBSIDIARIES



FORM 10-K



Index



|                |  |                                                                                       |  |    
|--------------- |  | ------------------------------------------------------------------------------------- |  | ---
|                |  | Page                                                                                 
|Part I.         |  |                                                                                      
|                |  |                                                                                      
|Item 1.         |  | Business                                                                              |  | 3  
|                |  |                                                                                      
|Item 2.         |  | Properties                                                                            |  | 46 
|                |  |                                                                                      
|Item 3.         |  | Legal Proceedings                                                                     |  | 46 
|                |  |                                                                                      
|Item 4.         |  | Submission of Matters to a Vote of Security Holders                                   |  | 47 
|                | 
|Part II.        |  |                                                                                      
|                |  |                                                                                      
|Item 5.         |  | Market for the Registrants Common Stock and Related Stockholder Matters              |  | 47 
|                |  |                                                                                      
|Item 6.         |  | Selected Financial Data                                                               |  | 49 
|                |  |                                                                                      
|Item 7.         |  | Managements Discussion and Analysis of Financial Condition and Results of Operation  |  | 51 
|                |  |                                                                                      
|Item 7A.        |  | Quantitative and Qualitative Disclosures about Market Risk                            |  | 73 
|                |  |                                                                                      
|Item 8.         |  | Financial Statements and Supplementary Data                                           |  | 78 
|                |  |                                                                                      
|Item 9.         |  | Changes in and Disagreements With Accountants on Accounting and Financial Disclosures |  | 116
|                |  |                                                                                      
|Item 9A.        |  | Controls and Procedures                                                               |  | 116
|                | 
|Part III.       |  |                                                                                      
|                |  |                                                                                      
|Item 10.        |  | Directors and Executive Officers of the Registrant                                    |  | 116
|                |  |                                                                                      
|Item 11.        |  | Executive Compensation                                                                |  | 116
|                |  |                                                                                      
|Item 12.        |  | Security Ownership of Certain Beneficial Owners and Management                        |  | 116
|                |  |                                                                                      
|Item 13.        |  | Certain Relationships and Related Transactions                                        |  | 117
|                |  |                                                                                      
|Item 14.        |  | Principal Accounting Fees and Services                                                |  | 117
|                | 
|Part IV.        |  |                                                                                      
|                |  |                                                                                      
|Item 15.        |  | Exhibits, Financial Statements and Reports on Form 8-K                                |  | 117
|                | 
|Signature Pages |  | 123                                                                                  



2



---

##### Table of Contents

Item 1. Business



Safe Harbor Statement under
the Private Securities Litigation Reform Act of 1995



This report, in Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations and elsewhere, contains, and other periodic reports and press releases of the Company may contain certain
forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. MAF Bancorp, Inc. (Company) intends such forward-looking
statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and is including this statement for purposes of invoking these safe harbor provisions. These
forward-looking statements, which are based on certain assumptions and describe future plans, strategies and expectations of the Company, are generally identifiable by use of the words believe, expect, intend,
anticipate, estimate, project, plan, or similar expressions. The Companys ability to predict results or the actual effect of future plans or strategies is inherently uncertain and actual results
may differ from those predicted. The Company undertakes no obligation to update these forward-looking statements in the future.



Factors which could have a material adverse effect on operations and could affect managements outlook or future prospects of the Company and its
subsidiaries include, but are not limited to, higher than expected costs related to the St. Francis transaction, delays in the St. Francis data processing and systems conversions, unanticipated changes in interest rates or flattening of the yield
curve, deteriorating economic conditions which could result in increased delinquencies in the Companys loan portfolio, higher than expected overhead, infrastructure and compliance costs needed to support growth in the Companys
operations, legislative or regulatory developments, monetary and fiscal policies of the U.S. Government, including policies of the U.S. Treasury and the Federal Reserve Board, the quality or composition of the Companys loan or investment
portfolios, or further deterioration in the value of investment securities, demand for loan products, secondary mortgage market conditions, deposit flows, competition, demand for financial services and residential real estate in the Companys
market area, unanticipated slowdowns in real estate lot sales or problems in closing pending real estate contracts, delays in real estate development projects, the possible short-term dilutive effect of other potential acquisitions, if any, and
changes in accounting principles, policies and guidelines. These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements.



Available Information



The Companys internet address is www.mafbancorp.com. The Company makes available through this address, free of
charge, its annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after
such material is electronically filed, or furnished to, the SEC.



General



The Company was incorporated under the laws of the state
of Delaware in 1989. The Company is a registered savings and loan holding company primarily engaged in the retail banking business through its wholly-owned subsidiary, Mid America Bank, fsb (Bank) and, to a lesser extent, in the
residential real estate development business through MAF Developments, Inc. (MAFD). The Bank is one of the largest community-oriented financial institutions in the Chicago and Milwaukee metropolitan areas. The Companys executive
offices are located at 55th Street and Holmes Avenue, Clarendon Hills, Illinois 60514-1500. The Companys telephone number is (630) 325-7300.



3



---

##### Table of Contents

The Companys primary assets are its investments in the Bank, as well as in MAFD. The Company also
maintains a small investment portfolio.



The Bank offers
various financial services to its retail and business banking customers through a network of 67 branches in Illinois and Wisconsin. In 2003, the Bank added 29 branches through three acquisitions plus four de novo branches built by the Bank. The
Illinois franchise is comprised of 44 branches in suburban and urban communities in the Chicago metropolitan area including 16 locations in the City of Chicago, a strong presence in western Cook and DuPage Counties, an increasing penetration in the
rapidly growing collar counties of Will and Kane, as well as a presence in the north and southwest suburbs of Chicago. In Wisconsin, the Bank serves communities in Milwaukee and Waukesha counties and portions of Ozaukee, Washington and Walworth
Counties through 23 retail branches under the name of St. Francis Bank, a division of Mid America Bank, fsb. Currently, the Bank plans to build four to five de novo branches in the next 18 months in its continued effort to expand its presence in the
Chicago metropolitan area.



Historically, the Bank has
principally been engaged in the business of attracting deposits from the retail consumer and using such deposits, along with other borrowings, to make loans secured by real estate, primarily one- to four-family residential mortgage loans. To a
lesser extent, the Bank has made multi-family mortgage, commercial, residential construction, land acquisition and development as well as consumer loans, primarily home equity loans and lines of credit. In 2001, the Bank formed a commercial business
lending unit to target lending and deposit relationships with small to medium-sized businesses in its primary market areas. The 2003 acquisitions of Fidelity Bancorp and St. Francis Capital Corporation, in particular, have significantly changed the
asset mix and expanded the lending focus of the Bank. These acquisitions added a large amount of multifamily commercial real estate, construction, land loans and commercial business loans to the Banks portfolio. See Lending
Activities. Through various wholly-owned subsidiaries, the Bank also provides general insurance services, investment services and securities brokerage primarily to Bank customers and limited title search services for certain loan transactions
of the Banks loan customers. In addition, the Bank operates an investment subsidiary and a subsidiary engaged in investment in affordable housing projects. The bank also operates a captive reinsurance company, which shares in a portion of
mortgage insurance premiums received by certain mortgage insurance companies on the Banks mortgage loan originations in return for assuming some of the risk of loss.



Information regarding the transactions completed by the Company in 2003 is set forth below:



On December 1, 2003, the Company completed its $358 million acquisition of
St. Francis Capital Corporation, the 100% parent of St. Francis Bank. At November 30, 2003, St. Francis had assets of $2.19 billion, deposits of $1.36 billion, and stockholders equity of $191.1 million. The franchise added 23 branches to the
Banks network, primarily in Milwaukee and its surrounding collar counties.



On July 21, 2003, the Company acquired Fidelity Bancorp, Inc. in an all-stock transaction valued at approximately $115 million. At July 2003, Fidelity had assets of $613 million, deposits of $435 million and
stockholders equity of $60 million. Fidelity Bank added five branches to the Banks network.



On March 31, 2003, the Company purchased a branch of UmbrellaBank, fsb in Chicago, IL. The transaction involved the purchase of approximately $8.5 million
in deposits.



4



---

##### Table of Contents

For financial information regarding the Companys two separate lines of business (banking and land
development), see Note 19. Segment Information to the audited consolidated financial statements of the Company included in Item 8. Financial Statements and Supplementary Data.



As a federally chartered savings bank, the Banks deposits are insured
up to the applicable limits by the Federal Deposit Insurance Corporation (FDIC). The Bank is a member of the Federal Home Loan Bank (FHLB) of Chicago, which is one of the twelve regional banks for federally insured savings
institutions comprising the FHLB system. The Bank is subject to extensive regulation, supervision and examination by the Office of Thrift Supervision (OTS), as its chartering authority and primary federal regulator, and by the FDIC,
which insures its deposits up to applicable limits. Such regulation and supervision establish a comprehensive framework of activities in which the Bank can engage and is designed primarily for the protection of the insurance fund and depositors. The
regulatory structure also gives the regulatory authorities extensive discretion in connection with their supervisory and enforcement activities. Any change in such regulation, whether by the OTS, the FDIC or Congress, could have a material impact on
the Bank and its operations. See Regulation and Supervision - Federal Savings Institution Regulation for more information. The Bank is further regulated by the Board of Governors of the Federal Reserve System as to reserves required to
be maintained against deposits and certain other matters.



Competition



The Bank is faced with increasing competition in
attracting retail and business banking customer business, including deposit accounts and loan originations. Several national financial institutions have recently announced and commenced aggressive de novo branching plans that are heightening the
competitive pressures in the Companys market areas particularly in the Chicago area. Competition for deposit accounts comes primarily from other savings institutions, commercial banks, money market mutual funds, and insurance companies
(primarily in the form of annuity products). Factors affecting the attraction of customers include interest rates offered, pricing of fees and services, convenience of branch locations, access to ATMs, ability to access services through multiple
distribution channels and office hours. Competition for loan products comes primarily from mortgage brokers, other savings institutions, commercial banks and mortgage banking companies. Competitive factors for loans include interest rates, terms,
fees, and customer service.



Lending Activities



General. The Banks lending activities reflect its focus as a
retail banking institution serving its local market area by concentrating on residential mortgage lending. The Bank is one of the largest originators of residential mortgages in its market area. The Bank had record residential loan originations in
2003, due to continued expansion into new lending markets, as well as a large volume of refinancings in response to historically low interest rates. The Banks residential originations are generally conducted through its branch retail network
using primarily commissioned loan officers. The Bank has traditionally held its originations of adjustable-rate or shorter-term fixed-rate mortgage loans for its portfolio and sold a portion of its long-term fixed-rate loans directly into the
secondary market. The Bank originates long-term fixed-rate mortgage loans in response to customer demand; however, the Bank tends to sell selected conforming and non-conforming long-term fixed-rate mortgage loans and a limited amount of ARM loans in
the secondary market, primarily to the Federal National Mortgage Association (Fannie Mae), and to a lesser extent, the Federal Home Loan Mortgage Corporation (Freddie Mac), and the Federal Home Loan Bank Mortgage Partnership
Program (MPF). The volume of current loan originations sold into the secondary market varies over time based on the Banks available cash or borrowing capacity, Bank capital ratios, as well as in response to the Banks
asset/liability management strategy. Consumer loans, primarily equity lines of credit and short-term fixed-rate home equity loans, have been increased through originations and acquisitions and now represent 15.5% of the Banks total loans
receivable. This strategy has enabled the Bank to position itself to enhance the yield of its portfolio in a



5



---

##### Table of Contents

rising interest rate environment, while also limiting interest rate sensitivity, as these loans are generally based on
the prime rate of interest plus or minus a stated margin. In addition, the Banks commercial business banking lending department added a variety of commercial business loans that are typically interest sensitive and of shorter duration. The
Bank also originates multi-family loans, commercial real estate, residential construction and land acquisition and development loans. At December 31, 2003, the Banks total loan portfolio was $6.37 billion, representing over 71% of the total
assets of the Company.



Loan Portfolio Composition.The following table
sets forth the composition of the Banks loan portfolio by loan type in dollar amounts and in percentages at the dates indicated and reflects the change in the loan portfolio mix resulting from the recent acquisitions that closed in 2003. The
concentration in one- to four-family real estate has been reduced from 79.5% at December 31, 2002 to 61.3% at December 31, 2003. These acquisitions quickened the pace of loan diversification away from one-to four-family real estate loans that
started in 2000.



|                                                         |  |                        |           |   |                 |        |   |        |   |           |                  |  |        |        |  |   |                  |   |  |        |  
|-------------------------------------------------------- |  | ---------------------- | --------- | - | --------------- | ------ | - | ------ | - | --------- | ---------------- |  | ------ | ------ |  | - | ---------------- | - |  | ------ | -
|                                                         |  | December 31,           |          
|                                                         |  | 2003                   |           |   | 2002            |        |   | 2001   |  
|                                                         |  | Amount                 |           |   | Percentof Total |        |   | Amount |   |           | Percent of Total |  |        | Amount |  |   | Percent of Total |  
|                                                         |  | (Dollars in thousands) |          
|Real estate loans:                                       |  |                        |           |   |                 |        |   |        |   |           |                  |  |        |        |  |   |                  |   |  |        |  
|One- to four-family:                                     |  |                        |           |   |                 |        |   |        |   |           |                  |  |        |        |  |   |                  |   |  |        |  
|Held for investment                                      |  | $                      | 3,924,965 |   |                 | 60.67  | % |        | $ | 3,470,937 |                  |  | 75.81  | %      |  | $ | 3,559,466        |   |  | 79.38  | %
|Held for sale                                            |  |                        | 44,511    |   |                 | .69    |   |        |   | 167,780   |                  |  | 3.67   |        |  |   | 161,105          |   |  | 3.59   |  
|Multi-family                                             |  |                        | 621,255   |   |                 | 9.60   |   |        |   | 260,318   |                  |  | 5.69   |        |  |   | 197,685          |   |  | 4.41   |  
|Commercial                                               |  |                        | 535,709   |   |                 | 8.28   |   |        |   | 142,493   |                  |  | 3.11   |        |  |   | 140,128          |   |  | 3.12   |  
|Construction                                             |  |                        | 135,704   |   |                 | 2.10   |   |        |   | 48,179    |                  |  | 1.05   |        |  |   | 43,756           |   |  | .98    |  
|Land                                                     |  |                        | 75,012    |   |                 | 1.16   |   |        |   | 42,530    |                  |  | .93    |        |  |   | 44,494           |   |  | .99    |  
|                                                         |  |                        |           |   |                 |        |   |        |   |           |                  |  |        |        |  |   |                  |   |  |        |  
|Total real estate loans                                  |  |                        | 5,337,156 |   |                 | 82.50  |   |        |   | 4,132,237 |                  |  | 90.26  |        |  |   | 4,146,634        |   |  | 92.47  |  
|                                                         |  |                        |           |   |                 |        |   |        |   |           |                  |  |        |        |  |   |                  |   |  |        |  
|Consumer loans:                                          |  |                        |           |   |                 |        |   |        |   |           |                  |  |        |        |  |   |                  |   |  |        |  
|Equity lines of credit                                   |  |                        | 898,452   |   |                 | 13.89  |   |        |   | 387,025   |                  |  | 8.45   |        |  |   | 258,884          |   |  | 5.77   |  
|Home equity loans                                        |  |                        | 67,119    |   |                 | 1.04   |   |        |   | 32,120    |                  |  | .70    |        |  |   | 52,216           |   |  | 1.16   |  
|Other                                                    |  |                        | 38,238    |   |                 | .59    |   |        |   | 6,255     |                  |  | .14    |        |  |   | 7,975            |   |  | .18    |  
|                                                         |  |                        |           |   |                 |        |   |        |   |           |                  |  |        |        |  |   |                  |   |  |        |  
|Total consumer loans                                     |  |                        | 1,003,809 |   |                 | 15.52  |   |        |   | 425,400   |                  |  | 9.29   |        |  |   | 319,075          |   |  | 7.11   |  
|Commercial business loans                                |  |                        | 128,266   |   |                 | 1.98   |   |        |   | 20,592    |                  |  | .45    |        |  |   | 18,596           |   |  | .42    |  
|                                                         |  |                        |           |   |                 |        |   |        |   |           |                  |  |        |        |  |   |                  |   |  |        |  
|Total loans receivable                                   |  |                        | 6,469,231 |   |                 | 100.00 | % |        |   | 4,578,229 |                  |  | 100.00 | %      |  |   | 4,484,305        |   |  | 100.00 | %
|                                                         |  |                        |           |   |                 |        |   |        |   |           |                  |  |        |        |  |   |                  |   |  |        |  
|Less:                                                    |  |                        |           |   |                 |        |   |        |   |           |                  |  |        |        |  |   |                  |   |  |        |  
|Loans in process                                         |  |                        | 82,183    |   |                 |        |   |        |   | 30,689    |                  |  |        |        |  |   | 21,678           |   |  |        |  
|Unearned discounts, premiums and deferred loan fees, net |  |                        | (16,614   | ) |                 |        |   |        |   | (2,875    | )                |  |        |        |  |   | (4,555           | ) |  |        |  
|Allowance for loan losses                                |  |                        | 34,555    |   |                 |        |   |        |   | 19,483    |                  |  |        |        |  |   | 19,607           |   |  |        |  
|                                                         |  |                        |           |   |                 |        |   |        |   |           |                  |  |        |        |  |   |                  |   |  |        |  
|Loans receivable, net                                    |  | $                      | 6,369,107 |   |                 |        |   |        | $ | 4,530,932 |                  |  |        |        |  | $ | 4,447,575        |   |  |        |  
|                                                         |  |                        |           |   |                 |        |   |        |   |           |                  |  |        |        |  |   |                  |   |  |        |  



6



---

##### Table of Contents

|                                                         |  |                        |           |   |                  |        |   |        |   |           |                  |  |        |  
|-------------------------------------------------------- |  | ---------------------- | --------- | - | ---------------- | ------ | - | ------ | - | --------- | ---------------- |  | ------ | -
|                                                         |  | December 31,           |          
|                                                         |  | 2000                   |           |   | 1999             |       
|                                                         |  | Amount                 |           |   | Percent of Total |        |   | Amount |   |           | Percent of Total | 
|                                                         |  | (Dollars in thousands) |          
|Real estate loans:                                       |  |                        |           |   |                  |        |   |        |   |           |                  |  |        |  
|One- to four-family:                                     |  |                        |           |   |                  |        |   |        |   |           |                  |  |        |  
|Held for investment                                      |  | $                      | 3,807,980 |   |                  | 87.50  | % |        | $ | 3,479,425 |                  |  | 89.05  | %
|Held for sale                                            |  |                        | 41,074    |   |                  | .94    |   |        |   | 12,601    |                  |  | .32    |  
|Multi-family                                             |  |                        | 173,072   |   |                  | 3.98   |   |        |   | 164,878   |                  |  | 4.22   |  
|Commercial                                               |  |                        | 41,223    |   |                  | .95    |   |        |   | 38,817    |                  |  | .99    |  
|Construction                                             |  |                        | 29,566    |   |                  | .67    |   |        |   | 27,707    |                  |  | .71    |  
|Land                                                     |  |                        | 40,497    |   |                  | .93    |   |        |   | 28,602    |                  |  | .73    |  
|                                                         |  |                        |           |   |                  |        |   |        |   |           |                  |  |        |  
|Total real estate loans                                  |  |                        | 4,133,412 |   |                  | 94.97  |   |        |   | 3,752,030 |                  |  | 96.02  |  
|                                                         |  |                        |           |   |                  |        |   |        |   |           |                  |  |        |  
|Consumer loans:                                          |  |                        |           |   |                  |        |   |        |   |           |                  |  |        |  
|Equity lines of credit                                   |  |                        | 146,020   |   |                  | 3.36   |   |        |   | 99,099    |                  |  | 2.54   |  
|Home equity loans                                        |  |                        | 64,465    |   |                  | 1.48   |   |        |   | 48,397    |                  |  | 1.24   |  
|Other                                                    |  |                        | 4,783     |   |                  | .11    |   |        |   | 4,757     |                  |  | .12    |  
|                                                         |  |                        |           |   |                  |        |   |        |   |           |                  |  |        |  
|Total consumer loans                                     |  |                        | 215,268   |   |                  | 4.95   |   |        |   | 152,253   |                  |  | 3.90   |  
|Commercial business loans                                |  |                        | 3,528     |   |                  | .08    |   |        |   | 3,132     |                  |  | .08    |  
|                                                         |  |                        |           |   |                  |        |   |        |   |           |                  |  |        |  
|Total loans receivable                                   |  |                        | 4,352,208 |   |                  | 100.00 | % |        |   | 3,907,415 |                  |  | 100.00 | %
|                                                         |  |                        |           |   |                  |        |   |        |   |           |                  |  |        |  
|Less:                                                    |  |                        |           |   |                  |        |   |        |   |           |                  |  |        |  
|Loans in process                                         |  |                        | 12,912    |   |                  |        |   |        |   | 11,893    |                  |  |        |  
|Unearned discounts, premiums and deferred loan fees, net |  |                        | (7,076    | ) |                  |        |   |        |   | (6,323    | )                |  |        |  
|Allowance for loan losses                                |  |                        | 18,258    |   |                  |        |   |        |   | 17,276    |                  |  |        |  
|                                                         |  |                        |           |   |                  |        |   |        |   |           |                  |  |        |  
|Loans receivable, net                                    |  | $                      | 4,328,114 |   |                  |        |   |        | $ | 3,884,569 |                  |  |        |  
|                                                         |  |                        |           |   |                  |        |   |        |   |           |                  |  |        |  



7



---

##### Table of Contents

The following table shows the composition of the Banks loan portfolio, further broken down by
fixed-rate and adjustable rate loans, as of the dates indicated. It reflects the significant changes occurring in the last two years from the increased efforts on making the loan portfolio more adjustable rate in nature and of shorter duration.
These changes have resulted from an increased internal emphasis on originating floating rate equity lines of credit and commercial business loans, the retention of hybrid ARM mortgage loans in portfolio, while selling the majority of the long-term
fixed rate mortgage loan originations in the secondary market. The table also reflects the significant impact the 2003 acquisitions had in increasing the percentage of adjustable rate loans in the portfolio.



|                                                             |  |                        |           |   |         |        |   |        |   |           |         |  |        |        |  |   |           |   |  |        |  
|------------------------------------------------------------ |  | ---------------------- | --------- | - | ------- | ------ | - | ------ | - | --------- | ------- |  | ------ | ------ |  | - | --------- | - |  | ------ | -
|                                                             |  | December 31,           |          
|                                                             |  | 2003                   |           |   | 2002    |        |   | 2001   |  
|                                                             |  | Amount                 |           |   | Percent |        |   | Amount |   |           | Percent |  |        | Amount |  |   | Percent   |  
|                                                             |  | (Dollars in thousands) |          
|Adjustable-rate loans:                                       |  |                        |           |   |         |        |   |        |   |           |         |  |        |        |  |   |           |   |  |        |  
|Real estate:                                                 |  |                        |           |   |         |        |   |        |   |           |         |  |        |        |  |   |           |   |  |        |  
|One- to four-family                                          |  | $                      | 2,613,896 |   |         | 40.41  | % |        | $ | 1,993,337 |         |  | 43.54  | %      |  | $ | 1,613,251 |   |  | 35.98  | %
|One- to four-family held for sale                            |  |                        |          |   |         |       |   |        |   | 40,162    |         |  | .87    |        |  |   |          |   |  |       |  
|Multi-family                                                 |  |                        | 489,354   |   |         | 7.56   |   |        |   | 160,543   |         |  | 3.51   |        |  |   | 111,311   |   |  | 2.48   |  
|Commercial                                                   |  |                        | 405,627   |   |         | 6.27   |   |        |   | 62,990    |         |  | 1.38   |        |  |   | 60,180    |   |  | 1.34   |  
|Construction                                                 |  |                        | 89,949    |   |         | 1.39   |   |        |   | 31,796    |         |  | .69    |        |  |   | 30,524    |   |  | .68    |  
|Land                                                         |  |                        | 73,410    |   |         | 1.13   |   |        |   | 40,028    |         |  | .87    |        |  |   | 36,484    |   |  | .81    |  
|                                                             |  |                        |           |   |         |        |   |        |   |           |         |  |        |        |  |   |           |   |  |        |  
|Total adjustable-rate real estate loans                      |  |                        | 3,672,236 |   |         | 56.76  |   |        |   | 2,328,856 |         |  | 50.86  |        |  |   | 1,851,750 |   |  | 41.29  |  
|Consumer                                                     |  |                        | 906,099   |   |         | 14.01  |   |        |   | 389,099   |         |  | 8.50   |        |  |   | 234,642   |   |  | 5.23   |  
|Commercial business                                          |  |                        | 63,821    |   |         | .99    |   |        |   | 16,160    |         |  | .36    |        |  |   | 16,266    |   |  | .36    |  
|                                                             |  |                        |           |   |         |        |   |        |   |           |         |  |        |        |  |   |           |   |  |        |  
|Total adjustable-rate loans receivable                       |  |                        | 4,642,156 |   |         | 71.76  |   |        |   | 2,734,115 |         |  | 59.72  |        |  |   | 2,102,658 |   |  | 46.88  |  
|                                                             |  |                        |           |   |         |        |   |        |   |           |         |  |        |        |  |   |           |   |  |        |  
|Fixed-rate loans:                                            |  |                        |           |   |         |        |   |        |   |           |         |  |        |        |  |   |           |   |  |        |  
|Real estate:                                                 |  |                        |           |   |         |        |   |        |   |           |         |  |        |        |  |   |           |   |  |        |  
|One- to four-family                                          |  |                        | 1,311,069 |   |         | 20.27  |   |        |   | 1,477,600 |         |  | 32.27  |        |  |   | 1,946,215 |   |  | 43.40  |  
|One- to four-family held for sale                            |  |                        | 44,511    |   |         | .69    |   |        |   | 127,618   |         |  | 2.79   |        |  |   | 161,105   |   |  | 3.59   |  
|Multi-family                                                 |  |                        | 131,901   |   |         | 2.04   |   |        |   | 99,775    |         |  | 2.18   |        |  |   | 86,374    |   |  | 1.93   |  
|Commercial                                                   |  |                        | 130,082   |   |         | 2.01   |   |        |   | 79,503    |         |  | 1.74   |        |  |   | 79,428    |   |  | 1.77   |  
|Construction                                                 |  |                        | 45,755    |   |         | .71    |   |        |   | 16,383    |         |  | .36    |        |  |   | 13,232    |   |  | .30    |  
|Land                                                         |  |                        | 1,602     |   |         | .02    |   |        |   | 2,502     |         |  | .05    |        |  |   | 8,010     |   |  | .18    |  
|                                                             |  |                        |           |   |         |        |   |        |   |           |         |  |        |        |  |   |           |   |  |        |  
|Total fixed-rate real estate loans                           |  |                        | 1,664,920 |   |         | 25.74  |   |        |   | 1,803,381 |         |  | 39.39  |        |  |   | 2,294,364 |   |  | 51.17  |  
|Consumer                                                     |  |                        | 97,710    |   |         | 1.51   |   |        |   | 36,301    |         |  | .79    |        |  |   | 84,433    |   |  | 1.88   |  
|Commercial business                                          |  |                        | 64,445    |   |         | .99    |   |        |   | 4,432     |         |  | .10    |        |  |   | 2,850     |   |  | .07    |  
|                                                             |  |                        |           |   |         |        |   |        |   |           |         |  |        |        |  |   |           |   |  |        |  
|Total fixed-rate loans receivable                            |  |                        | 1,827,075 |   |         | 28.24  |   |        |   | 1,844,114 |         |  | 40.28  |        |  |   | 2,381,647 |   |  | 53.12  |  
|                                                             |  |                        |           |   |         |        |   |        |   |           |         |  |        |        |  |   |           |   |  |        |  
|Total loans receivable                                       |  |                        | 6,469,231 |   |         | 100.00 | % |        |   | 4,578,229 |         |  | 100.00 | %      |  |   | 4,484,305 |   |  | 100.00 | %
|                                                             |  |                        |           |   |         |        |   |        |   |           |         |  |        |        |  |   |           |   |  |        |  
|Less:                                                        |  |                        |           |   |         |        |   |        |   |           |         |  |        |        |  |   |           |   |  |        |  
|Loans in process                                             |  |                        | 82,183    |   |         |        |   |        |   | 30,689    |         |  |        |        |  |   | 21,678    |   |  |        |  
|Unearned discounts, premiums and deferred loan expenses, net |  |                        | (16,614   | ) |         |        |   |        |   | (2,875    | )       |  |        |        |  |   | (4,555    | ) |  |        |  
|Allowance for loan losses                                    |  |                        | 34,555    |   |         |        |   |        |   | 19,483    |         |  |        |        |  |   | 19,607    |   |  |        |  
|                                                             |  |                        |           |   |         |        |   |        |   |           |         |  |        |        |  |   |           |   |  |        |  
|Loans receivable, net                                        |  | $                      | 6,369,107 |   |         |        |   |        | $ | 4,530,932 |         |  |        |        |  | $ | 4,447,575 |   |  |        |  
|                                                             |  |                        |           |   |         |        |   |        |   |           |         |  |        |        |  |   |           |   |  |        |  



8



---

##### Table of Contents

Loan Maturity.The following table shows the contractual final maturity of the Banks loan
portfolio at December 31, 2003. The loan amounts do not reflect the timing of scheduled monthly principal repayment amounts. Principal repayments and prepayments on mortgage loans totaled $2.91 billion, $2.22 billion, and $1.88 billion, for the
years ended December 31, 2003, 2002 and 2001, respectively. Based on these amounts, management believes the information in the following table is not indicative of what the actual repayments on these loans will be.



|                             |  |                            |           |               |         |              |         |                |         |      |        |          |           |                       |         |       |   |           |  
|---------------------------- |  | -------------------------- | --------- | ------------- | ------- | ------------ | ------- | -------------- | ------- | ---- | ------ | -------- | --------- | --------------------- | ------- | ----- | - | --------- | -
|                             |  | At December 31, 2003       |          
|                             |  | Real Estate Mortgage Loans |           | Other         |         |              |        
|                             |  | One- to Four- Family       |           | Multi- Family |         | Comm- ercial |         | Con- struction |         | Land |        | Consumer |           | Comm- ercial Business |         | Total |  
|                             |  | (Dollars in thousands)     |          
|Amount due:                  |  |                            |           |               |         |              |         |                |         |      |        |          |           |                       |         |       |   |           |  
|One year or less             |  | $                          | 5,959     |               | 2,708   |              | 55,393  |                | 36,407  |      | 10,544 |          | 60,894    |                       | 57,400  |       |   | 229,305   |  
|                             |  |                            |           |               |         |              |         |                |         |      |        |          |           |                       |         |       |   |           |  
|After one year               |  |                            |           |               |         |              |         |                |         |      |        |          |           |                       |         |       |   |           |  
|1 year to 5 years            |  |                            | 85,765    |               | 129,051 |              | 292,023 |                | 9,897   |      | 38,690 |          | 389,342   |                       | 67,806  |       |   | 1,012,574 |  
|Over 5 years                 |  |                            | 3,833,241 |               | 489,496 |              | 188,293 |                | 89,400  |      | 25,778 |          | 553,573   |                       | 3,060   |       |   | 5,182,841 |  
|                             |  |                            |           |               |         |              |         |                |         |      |        |          |           |                       |         |       |   |           |  
|Total after 1 year           |  |                            | 3,919,006 |               | 618,547 |              | 480,316 |                | 99,297  |      | 64,468 |          | 942,915   |                       | 70,866  |       |   | 6,195,415 |  
|                             |  |                            |           |               |         |              |         |                |         |      |        |          |           |                       |         |       |   |           |  
|Total amount due             |  | $                          | 3,924,965 |               | 621,255 |              | 535,709 |                | 135,704 |      | 75,012 |          | 1,003,809 |                       | 128,266 |       |   | 6,424,720 |  
|                             |  |                            |           |               |         |              |         |                |         |      |        |          |           |                       |         |       |   |           |  
|Less:                        |  |                            |           |               |         |              |         |                |         |      |        |          |           |                       |         |       |   |           |  
|Loans in process             |  |                            |           |               |         |              |         |                |         |      |        |          |           |                       |         |       |   | (82,183   | )
|Deferred cost adjustments    |  |                            |           |               |         |              |         |                |         |      |        |          |           |                       |         |       |   | 16,614    |  
|Allowance for loan losses    |  |                            |           |               |         |              |         |                |         |      |        |          |           |                       |         |       |   | (34,555   | )
|                             |  |                            |           |               |         |              |         |                |         |      |        |          |           |                       |         |       |   |           |  
|Total loans receivable, net  |  |                            |           |               |         |              |         |                |         |      |        |          |           |                       |         |       |   | 6,324,596 |  
|Mortgage loans held for sale |  |                            |           |               |         |              |         |                |         |      |        |          |           |                       |         |       |   | 44,511    |  
|                             |  |                            |           |               |         |              |         |                |         |      |        |          |           |                       |         |       |   |           |  
|Total loans, net             |  |                            |           |               |         |              |         |                |         |      |        |          |           |                       |         |       | $ | 6,369,107 |  
|                             |  |                            |           |               |         |              |         |                |         |      |        |          |           |                       |         |       |   |           |  



The following table
sets forth at December 31, 2003 the dollar amount of loans receivable held for investment due after one year, and whether such loans have fixed or adjustable interest rates.



|                       |  |                        |           |            |           |       |          
|---------------------- |  | ---------------------- | --------- | ---------- | --------- | ----- | ---------
|                       |  | Due after one year    
|                       |  | Fixed                  |           | Adjustable |           | Total
|                       |  | (Dollars in thousands)
|Real estate loans:     |  |                        |           |            |           |       |          
|One- to four-family    |  | $                      | 1,247,034 |            | 2,671,972 |       | 3,919,006
|Multi-family           |  |                        | 130,021   |            | 488,526   |       | 618,547  
|Commercial             |  |                        | 126,093   |            | 354,223   |       | 480,316  
|Construction           |  |                        | 14,567    |            | 84,730    |       | 99,297   
|Land                   |  |                        | 767       |            | 63,701    |       | 64,468   
|Consumer               |  |                        | 73,754    |            | 869,161   |       | 942,915  
|Commercial business    |  |                        | 34,754    |            | 36,112    |       | 70,866   
|                       |  |                        |           |            |           |       |          
|Total loans receivable |  | $                      | 1,626,990 |            | 4,568,425 |       | 6,195,415
|                       |  |                        |           |            |           |       |          



Residential
Lending.The Bank offers fixed-rate mortgage loans with terms to maturity of 10, 15, 20 and 30 years and fixed-rate balloon loans that mature after seven years. The Banks fixed-rate loan products generally offer a monthly repayment option.
Interest rates charged on fixed-rate loans are competitively priced on a daily basis based on secondary market prices and market conditions. The Bank also offers a variety of adjustable-rate mortgage loans which are also competitively priced to the
secondary market prices in general, but may be more aggressively priced from time to time due to market conditions. The Bank generally originates its fixed-rate and adjustable-rate mortgage loans in a form consistent with secondary market standards
as a means of maintaining high credit quality, and limiting liquidity risk should the Bank want to sell or securitize those loans.



9



---

##### Table of Contents

The Bank focuses its lending efforts primarily on the retail origination of loans secured by first
mortgages on owner-occupied, one-to four-family residences. Residential loan originations are generated by the Banks marketing efforts, its present customers, walk-in customers and referrals from real estate brokers and builders. The
Banks loan officers are compensated primarily through commissions, based on the level of loans originated in accordance with the Banks lending standards.



The Bank offers a mortgage loan modification program, for loans not previously sold in the secondary market, that allows the
borrower to receive a reduced interest rate, change in term, or a change in loan program, in lieu of refinancing the original loan. The borrower is charged a fee that varies based upon the modifications made, including an appraisal fee when the Bank
requires a reappraisal of the collateral. The program has been advantageous to the Bank during heavy refinancing periods, by enabling the Bank to meet customer demand for loan refinancings, limiting the disruption to its loan operations for loan
customers who are borrowing for home purchases, as well as reducing the costs associated with refinance activity of existing borrowers.



Loan applications are reviewed in accordance with the underwriting standards approved by the Banks Board of Directors and which generally conform to
Fannie Mae standards. Loans in excess of $3.0 million must be approved by the Loan Committee of the Board of Directors. In underwriting residential real estate loans, the Bank evaluates both the borrowers ability to make monthly payments and
the value of the property securing the loan. Potential borrowers are qualified for ARM loans and fixed-rate loans based on the initial or stated rate of the loan, except for one-year ARM loans with a loan-to-value ratio in excess of 70% and a term
greater than 15 years, in which case the borrower is qualified at 2% above the initial note rate. Despite the benefits of ARM loans to the Banks asset/liability management program, they do pose potential additional risks, primarily because as
interest rates rise, the underlying payment requirements of the borrower rise, thereby increasing the potential risk of default.



Upon receipt of a completed loan application from a prospective borrower, credit reports are ordered and income, employment and financial information is
verified in accordance with underwriting standards. An appraisal of the real estate intended to secure the proposed loan is undertaken by a Bank appraiser or an independent appraiser previously approved by the Bank. It is the Banks policy to
obtain title insurance on all mortgage loans. Borrowers also must obtain hazard (including fire) insurance prior to closing. The Bank requires flood insurance on properties located in special flood hazard areas. Borrowers are generally required to
advance funds on a monthly basis together with each payment of principal and interest through a mortgage escrow account from which the Bank makes disbursements for items such as real estate taxes and hazard insurance premiums as they become due.



The Bank has adopted a policy of generally limiting the
loan-to-value ratio on originated first mortgage loans and refinanced loans to 97% and requiring that loans exceeding 80% of the appraised value of the property or its purchase price, whichever is less, generally be insured by a mortgage insurance
company approved by Fannie Mae in an amount sufficient to reduce the Banks exposure to no greater than the 75% level. However, the Bank has also started offering loans up to 100% loan-to-value under an affordable access program. In many
instances under this program, loans up to 100% of the purchase price may be available for borrowers, particularly those who live in historically underserved communities. The Bank self-insures certain loans, subject to higher minimum credit quality
standards, that have loan-to-value ratios between 80% and 90%, by charging a slightly higher interest rate. At December 31, 2003, the Bank had $313.3 million of mortgage loans, or 8% of the one- to four-family portfolio that had a loan-to-value
ratio of greater than 80% without mortgage insurance. Included in that amount are $34.4 million of loans with greater than 90% loan-to-value ratios, primarily related to the Banks affordable housing initiatives. In 2001, the Bank formed a
captive reinsurance subsidiary to accept a second-tier layer of risk on mortgage loans with mortgage insurance, in exchange for a portion of the mortgage insurance premiums paid by the customer to certain mortgage insurance companies. See
Subsidiary Activities  Mid America Re, Inc. for more information.



10



---

##### Table of Contents

As part of its community lending effort, the Bank participates in or actively supports many special
lending programs designed to promote affordable homeownership and to address the needs of underserved communities in the markets it serves. Under these programs, the Bank offers various innovative and flexible home mortgage products that primarily
benefit low-to moderate-income borrowers, including high loan-to-value mortgages as discussed above. In February 2003, the Bank established an increased community lending goal of $3 billion of mortgage loan originations, in the Chicagoland area, in
its CRA assessment area over the next six years. During 2003, $988 million of that goal was fulfilled. In May 2003, the Bank announced that it will provide $500 million in loans over the next five years to Milwaukee area communities and
neighborhoods. This goal began to be fulfilled in December 2003 after the closing date of the acquisition. These goals include, single and multi-family home mortgage loans in low-to-moderate income census tracts, loans in predominantly minority
communities, and loans to borrowers whose income is below 80% of median income. Management set these goals for the Bank assuming continued access to financing, mortgage purchase and affordable housing programs through Fannie Mae, Freddie Mac and
MPF, continued access to secondary mortgage market outlets, continued adequacy of other funding sources critical to the Banks lending capacity, and favorable housing market and affordable interest rate conditions.



Multi-family Lending. The Bank originates multi-family residential
mortgage loans in its market areas. At December 31, 2003, the Bank had multi-family loans of $621.3 million, including a portfolio of purchased participating interests of $2.5 million related to low-income housing. Multi-family loans represent 9.6%
of total loans receivable at December 31, 2003. ARM loans represented 78.8% of the multi-family residential loan portfolio at December 31, 2003. Multi-family loans are generally offered with initial fixed-rate periods of one, three, five, seven and
ten years. Multi-family residential mortgage loans are made for terms to maturity of up to 25 years and carry a loan-to-value ratio not greater than 80%. The Bank generally requires a net operating income to debt service ratio of at least 1.0 times.
Loans secured by properties of five or more units are primarily qualified on the basis of rental income generated by the property.



Commercial Real Estate Lending. Loans secured by commercial real estate, generally carry a higher yield and are made for a shorter term than
fixed-rate one- to four-family residential loans. At December 31, 2003, the Bank had $535.7 million of commercial real estate loans. Historically, the Banks policy has been to originate commercial real estate loans on a limited basis primarily
to assist the Bank in an effort to maintain an interest-rate sensitive loan portfolio. With the acquisitions completed since 2001, however, the Company has expanded its commercial real estate lending area to facilitate the growth in this portfolio.
During 2003, the Banks commercial real estate portfolio increased by $393.2 million, with $370.4 million of that increase due to the acquisition of St. Francis. The current portfolio includes a variety of commercial properties, including
office buildings, warehouses, industrial/manufacturing buildings, motel properties, land acquisition and development and other improved non-residential properties.



Commercial real estate loans are generally made in amounts up to 80% of the appraised value of the property, as determined
by an independent appraiser previously approved by the Bank. The Companys commercial real estate lending area includes the states of Illinois, Wisconsin and Minnesota, with its primary geographical focus in the Chicago and Milwaukee
metropolitan areas. The Bank often requires borrowers to provide their personal guarantees on loans made for commercial real estate.



Loans secured by commercial real estate properties are generally larger and involve a greater degree of risk than residential mortgage loans. Because
payments on loans secured by commercial real estate properties are often dependent on the successful operation or



11



---

##### Table of Contents

management of the properties, repayment of such loans may be subject to adverse conditions in the real estate market or
the economy. The Bank seeks to minimize these risks by lending primarily on existing income-producing properties and generally restricting such loans to properties in the Chicago and Milwaukee areas. The Bank analyzes the financial condition of the
borrower and the reliability and predictability of the net income generated by the security property in determining whether to extend credit. In addition, the Bank generally requires a net operating income to debt service ratio of at least 1.15
times. At December 31, 2003, the Banks ten largest commercial real estate loans totaled $64.8 million, all of which are current and performing in accordance with their original terms.



Construction and Land Lending. The Bank originates loans to finance
the construction of one- to four-family residences, primarily in its market areas. At December 31, 2003, the Bank had $135.7 million of construction loans of which $107.4 million, and $16.2 million financed the construction of one- to four-family
and multi-family residences, respectively. The Bank also originates loans for the acquisition and development of unimproved property to be used primarily for residential purposes in cases where the Bank is to provide the construction funds to
improve the properties. At December 31, 2003, the Banks construction and land loans totaled $210.7 million, or 3.3%, of total loans receivable.



The Bank uses loan underwriting and construction loan guidelines for financing primarily individual, owner-occupied houses where qualified contractors are
involved. Construction loans are generally structured either to be converted to permanent loans at the end of the construction phase or to be paid off upon receiving financing from another financial institution. The majority of the single-family
construction loans were acquired from St. Francis. These loans are generally hybrid ARMs originated with a final maturity of 30 years, that convert to a permanent loan after an initial construction period of up to twelve months, during which the
borrower only pays interest. Construction loans are based on the appraised value of the property, as determined by either an independent appraiser, or an appraiser on staff at the Bank, and an analysis of the potential marketability and
profitability of the project. The Bank also makes construction loans, with maturities of up to 12 months, with extensions as needed. Loan proceeds are disbursed in increments as construction progresses and as inspections warrant.



Land loans include loans to developers for the development of residential
subdivisions in the Banks market areas. At December 31, 2003, the Bank had land loans to developers totaling $33.2 million. Of this amount, the largest aggregate amount of land acquisition and development loans to a single developer amounted
to $11.7 million. In addition to land loans, this borrower had construction loans with the Bank totaling $8.7 million. Loans to developers are generally short-term loans with terms of three to five years. Under Bank policy, the loan-to-value ratio
may not exceed 80% and is generally less than 75%. The majority of such loans are floating rate based on the prime rate or LIBOR. Loans generally are made to customers of the Bank and developers with whom the Bank has had long-standing
relationships. The Bank requires an independent appraisal of the property and feasibility studies may be required to determine the profit potential of the development project.



Land loans are also made to local builders for the purchase of improved lots. At December 31, 2003, the Bank had land loans
outstanding to local builders totaling $7.9 million. Such loans are generally for terms of up to three years and are generally granted at rates similar to rates quoted for residential mortgage loans. The loan-to-value ratio on such loans is limited
to 75%. Land loans for the purchase of fully improved lots are also made to individuals. At December 31, 2003, the Bank had land loans to individuals totaling $33.9 million. Such loans are made for up to 15-year terms with adjustable or fixed
interest rates that are made at the prevailing rates for one- to four-family residential loans.



Construction and land development loans afford the Bank the opportunity to increase the interest rate sensitivity of its loan portfolio and to receive
yields higher than those obtainable



12



---

##### Table of Contents

on ARM loans secured by existing residential properties. These higher yields correspond to the higher risks associated
with construction lending. Construction and land development loans involve additional risks attributable to the fact that loan funds are advanced upon the security of the project under construction, which is of uncertain value prior to its
completion. Because of the uncertainties inherent in estimating construction costs as well as the market value of the completed project and the effects of governmental regulation of real property, it is relatively difficult to evaluate accurately
the total funds required to complete a project and the related loan-to-value ratio. As a result of the foregoing, construction and land development lending often involves the disbursement of substantial funds with repayment dependent, in part, on
the success of the ultimate project rather than the ability of the borrower or guarantor to repay principal and interest. If the Bank is forced to foreclose on a project prior to or at completion due to a default, there can be no assurance that the
Bank will be able to recover all of the unpaid balance of, and accrued interest on, the loan as well as related foreclosure and holding costs. In addition, the Bank may be required to fund additional amounts to complete the project and may have to
hold the property for an unspecified period of time. The Bank has attempted to address these risks through its underwriting procedures and its limited amount of construction lending on multi-family and commercial real estate properties.



Consumer Lending. The Banks consumer lending is primarily
home equity lines of credit and fixed-rate second mortgage loans and to a limited extent, auto loans and unsecured consumer loans. On December 31, 2003, outstanding balances on home equity lines represented $898.5 million or 14% of the Banks
total loan portfolio. Home equity lines of credit are generally extended up to 85% of the appraised value of the property, less existing liens, generally at interest rates which range from the designated prime rate minus .50% to plus .50%,
based on balances drawn. To a lesser extent, the Bank offers home equity lines of credit at greater than 85% of the appraised value of the property. The interest rate on 85%-100% loan-to-value lines of credit is the designated prime rate plus 1.50%
to 3.50%. The Bank uses the same underwriting standards for home equity lines of credit as it uses for residential mortgage loans. Other home equity loans consist of $67.1 million of primarily fixed-rate second mortgage loans that amortize over a
three-to ten-year period.



Commercial Business Lending.The Bank originates a variety of commercial loans, including working capital financing, equipment loans, real estate loans and personal loans. Collateral can take many forms, such as real estate, business or personal assets, or in some cases may
be unsecured. Business loans may include the personal guarantees of business owners. Historical and projected financial statements, business and personal credit inquiries and collateral valuations are analyzed to give the Bank assurance that the
borrowers will generate sufficient cash flow to cover ongoing expenses and debt service. The type and liquidity of the collateral taken as a secondary source of repayment is monitored, as is ongoing debt service capacity. Additionally, the Bank may
provide letter of credit services to certain borrowers on a case-by-case basis.



New commercial loans are reviewed and approved on a weekly basis by a committee of senior management and loan officers that are responsible for the review and approval of new loans up to $4.0 million. Under the
Banks policies, loans up to $7.5 million are subject to approval by a committee consisting of members of the Banks board of directors, and loans over $7.5 million must be approved by the board of directors. In addition, a loan grading
system was established for reviewing and assessing portfolio credit quality for all commercial business loans. An internal loan review committee of senior management and loan officers of the Bank periodically monitors credit quality of commercial
business loans including loans on the Banks watch list to determine actions to be taken, including collection, additional collateral, and accrual status. During 2003, the Bank also established an independent loan review function to
review commercial loan files and ascertain compliance with Bank documentation and underwriting policies and also to independently grade the loans. At December 31, 2003, the Banks portfolio of commercial business loans was $128.3 million.



13



---

##### Table of Contents

Commercial loans may involve a greater degree of risk than other types of loans, and a borrowers
ability to repay may be more susceptible to adverse economic conditions. The value of the collateral securing a commercial loan is often dependent upon the successful operation of the business. To the extent the Bank originates loans outside of its
primary market areas, risk may be elevated due to the increased difficulty distance brings in monitoring the loan and the borrowers business. The Companys strategy is to continue to grow its commercial lending portfolio, as management
believes this type of lending is providing a higher yield than residential loans and is an important component in helping to maintain a balanced loan portfolio. Typically, the Company targets small to medium sized, privately held businesses in its
primary market areas with which to establish commercial banking relationships.



Credit Enhancement Programs. The Company has entered into agreements whereby, for an initial fee, it will guarantee payment of an industrial revenue bond issue (IRB), issued by a municipality to
finance real estate owned by a third party. The Company does not pledge collateral for these agreements. At December 31, 2003 the amount of IRBs for which the Company has guaranteed payment was $29.2 million.



Environmental Issues. The Bank encounters certain environmental risks
in its lending activities. Under federal and state environmental laws, lenders may become liable for the costs of cleaning up hazardous materials found on security property. Although environmental risks are usually associated with industrial and
commercial loans, risks may be substantial for residential lenders like the Bank if environmental contamination makes the security property unsuitable for use. This could also have an effect on nearby property values. In accordance with Fannie Mae
and Freddie Mac guidelines, appraisals for single-family residences on which the Bank lends include comments on environmental influences. The Bank attempts to control its risk by training its appraisers and underwriters to be cognizant of signs
indicative of environmental hazards. No assurance can be given, however, that the values of properties securing loans in the Banks portfolio will not be adversely affected by unforeseen environmental risks, although the Bank is unaware of any
such environmental issues which subject it to potential material liability at this time.



Environmental concerns such as asbestos containing material, underground storage tanks, mold, and lead based paint can pose a health risk to tenants and negatively impact the collateral value of security property. To
mitigate this risk to the Bank, loan policies call for management to consider all relevant factors in order to determine whether an environmental review is needed and, if so, the scope and detail, prior to the Banks origination of commercial
and multi-family loans. The relevant factors include, but are not limited to, the following: age of property, use of property, location of property, knowledge of subject area, borrower(s) financial capacity to withstand potential clean-up costs,
loan amount and loan-to-value ratio of the proposed loan. For loans in excess of $1 million, a satisfactory Phase I environmental exam is generally required as part of the loan approval process, with further investigation in the form of a Phase II
exam taking place as dictated therein.



Originations,
Purchases, Sales, Swaps of Mortgage Loans and Mortgage-Backed Securities. The Bank originates both ARM and fixed-rate loans. Its ability to originate loans is dependent upon the relative customer demand for fixed-rate or ARM loans in the
origination and purchase market, which is affected by the term structure (short-term compared to long-term) of interest rates as well as the current and expected future level of interest rates. The Bank sells selected conforming and non-conforming
long-term fixed-rate and a limited amount of ARM mortgage loans in the secondary mortgage market to manage its interest rate risk exposure. In the last two years the Bank has generally sold most of its conforming and non-conforming, or jumbo
long-term fixed-rate loan originations. In 2003, the Bank retained the majority of its 15-year fixed rate originations in its loan portfolio as it could absorb the interest rate risk in this product with the change in its asset mix and increase in
core deposit levels. These loan sales also allow the Bank to continue to make loans when deposit flows decline or funds are not otherwise available for lending. Generally, the loans are sold for cash or securitized and



14



---

##### Table of Contents

sold in the secondary mortgage market to investors such as Fannie Mae, Freddie Mac, and MPF as well as mortgage bankers,
investment banks and other financial institutions. The majority of these loans are sold without recourse, except those loans sold to MPF, where the Bank retains a limited level of risk in exchange for better pricing on the loans sold. At December
31, 2003, the Bank had approximately $10.4 million in net credit risk exposure on loans it has sold to MPF.



The Bank may also exchange or swap loans out of its portfolio for mortgage-backed securities primarily with Fannie Mae and Freddie Mac that are either
sold simultaneously or held as mortgage-backed-securities available for sale. Generally, the mortgage-backed securities are used to collateralize borrowings and deposits or are sold in the secondary market to raise additional funds. Swap activity by
the Bank is governed by pricing levels in the secondary mortgage market for whole mortgage loans versus securitized mortgage loans, as well as the level of rates for collateralized borrowings. During the current year, the Bank swapped and sold $76.9
million in loans receivable, compared to $58.8 million for the year ended December 31, 2002. Additionally, in 2003 and 2002 the Bank swapped $85.3 million and $67.6 million, respectively, of long-term fixed-rate prepayment penalty protected loans
that were in their final year of prepayment protection into mortgage-backed securities.



In 2003, the Bank originated and purchased $4.99 billion in loans receivable, compared to $3.69 billion in 2002. During 2003, with the continued decrease in interest rates, fixed-rate mortgage loan originations for
single family residences were $2.19 billion compared to $1.59 billion for the previous year, as customers continued to take advantage of the ability to lock in historically low long-term mortgage rates. During 2003, originations of adjustable rate
single family mortgage loans were $1.79 billion compared to $1.46 billion for 2002. Of the fixed-rate originations in 2003, $1.67 billion, or 76%, conformed to the requirements for sale to Fannie Mae and Freddie Mac and $521.9 million, or 24%, did
not conform to the requirements of these agencies. The Banks nonconforming loans are generally designated as such because the principal loan balance exceeds $322,700 ($333,700 as of January 1, 2004), which is the Freddie Mac,
Fannie Mae, and MPF purchase limit, and not because the loans present increased risk of default to the Bank. Loans with such excess balances generally carry interest rates from one-eighth to three-eighths of one percent higher than similar,
conforming fixed-rate loans. The Bank generally sells its conforming fixed-rate production to Freddie Mac, Fannie Mae, and MPF and to a lesser degree, also sells a portion of its non-conforming production to non-government agency investors.
Generally, prior to 2001, nonconforming loans were held in the Banks loan portfolio. During the current year, the Bank sold $1.77 billion of loans into the secondary market, compared to $1.31 billion in 2002. Prior to its acquisition by the
Company, St. Francis also tended to sell fixed-rate loan originations into the secondary market, a significant portion of which activity was conducted through its wholly owned subsidiary, St. Francis Mortgage Corporation, a Wisconsin corporation
with an office in Illinois that purchased loans originated by mortgage brokers in the Midwest and then sold them to various investors. For the St. Francis fiscal year ended September 30, 2003, SF Mortgage purchased and sold approximately $580
million of mortgages. This wholesale volume was heavily refinance driven. As contemplated, St. Francis sold this mortgage banking subsidiary to a third party prior to its merger with the Company, and the Company has not continued St. Francis
wholesale mortgage operation. This will contribute to what is expected to be lower loan originations and loan sale profits for the Company in 2004 compared to the aggregate origination volumes and loan sale profits for the two companies combined
based on their respective 2003 fiscal years.



15



---

##### Table of Contents

The following table sets forth the Banks originations, purchases, sales, swaps and principal
repayments of loans receivable for the periods indicated.



|                                                                 |  |                         |           |      |           |      |          
|---------------------------------------------------------------- |  | ----------------------- | --------- | ---- | --------- | ---- | ---------
|                                                                 |  | Year Ended December 31,
|                                                                 |  | 2003                    |           | 2002 |           | 2001
|                                                                 |  | (Dollars in thousands) 
|Loans originated and purchased:                                  |  |                         |           |      |           |      |          
|Adjustable-rate loans originated:                                |  |                         |           |      |           |      |          
|One- to four-family                                              |  | $                       | 1,790,163 |      | 1,459,668 |      | 735,463  
|Multi-family                                                     |  |                         | 195,002   |      | 92,405    |      | 27,736   
|Commercial real estate                                           |  |                         | 19,466    |      | 8,772     |      | 17,717   
|Construction                                                     |  |                         | 11,016    |      | 29,268    |      | 17,453   
|Land                                                             |  |                         | 35,845    |      | 20,529    |      | 30,272   
|Commercial business                                              |  |                         | 90,511    |      | 47,092    |      | 7,147    
|Consumer                                                         |  |                         | 592,167   |      | 383,102   |      | 196,381  
|                                                                 |  |                         |           |      |           |      |          
|Total adjustable-rate loans originated and purchased:            |  |                         | 2,734,170 |      | 2,040,836 |      | 1,032,169
|Fixed-rate loans originated and purchased:                       |  |                         |           |      |           |      |          
|One- to four-family                                              |  |                         | 2,188,658 |      | 1,588,769 |      | 1,708,663
|Multi-family                                                     |  |                         | 8,151     |      | 10,258    |      | 6,230    
|Commercial real estate                                           |  |                         | 3,868     |      | 1,256     |      | 15,417   
|Construction                                                     |  |                         | 45,262    |      | 25,072    |      | 16,071   
|Land                                                             |  |                         | 165       |      | 784       |      | 6,274    
|Commercial business                                              |  |                         |          |      |          |      | 790      
|Consumer                                                         |  |                         | 13,401    |      | 24,195    |      | 41,980   
|                                                                 |  |                         |           |      |           |      |          
|Total fixed-rate loans originated and purchased:                 |  |                         | 2,259,505 |      | 1,650,334 |      | 1,795,425
|                                                                 |  |                         |           |      |           |      |          
|Total loans originated and purchased                             |  |                         | 4,993,675 |      | 3,691,170 |      | 2,827,594
|                                                                 |  |                         |           |      |           |      |          
|Loans acquired through acquisitions                              |  |                         | 1,573,619 |      |          |      | 210,020  
|                                                                 |  |                         |           |      |           |      |          
|Loans sold:                                                      |  |                         |           |      |           |      |          
|One- to four-family                                              |  |                         | 1,598,704 |      | 1,247,858 |      | 940,952  
|Consumer loans                                                   |  |                         | 228       |      | 307       |      | 476      
|                                                                 |  |                         |           |      |           |      |          
|Total loans sold                                                 |  |                         | 1,598,932 |      | 1,248,165 |      | 941,428  
|Mortgage loans swapped into mortgage-backed securities           |  |                         | 162,164   |      | 126,433   |      | 76,670   
|Transfer to foreclosed real estate and charge-offs               |  |                         | 6,405     |      | 4,422     |      | 2,756    
|Amortization and prepayments                                     |  |                         | 2,908,791 |      | 2,218,226 |      | 1,884,663
|                                                                 |  |                         |           |      |           |      |          
|Total loans sold, swaps, transfers, amortization and prepayments |  |                         | 4,676,292 |      | 3,597,246 |      | 2,905,517
|                                                                 |  |                         |           |      |           |      |          
|Net increase in total loans receivable                           |  | $                       | 1,891,002 |      | 93,924    |      | 132,097  
|                                                                 |  |                         |           |      |           |      |          



Loan servicing fee
income.Loan servicing fee income is generated from loans that the Bank has originated and sold, and includes fees for the collection and remittance of mortgage payments, insurance policies and real estate taxes. Typically, the Bank receives a
servicing fee for performing the aforementioned services equal to at least .25% for fixed-rate mortgages and .25% to .375% for ARM loans on the outstanding principal balance of the sold loan being serviced. Servicing fees are included in income as
loan payments are received. Costs of servicing loans for others are charged to expense as incurred. The Bank is required to capitalize mortgage servicing rights upon the sale of loans based on assumptions as to fee income earned, estimated
prepayment speeds of the underlying mortgage loans, and the cost of servicing. Mortgage servicing rights are amortized based on the estimated life of the loan servicing income stream, which is recorded as a decrease to loan servicing fee income. In
addition, mortgage servicing rights are periodically assessed for impairment, with any impairment or recovery recognized through a valuation allowance.



16



---

##### Table of Contents

The following table shows the components of loan servicing fee income in dollars and as a percentage of
loans serviced for others, as well as other information regarding loans serviced for others for the years indicated:



|                                                                                |  |                         |           |    |      |           |   |      |           |  
|------------------------------------------------------------------------------- |  | ----------------------- | --------- | -- | ---- | --------- | - | ---- | --------- | -
|                                                                                |  | Year Ended December 31, |          
|                                                                                |  | 2003                    |           |    | 2002 |           |   | 2001 |          
|                                                                                |  | (Dollars in thousands)  |          
|Gross servicing revenue                                                         |  | $                       | 6,983     |    |      | 4,742     |   |      | 3,083     |  
|Amortization of mortgage servicing rights                                       |  |                         | (12,922   | )  |      | (7,214    | ) |      | (3,454    | )
|Valuation allowance on mortgage servicing rights                                |  |                         | (940      | )  |      | (2,300    | ) |      | (904      | )
|Recovery of mortgage servicing rights                                           |  |                         | 2,070     |    |      |          |   |      |          |  
|                                                                                |  |                         |           |    |      |           |   |      |           |  
|Loan servicing fee expense, net                                                 |  | $                       | (4,809    | )  |      | (4,772    | ) |      | (1,275    | )
|                                                                                |  |                         |           |    |      |           |   |      |           |  
|As a percentage of average loans serviced for others:                           |  |                         |           |    |      |           |   |      |           |  
|Gross servicing revenue                                                         |  |                         | .278      | %  |      | .275      |   |      | .291      |  
|Amortization of mortgage servicing rights                                       |  |                         | (.515     | )  |      | (.419     | ) |      | (.326     | )
|Valuation allowance on mortgage servicing rights                                |  |                         | (.037     | )  |      | (.134     | ) |      | (.085     | )
|Recovery of mortgage servicing rights                                           |  |                         | .082      |    |      |          |   |      |          |  
|                                                                                |  |                         |           |    |      |           |   |      |           |  
|Loan servicing fee income (expense), net                                        |  |                         | (.192     | )% |      | (.278     | ) |      | (.120     | )
|                                                                                |  |                         |           |    |      |           |   |      |           |  
|Loan sales for the year                                                         |  | $                       | 1,852,238 |    |      | 1,375,196 |   |      | 1,019,145 |  
|                                                                                |  |                         |           |    |      |           |   |      |           |  
|Average balance of loans serviced for others                                    |  | $                       | 2,509,345 |    |      | 1,722,503 |   |      | 1,060,194 |  
|Loans serviced for others at end of year                                        |  |                         | 3,330,987 |    |      | 2,021,512 |   |      | 1,401,607 |  
|Average service fee at year end                                                 |  |                         | .26       | %  |      | .26       |   |      | .25       |  
|Mortgage servicing rights at end of year, net                                   |  |                         | 24,128    |    |      | 12,960    |   |      | 10,531    |  
|Mortgage servicing rights as a percentage of mortgage loans serviced for others |  |                         | .72       |    |      | .64       |   |      | .75       |  
|Multiple of average servicing fee at year end                                   |  |                         | 2.8       | x  |      | 2.5       | x |      | 3.0       | x
|Weighted average interest rate of loans serviced for others                     |  |                         | 5.89      | %  |      | 6.63      |   |      | 7.10      |  
|                                                                                |  |                         |           |    |      |           |   |      |           |  



|Asset | Quality and Allowance for Loan Losses
|----- | -------------------------------------



ResidentialLending Collection Procedures.When a borrower fails to make a required payment by the end of the month in which the payment is
due, the Bank generally institutes collection procedures. The Bank will send a late notice, and in most cases, delinquencies are cured promptly; however, if a loan has been delinquent for more than 60 days, the Banks procedure is to contact
the borrower in order to determine the reason for the delinquency and to effect a cure, and, where appropriate, loan personnel will review the condition of the property and the financial circumstances of the borrower. Based upon the results of any
such investigation, the Bank may: (1) accept a repayment program for the arrearage from the borrower; (2) seek evidence, in the form of a listing contract, of efforts by the borrower to sell the property if the borrower has stated that he is
attempting to sell; (3) request a deed in lieu of foreclosure; or (4) initiate foreclosure proceedings. When a loan payment is delinquent for three or more monthly installments, the Bank will generally initiate foreclosure proceedings. Interest
income on loans is reduced by the full amount of accrued and uncollected interest on loans that are in process of foreclosure or otherwise determined to be uncollectible.



17



---

##### Table of Contents

Business Banking Collection Procedures. Business banking officers and staff are responsible for
monitoring delinquencies regularly, and loan officers generally contact borrowers by telephone or written correspondence within 30 days of a loan becoming delinquent to address payment of past due amounts. As part of the collection procedures,
business banking staff review the borrowers financial condition and consider the Banks collateral and documentation position. If delinquency persists beyond an agreed to cure period and the loan is in default, the Bank may work with the
borrower to restructure the loan in appropriate circumstances. If the Bank is not able to reach a satisfactory solution with the Borrower, the Bank will generally initiate legal action to protect its interest in the borrowers cash flow and
collateral. Where appropriate, the Bank uses internal staff to handle foreclosure or legal proceedings. For larger or more complex situations, the Bank generally retains outside counsel.



Delinquent Loans. At December 31, 2003, 2002, and 2001, delinquencies in the Banks portfolio were as follows:



|                  |  |                        |  |                                       |                    |                      |     |   |                 |     |                                       |   |                      |  |     |  
|----------------- |  | ---------------------- |  | ------------------------------------- | ------------------ | -------------------- | --- | - | --------------- | --- | ------------------------------------- | - | -------------------- |  | --- | -
|                  |  | 61-90 Days             |  |                                       | 91 or More Days(2) |                     
|                  |  | Number of Loans        |  | Principal Balance of Delinquent Loans |                    | Percent of Total (1) |     |   | Number of Loans |     | Principal Balance of Delinquent Loans |   | Percent of Total (1) | 
|                  |  | (Dollars in thousands) | 
|December 31, 2003 |  | 43                     |  | $                                     | 4,851              |                      | .08 | % |                 | 255 |                                       | $ | 32,787               |  | .51 | %
|December 31, 2002 |  | 51                     |  |                                       | 4,577              |                      | .10 |   |                 | 200 |                                       |   | 25,394               |  | .58 |  
|December 31, 2001 |  | 59                     |  |                                       | 7,628              |                      | .18 |   |                 | 160 |                                       |   | 19,451               |  | .45 |  
|                  |  |                        |  |                                       |                    |                      |     |   |                 |     |                                       |   |                      |  |     |  

---

|(1) | Percentage represents principal balance of delinquent loans to total loans outstanding.
|--- | ---------------------------------------------------------------------------------------

|(2) | The 91 or More Days category includes all loans on non-accrual regardless of days past due.
|--- | -------------------------------------------------------------------------------------------



Non-Performing Loans.The Bank ceases the
accrual of interest when, based on current information and events, it is probable that a creditor will be unable to collect all amounts due according to the contractual terms of the loan.



A loan (whether considered impaired or not) is classified as non-accrual when collectibility is in doubt. Generally, when a
loan is 90 days or more past due, in the process of foreclosure, or in bankruptcy, the full amount of previously accrued but unpaid interest is deducted from interest income. Income is subsequently recorded to the extent cash payments are received,
or at the time when the loan is brought current in accordance with its original terms. This policy is applied consistently for all types of loans in the Banks loan portfolio.



18



---

##### Table of Contents

The table below sets forth information regarding non-performing assets held by the Bank at the dates
indicated. Since January 1, 2001, the Bank does not accrue interest on any loan more than 90 days overdue.



|                                                                |  |                        |        |   |      |        |      |        |      |        |      |       
|--------------------------------------------------------------- |  | ---------------------- | ------ | - | ---- | ------ | ---- | ------ | ---- | ------ | ---- | ------
|                                                                |  | December 31,          
|                                                                |  | 2003                   |        |   | 2002 |        | 2001 |        | 2000 |        | 1999
|                                                                |  | (Dollars in thousands)
|One- to four-family and multi-family loans:                     |  |                        |        |   |      |        |      |        |      |        |      |       
|Non-accrual loans(1)                                            |  | $                      | 27,110 |   |      | 22,480 |      | 17,985 |      | 14,023 |      | 12,548
|Accruing loans 91 or more days overdue                          |  |                        |       |   |      |       |      |       |      | 1,732  |      | 771   
|                                                                |  |                        |        |   |      |        |      |        |      |        |      |       
|Total                                                           |  |                        | 27,110 |   |      | 22,480 |      | 17,985 |      | 15,755 |      | 13,319
|                                                                |  |                        |        |   |      |        |      |        |      |        |      |       
|Non-accrual commercial real estate, construction and land loans |  |                        | 1,797  |   |      | 895    |      | 544    |      | 269    |      | 607   
|Consumer loans:                                                 |  |                        |        |   |      |        |      |        |      |        |      |       
|Non-accrual loans(1)                                            |  |                        | 3,122  |   |      | 1,159  |      | 922    |      | 683    |      | 1,683 
|Accruing loans 91 or more days overdue                          |  |                        |       |   |      |       |      |       |      | 2      |      | 41    
|                                                                |  |                        |        |   |      |        |      |        |      |        |      |       
|Total                                                           |  |                        | 3,122  |   |      | 1,159  |      | 922    |      | 685    |      | 1,724 
|                                                                |  |                        |        |   |      |        |      |        |      |        |      |       
|Non-accrual commercial business loans                           |  |                        | 758    |   |      | 860    |      |       |      |       |      |      
|Total non-performing loans:                                     |  |                        |        |   |      |        |      |        |      |        |      |       
|Non-accrual loans(1)                                            |  |                        | 32,787 |   |      | 25,394 |      | 19,451 |      | 14,975 |      | 14,838
|Accruing loans 91 or more days overdue                          |  |                        |       |   |      |       |      |       |      | 1,734  |      | 812   
|                                                                |  |                        |        |   |      |        |      |        |      |        |      |       
|Total                                                           |  | $                      | 32,787 |   |      | 25,394 |      | 19,451 |      | 16,709 |      | 15,650
|                                                                |  |                        |        |   |      |        |      |        |      |        |      |       
|Non-accrual loans to total loans                                |  |                        | .51    | % |      | .58    |      | .45    |      | .35    |      | .38   
|Accruing loans 91 or more days overdue to total loans           |  |                        |       |   |      |       |      |       |      | .04    |      | .02   
|                                                                |  |                        |        |   |      |        |      |        |      |        |      |       
|Non-performing loans to total loans                             |  |                        | .51    | % |      | .58    |      | .45    |      | .39    |      | .40   
|                                                                |  |                        |        |   |      |        |      |        |      |        |      |       
|Non-accrual investment securities                               |  | $                      | 7,697  |   |      |       |      |       |      |       |      |      
|                                                                |  |                        |        |   |      |        |      |        |      |        |      |       
|Foreclosed real estate:                                         |  |                        |        |   |      |        |      |        |      |        |      |       
|One- to four-family                                             |  | $                      | 3,200  |   |      | 2,366  |      | 1,405  |      | 1,762  |      | 1,220 
|Commercial real estate                                          |  |                        |       |   |      |       |      |       |      | 46     |      | 6,195 
|                                                                |  |                        |        |   |      |        |      |        |      |        |      |       
|Total foreclosed real estate, net of reserves                   |  | $                      | 3,200  |   |      | 2,366  |      | 1,405  |      | 1,808  |      | 7,415 
|                                                                |  |                        |        |   |      |        |      |        |      |        |      |       
|Total non-performing assets                                     |  | $                      | 43,684 |   |      | 27,760 |      | 20,856 |      | 18,517 |      | 23,065
|                                                                |  |                        |        |   |      |        |      |        |      |        |      |       
|Total non-performing assets to total assets                     |  |                        | .49    | % |      | .47    |      | .37    |      | .36    |      | .50   
|                                                                |  |                        |        |   |      |        |      |        |      |        |      |       

---

|(1) | Consists of loans in the process of foreclosure or for which interest is otherwise deemed
uncollectible.
|--- | --------------------------------------------------------------------------------------------------------



Non-performing loans increased
$7.4 million to $32.8 million, or .51% of total loans receivable at December 31, 2003, compared to $25.4 million, or .58% of total loans receivable at December 31, 2002. The increase in non-performing loans is primarily due to an increase in one-to
four-family and consumer non-performing loans. The increases are attributable to non-performing loans acquired in the St. Francis and Fidelity acquisitions and are not indicative of deterioration in overall loan portfolio quality. Non-performing
assets were $43.7 million or .49% of total assets at December 31, 2003, compared to $27.8 million or .47% of total assets at December 31, 2002. Included in non-performing assets are two aircraft-related asset-backed securities totaling $7.7 million
at December 31, 2003 that are on non-accrual status and classified as substandard. One of these securities, with a December 31, 2003 carrying value of $6.7 million, was written down by $3.0 million in the fourth quarter of 2002, and the other with a
December 31, 2003 carrying value of $1.0 million was written down by $5.0 million in the first quarter of 2003 and by an additional $1.9 million in the third quarter of 2003 due to continued declines in its estimated market value. A third security
written down by $3.1 million in the first quarter of 2003, which management has classified as special mention and monitors closely, is not included in non-performing assets, was current as to principal and interest payments at December 31, 2003 and
is still accruing interest. The December 31, 2003 carrying value of this collateralized bond obligation security was $4.9 million after the $3.1 million writedown. All three securities were sold during the first quarter of 2004 at a net gain of $2.7
million.



19



---

##### Table of Contents

Non-Performing Residential Properties.Ratios for loans secured by one-to-four family
residential properties were as follows:



|                                                                                                                         |  |                   |   |  |                   |  
|------------------------------------------------------------------------------------------------------------------------ |  | ----------------- | - |  | ----------------- | -
|                                                                                                                         |  | December 31, 2003 |   |  | December 31, 2002 |  
|One- to four-family loans as a percentage of total loans                                                                 |  | 76                | % |  | 89                | %
|                                                                                                                         |  |                  
|Non-performing one- to-four family loans as a percentage of total non-performing loans                                   |  | 88                |   |  | 89                |  
|Non-performing one- to four-family loans with private mortgage insurance or other guarantees                             |  | 42                |   |  | 52                |  
|Average loan-to-value of non-performing one- to four-family loans without private mortgage insurance or other guarantees |  | 65                |   |  | 71                |  



For the years ended
December 31, 2003, 2002 and 2001, the amount of interest income that would have been recorded on non-accrual loans if these loans were performing in accordance with their terms amounted to $1.4 million, $1.4 million, and $1.1 million respectively.
For the year ended December 31, 2003, interest income on non-accrual loans that was actually collected and recorded amounted to $718,000.



Impaired Loans.The Bank considers a loan impaired when, based on current information and events, it is probable that the Bank will be unable to
collect all amounts due according to the contractual terms of the loan. Impairment for loans considered individually significant and that exhibit probable or observed credit weaknesses are measured based on the present value of expected future cash
flows discounted at the loans effective interest rate, or the fair value of the collateral if the loan is collateral dependent. If the determined fair value of an impaired loan is less than the carrying value of the loan, the Bank charges off
the principal amount of the loan in excess of fair value. For loans that are not individually significant (i.e. loans under $1.0 million), and represent a homogeneous population, the Bank evaluates impairment collectively based on management reports
on the level and extent of delinquencies, as well as historical loss experience for these types of loans. These small, homogeneous loans are excluded from the impaired loan disclosures. The Bank uses these criteria on one- to four-family residential
loans, consumer loans, smaller multi-family residential loans, and land loans. At December 31, 2003 and 2002, the Company had $2.6 million and $1.8 million of impaired loans, respectively. The average balance of impaired loans for 2003 and 2002 was
$1.8 million and $4.8 million, respectively.



Classified
Assets. The federal regulators have adopted a classification system for problem assets of insured institutions, which covers all problem assets and requires certain reserves. Under this classification system, problem assets of insured
institutions are classified as substandard, doubtful, or loss. An asset is considered substandard if it is inadequately protected by the current net worth and paying capacity of the obligor or the
value of the collateral pledged, if any. Substandard assets include those characterized by the distinct possibility that the insured institution will sustain some loss if the deficiencies are not corrected. Assets
classified as doubtful have all of the weaknesses inherent in those classified substandard, with the added characteristic that the weaknesses present make collection or liquidation in full, on the basis of
currently existing facts, conditions, and values, highly questionable and improbable. Assets classified as loss are those considered uncollectible and of such little value that their continuance as assets without
the establishment of a specific loss reserve is not warranted. In addition, a special mention category consists of assets, which currently do not expose the Company to a sufficient degree



20



---

##### Table of Contents

of risk to warrant adverse classification, but do possess credit deficiencies deserving managements close
attention.



In connection with the filing of its periodic
reports with the OTS, the Bank regularly reviews the problem loans in its portfolio to determine whether any loans require classification in accordance with applicable regulations. At December 31, 2003 and 2002, all of the Banks non-performing
loans were classified as substandard. In addition, at December 31, 2003, the Bank has classified a $532,000 commercial loan as substandard for regulatory purposes and portions of two other commercial loans totaling $750,000 as doubtful. These three
loans are performing in accordance with the contractual terms of the loan agreements. Special mention loans at December 31, 2003 and 2002 totaled $29.5 million and $500,000, respectively. The increase in 2003 was due to loans acquired in the St.
Francis acquisition.



Allowance for Loan Losses. In
evaluating the adequacy of the allowance for loan losses and determining, if any, the related provision for loan losses, management considers: (1) subjective factors, including local and general economic business factors and trends, portfolio
concentrations and changes in the size and/or general terms of the loan portfolio, (2) historical loss experience and the change in the mix of the overall portfolio composition over the last five years, (3) specific allocations based upon probable
losses identified during the review of the portfolio, and (4) delinquency in the portfolio and the composition of non-performing loans including the percent of non-performing loans with supplemental mortgage insurance. Larger loans, typically
secured by commercial real estate, that exhibit probable or observed credit weaknesses are subject to individual review. In addition, various regulatory agencies, as an integral part of their examination process, periodically review the Banks
allowance for loan losses. Such agencies may require the Bank to recognize additions to the allowance based on their judgments about information available to them at the time of their examination. In the opinion of management, the allowance, when
taken as a whole, is adequate to absorb probable losses in the loan portfolio. While management uses available information to recognize losses on loans, future adjustments to the allowance for loan losses may be necessary based on changes in
economic conditions and the impact of such change on the Banks borrowers.



The allowance for loan losses totaled $34.6 million at December 31, 2003, or .54% of total loans receivable and $19.5 million, or .44% at December 31, 2002. An analysis of the changes in the allowance for loan losses,
including charge-offs, recoveries, provision and additions related to acquisitions for the years indicated is presented in the table below. The increase in the allowance for loan losses in 2003 compared to 2002 is primarily due to the impact of the
acquisitions that closed in 2003. Loans receivable acquired through acquisition, which were primarily comprised of multi-family, commercial real estate, commercial business, construction, land and equity lines of credit, accounted for $1.6 billion
of the $1.9 billion increase in loans receivable for 2003. These types of loans generally carry a higher level of credit risk than one- to four-family residential loans.



21



---

##### Table of Contents

|                                                                                                          |  |                         |        |   |      |        |   |      |        |   |      |        |   |      |        |  
|--------------------------------------------------------------------------------------------------------- |  | ----------------------- | ------ | - | ---- | ------ | - | ---- | ------ | - | ---- | ------ | - | ---- | ------ | -
|                                                                                                          |  | Year Ended December 31, |       
|                                                                                                          |  | 2003                    |        |   | 2002 |        |   | 2001 |        |   | 2000 |        |   | 1999 |       
|                                                                                                          |  | (Dollars in thousands)  |       
|Balance at beginning of year                                                                              |  | $                       | 19,483 |   |      | 19,607 |   |      | 18,258 |   |      | 17,276 |   |      | 16,770 |  
|Charge-offs:                                                                                              |  |                         |        |   |      |        |   |      |        |   |      |        |   |      |        |  
|One- to four-family                                                                                       |  |                         | (67    | ) |      | (78    | ) |      | (87    | ) |      | (136   | ) |      | (522   | )
|Multi-family                                                                                              |  |                         |       |   |      |       |   |      |       |   |      | (275   | ) |      |       |  
|Commercial real estate                                                                                    |  |                         |       |   |      |       |   |      |       |   |      |       |   |      | (88    | )
|Consumer                                                                                                  |  |                         | (154   | ) |      | (115   | ) |      | (17    | ) |      | (120   | ) |      | (101   | )
|Commercial business                                                                                       |  |                         | (148   | ) |      | (424   | ) |      |       |   |      |       |   |      |       |  
|                                                                                                          |  |                         |        |   |      |        |   |      |        |   |      |        |   |      |        |  
|                                                                                                          |  |                         | (369   | ) |      | (617   | ) |      | (104   | ) |      | (531   | ) |      | (711   | )
|                                                                                                          |  |                         |        |   |      |        |   |      |        |   |      |        |   |      |        |  
|Recoveries:                                                                                               |  |                         |        |   |      |        |   |      |        |   |      |        |   |      |        |  
|One- to four-family                                                                                       |  |                         | 29     |   |      | 60     |   |      | 39     |   |      | 9      |   |      | 105    |  
|Commercial real estate                                                                                    |  |                         |       |   |      | 15     |   |      |       |   |      |       |   |      |       |  
|Consumer                                                                                                  |  |                         | 30     |   |      | 12     |   |      | 6      |   |      | 4      |   |      | 12     |  
|Commercial business                                                                                       |  |                         | 11     |   |      | 106    |   |      |       |   |      |       |   |      |       |  
|                                                                                                          |  |                         |        |   |      |        |   |      |        |   |      |        |   |      |        |  
|                                                                                                          |  |                         | 70     |   |      | 193    |   |      | 45     |   |      | 13     |   |      | 117    |  
|                                                                                                          |  |                         |        |   |      |        |   |      |        |   |      |        |   |      |        |  
|Charge-offs, net of recoveries                                                                            |  |                         | (299   | ) |      | (424   | ) |      | (59    | ) |      | (518   | ) |      | (594   | )
|Provision for loan losses                                                                                 |  |                         |       |   |      | 300    |   |      |       |   |      | 1,500  |   |      | 1,100  |  
|Additions related to acquisitions                                                                         |  |                         | 15,371 |   |      |       |   |      | 1,408  |   |      |       |   |      |       |  
|                                                                                                          |  |                         |        |   |      |        |   |      |        |   |      |        |   |      |        |  
|Balance at end of year                                                                                    |  | $                       | 34,555 |   |      | 19,483 |   |      | 19,607 |   |      | 18,258 |   |      | 17,276 |  
|                                                                                                          |  |                         |        |   |      |        |   |      |        |   |      |        |   |      |        |  
|Net charge-offs to average loans outstanding                                                              |  |                         | .01    | % |      | .01    |   |      | .00    |   |      | .01    |   |      | .02    |  
|Allowance for loan losses to total loans receivable, exclusive of one- to four-family loans held for sale |  |                         | .54    |   |      | .44    |   |      | .45    |   |      | .42    |   |      | .44    |  
|Allowance for loan losses to total non-performing loans                                                   |  |                         | 105.39 |   |      | 76.72  |   |      | 100.80 |   |      | 109.27 |   |      | 110.39 |  
|                                                                                                          |  |                         |        |   |      |        |   |      |        |   |      |        |   |      |        |  



The following table
sets forth the Companys allocation of its allowance for loan losses. This allocation is based on managements subjective estimates. The amount of reserves allocated to a particular category may not be indicative of actual future losses,
and amounts allocated to particular categories may change from year to year based on changes in managements assessment of the risk characteristics of the loan portfolio. An unallocated reserve is maintained to recognize the imprecision in
measuring and estimating loss when evaluating reserves for individual loans or categories of loans. The allocation methods used during 2003, 2002 and 2001 were generally consistent. The increase in the amount of the allowance and changes in the
allocation of the allowance among loan categories at December 31,2003 compared to December 31, 2002 primarily reflect the additional allowances resulting from the completed bank mergers and changes in the loan portfolio composition
largely attributable to the 2003 acquisitions. The allowance allocations as a percentage of one- to-four family and multi-family residential real estate loans decreased based on managements assessment of the impact of the lower interest rate
environment, improving economic conditions, the quality of underlying collateral and loss experience and balance decreases on out-of-state purchased ARM loans. The unallocated reserve decreased and the commercial real estate allowance increased in
2003 based on consideration of the change in portfolio mix, including the larger andmore complex commercial real estate loans acquired in the St. Francis acquisition.



|                                |  |                        |        |                                     |        |   |           |      |                                     |  |        |           |  |                                     |        |  |        |  
|------------------------------- |  | ---------------------- | ------ | ----------------------------------- | ------ | - | --------- | ---- | ----------------------------------- |  | ------ | --------- |  | ----------------------------------- | ------ |  | ------ | -
|                                |  | At December 31,        |       
|                                |  | 2003                   |        |                                     | 2002   |   |           | 2001 |                                    
|                                |  | Allowance              |        | Loan category as a % of Total Loans |        |   | Allowance |      | Loan category as a % of Total Loans |  |        | Allowance |  | Loan category as a % of Total Loans |       
|                                |  | (Dollars in thousands) |       
|One- to four-family residential |  | $                      | 8,594  |                                     | 61.36  | % |           | $    | 9,062                               |  | 79.48  | %         |  | $                                   | 9,755  |  | 82.97  | %
|Multi-family                    |  |                        | 3,721  |                                     | 9.60   |   |           |      | 2,030                               |  | 5.69   |           |  |                                     | 1,730  |  | 4.41   |  
|Commercial real estate          |  |                        | 11,304 |                                     | 8.28   |   |           |      | 2,846                               |  | 3.11   |           |  |                                     | 2,646  |  | 3.12   |  
|Construction                    |  |                        | 759    |                                     | 2.10   |   |           |      | 426                                 |  | 1.05   |           |  |                                     | 501    |  | .98    |  
|Land                            |  |                        | 870    |                                     | 1.16   |   |           |      | 531                                 |  | .93    |           |  |                                     | 656    |  | .99    |  
|Consumer                        |  |                        | 5,931  |                                     | 15.52  |   |           |      | 2,376                               |  | 9.29   |           |  |                                     | 1,804  |  | 7.11   |  
|Commercial business             |  |                        | 2,087  |                                     | 1.98   |   |           |      | 397                                 |  | .45    |           |  |                                     | 250    |  | .42    |  
|Unallocated reserve             |  |                        | 1,289  |                                     | N/A    |   |           |      | 1,815                               |  | N/A    |           |  |                                     | 2,265  |  | N/A    |  
|                                |  |                        |        |                                     |        |   |           |      |                                     |  |        |           |  |                                     |        |  |        |  
|Total                           |  | $                      | 34,555 |                                     | 100.00 | % |           | $    | 19,483                              |  | 100.00 | %         |  | $                                   | 19,607 |  | 100.00 | %
|                                |  |                        |        |                                     |        |   |           |      |                                     |  |        |           |  |                                     |        |  |        |  



22



---

##### Table of Contents

|                                |  |                        |        |                                   |        |   |           |   |                                   |  |        |  
|------------------------------- |  | ---------------------- | ------ | --------------------------------- | ------ | - | --------- | - | --------------------------------- |  | ------ | -
|                                |  | At December 31,        |       
|                                |  | 2000                   |        |                                   | 1999   |  
|                                |  | Allowance              |        | Loan categoryas a % ofTotal Loans |        |   | Allowance |   | Loan categoryas a % ofTotal Loans | 
|                                |  | (Dollars in thousands) |       
|One- to four-family residential |  | $                      | 9,803  |                                   | 88.44  | % |           | $ | 8,705                             |  | 89.37  | %
|Multi-family                    |  |                        | 1,408  |                                   | 3.98   |   |           |   | 1,235                             |  | 4.22   |  
|Commercial real estate          |  |                        | 1,978  |                                   | .95    |   |           |   | 2,078                             |  | .99    |  
|Construction                    |  |                        | 401    |                                   | .67    |   |           |   | 256                               |  | .71    |  
|Land                            |  |                        | 606    |                                   | .93    |   |           |   | 346                               |  | .73    |  
|Consumer                        |  |                        | 1,575  |                                   | 4.95   |   |           |   | 1,085                             |  | 3.90   |  
|Commercial business             |  |                        |       |                                   | .08    |   |           |   |                                  |  | .08    |  
|Unallocated reserve             |  |                        | 2,415  |                                   | N/A    |   |           |   | 3,571                             |  | NIA    |  
|                                |  |                        |        |                                   |        |   |           |   |                                   |  |        |  
|Total                           |  | $                      | 18,258 |                                   | 100.00 | % |           | $ | 17,276                            |  | 100.00 | %
|                                |  |                        |        |                                   |        |   |           |   |                                   |  |        |  



At December 31, 2003,
the Banks loan portfolio consisted of $3.97 billion of one- to four- family real estate loans, with an additional $1.0 billion of equity lines of credit or home equity loans on one- to four-family real estate and other consumer loans. At
December 31, 2003, 42% of the one-to-four family non-performing loans carried private mortgage insurance or government guarantees. The average loan-to-value ratio on the one- to-four- family non-performing loans without supplemental mortgage
insurance was 65%. Based on the Banks underwriting standards, overall loan-to-value ratios, concentration of lending primarily in its market area, and historically low charge-off experience, management considers the risk of loss due to these
loans as minimal. The remaining 23.1% of the Banks portfolio, or $1.50 billion, consist of multi-family mortgage, commercial real estate, construction, land, and to a lesser extent, commercial business loans. These loans generally tend to
exhibit greater risk of loss than do one- to four-family loans, primarily because such loans typically carry higher loan balances and repayment is dependent, in large part, on sufficient income to cover operating expenses. In addition, economic
events and government regulations, which are outside the control of the Bank and the borrower, could impact the security of the loan or the future cash flow of affected properties.



In its multi-family loan portfolio, the Bank has traditionally limited its lending to small apartment buildings (less than
36 units) which management believes have lower risk than larger properties. At December 31, 2003, in the Banks $621.3 million multi-family portfolio, 74 loans are on properties greater than 36 units with an aggregate balance outstanding of
$126.8 million, with the average multi-family loan balance in the portfolio at $400,000. With respect to construction and land loans, although a change in economic conditions could impact the collateral value of the Banks loans, a large
percentage of this collateral is on one- to four-family residential properties whose values tend to be more stable during times of economic difficulty. Loans secured by commercial real estate properties generally involve a greater degree of risk
than residential mortgage loans. Payments on loans secured by commercial real estate properties are often dependent on the successful operation or management of the properties themselves, and can also be impacted by adverse conditions in the real
estate market or general economy. The Bank seeks to minimize these risks by lending primarily on existing income-producing properties and generally restricting such loans to properties in the Chicago and Milwaukee metropolitan areas.



Net income of the Company could be affected if managements estimate of
the number of loans with loss, or the estimate of the amount of loss that may be incurred are materially different, which could require an additional provision for loan losses. Management believes the allowance for loan losses is adequate at
December 31, 2003. However, future adjustments to the allowance may be necessary based on changes in economic conditions and the impact such changes may have on the Banks borrowers.



23



---

##### Table of Contents

Investment Activities



Federally chartered savings institutions have the authority to invest in various types of liquid assets, including United States Treasury obligations,
securities of various federal agencies, certain certificates of deposit of insured banks and savings institutions, certain bankers acceptances, repurchase agreements and federal funds. Subject to various restrictions, federally chartered
savings institutions may also invest in commercial paper, investment grade corporate debt securities and mutual funds whose assets conform to the investments that a federally chartered savings institution is otherwise authorized to make directly.
The Bank is required to maintain liquid assets at prudent levels based on its operations.



The Banks liquid investments include interest-bearing deposits, primarily at the Federal Home Loan Bank of Chicago, federal funds sold and U.S. Government and federal agency obligations. The Bank invests
overnight federal funds with two large commercial banks in Chicago, based upon periodic review of these institutions financial condition. The Bank generally limits overnight federal funds sold investments to $125.0 million at any one
institution.



Generally, the investment policy of the Bank is
to invest funds among various categories of investments and maturities based upon the Banks asset/liability management policies, investment quality and marketability, liquidity needs and performance objectives.



The $384.6 million of stock in the FHLB of Chicago is carried at cost. At
December 31, 2003, the Bank was required to hold $105.2 million in FHLB stock as collateral for its advances and had $279.4 million in additional discretionary investments in FHLB stock. The Bank may at the FHLB of Chicagos discretion, redeem
at par any capital stock greater than its required investment or sell it to other FHLB of Chicago members. At December 31, 2003, investment in FHLB stock represented a concentration risk equal to 4.3% of total assets and 42.7% of stockholders
equity. The excess investment has increased significantly as a result of the Fidelity and St. Francis acquisitions, as they also maintained investments in excess of the required minimum due to the high rate of dividends currently being paid by the
FHLB of Chicago. Standard and Poors currently rates the FHLB of Chicago as AAA, although the rating shifted to a negative outlook in November 2003 due to its increasing portfolio of mortgage assets. The Bank monitors the financial results of
and the interest-rate risk position of the FHLB of Chicago on a quarterly basis. The Bank currently expects to begin reducing its investment in mid-2004 as the FHLB of Chicago approaches the implementation of its new capital plan which is expected
in the fourth quarter of 2004 or early 2005.



The
following table sets forth certain information regarding the book value of the Companys and the Banks liquidity and investment securities portfolio at the dates indicated. At December 31, 2003 and 2002, the fair value of the investment
securities portfolio was $365.3 million and $308.2 million, respectively.



|                                          |  |                        |         |      |         |      |        
|----------------------------------------- |  | ---------------------- | ------- | ---- | ------- | ---- | -------
|                                          |  | December 31,          
|                                          |  | 2003                   |         | 2002 |         | 2001
|                                          |  | (Dollars in thousands)
|Interest-bearing deposits                 |  | $                      | 57,988  |      | 28,210  |      | 29,367 
|                                          |  |                        |         |      |         |      |        
|Federal funds sold                        |  | $                      | 19,684  |      | 100,205 |      | 112,765
|                                          |  |                        |         |      |         |      |        
|Investment securities available for sale: |  |                        |         |      |         |      |        
|U.S. Government and agency securities     |  | $                      | 228,926 |      | 99,140  |      | 141,530
|Asset-backed securities                   |  |                        | 47,738  |      | 62,530  |      | 81,670 
|Corporate debt securities                 |  |                        | 7,809   |      | 65,422  |      | 71,309 
|Bank trust preferred securities           |  |                        | 62,668  |      | 58,230  |      | 40,899 
|Marketable equity securities              |  |                        | 18,193  |      | 22,913  |      | 20,053 
|                                          |  |                        |         |      |         |      |        
|Total investment securities               |  | $                      | 365,334 |      | 308,235 |      | 355,461
|                                          |  |                        |         |      |         |      |        
|Stock in the FHLB of Chicago              |  | $                      | 384,643 |      | 169,708 |      | 132,081
|                                          |  |                        |         |      |         |      |        



24



---

##### Table of Contents

The table below sets forth information regarding the carrying value, weighted average yields based on
amortized cost, and maturities of the Companys investment securities. At December 31, 2003, all investment securities are classified as available for sale.



|                                      |  |                        |        |                        |              |   |                |               |                        |  |                    |                |  |                        |        |  |                |   |                        |   |        |  |      |  
|------------------------------------- |  | ---------------------- | ------ | ---------------------- | ------------ | - | -------------- | ------------- | ---------------------- |  | ------------------ | -------------- |  | ---------------------- | ------ |  | -------------- | - | ---------------------- | - | ------ |  | ---- | -
|                                      |  | At December 31, 2003   |       
|                                      |  | One Year or Less       |        |                        | 1 to 5 Years |   |                | 5 to 10 Years |                        |  | More than 10 Years |               
|                                      |  | Carrying Value         |        | Weighted Average Yield |              |   | Carrying Value |               | Weighted Average Yield |  |                    | Carrying Value |  | Weighted Average Yield |        |  | Carrying Value |   | Weighted Average Yield |  
|                                      |  | (Dollars in thousands) |       
|U.S. Government and agency securities |  | $                      | 18,703 |                        | 2.75         | % |                | $             | 204,332                |  | 3.02               | %              |  | $                      |       |  |               | % |                        | $ | 5,891  |  | 2.29 | %
|Asset-backed securities               |  |                        | 6,672  |                        | 1.39         |   |                |               | 4,291                  |  | 3.55               |                |  |                        | 25,918 |  | 2.15           |   |                        |   | 10,857 |  | 4.29 |  
|Corporate debt securities             |  |                        | 492    |                        | 42.00        |   |                |               | 7,317                  |  | 12.93              |                |  |                        |       |  |               |   |                        |   |       |  |     |  
|Bank trust preferred securities       |  |                        |       |                        |             |   |                |               |                       |  |                   |                |  |                        |       |  |               |   |                        |   | 62,668 |  | 3.74 |  
|Marketable equity securities(1)       |  |                        |        |                        |              |   |                |               |                        |  |                    |                |  |                        |        |  |                |   |                        |   |        |  |      |  
|Common stock                          |  |                        |       |                        |             |   |                |               |                       |  |                   |                |  |                        |       |  |               |   |                        |   | 642    |  | .49  |  
|Preferred stock                       |  |                        |       |                        |             |   |                |               |                       |  |                   |                |  |                        |       |  |               |   |                        |   | 17,551 |  | 4.67 |  
|                                      |  |                        |        |                        |              |   |                |               |                        |  |                    |                |  |                        |        |  |                |   |                        |   |        |  |      |  
|Total                                 |  | $                      | 25,867 |                        | 3.14         | % |                | $             | 215,940                |  | 3.36               | %              |  | $                      | 25,918 |  | 2.15           | % |                        | $ | 97,609 |  | 3.86 | %
|                                      |  |                        |        |                        |              |   |                |               |                        |  |                    |                |  |                        |        |  |                |   |                        |   |        |  |      |  



|                                      |  |                             |  |                |         |            |   |                        |  |       |  
|------------------------------------- |  | --------------------------- |  | -------------- | ------- | ---------- | - | ---------------------- |  | ----- | -
|                                      |  | Total Investment Securities | 
|                                      |  | Average Life in Years       |  | Carrying Value |         | Fair Value |   | Weighted Average Yield | 
|U.S. Government and agency securities |  | 3.11                        |  | $              | 228,926 |            | $ | 228,926                |  | 2.98  | %
|Asset-backed securities               |  | 10.14                       |  |                | 47,738  |            |   | 47,738                 |  | 2.72  |  
|Corporate debt securities             |  | 3.35                        |  |                | 7,809   |            |   | 7,809                  |  | 14.68 |  
|Bank trust preferred securities       |  | 28.21                       |  |                | 62,668  |            |   | 62,668                 |  | 3.76  |  
|Marketable equity securities(1)       |  |                             |  |                |         |            |   |                        |  |       |  
|Common stock                          |  |                            |  |                | 642     |            |   | 642                    |  | .49   |  
|Preferred stock                       |  |                            |  |                | 17,551  |            |   | 17,551                 |  | 4.67  |  
|                                      |  |                             |  |                |         |            |   |                        |  |       |  
|Total                                 |  | 8.49                        |  | $              | 365,334 |            | $ | 365,334                |  | 3.40  | %
|                                      |  |                             |  |                |         |            |   |                        |  |       |  

---

|(1) | Marketable equity securities with no stated maturity are included in the More than 10 Years category. These securities are excluded in the calculation of
average life.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The classification of investments
as held to maturity, available for sale, or trading is made at the time of purchase based upon managements intent at that time. At December 31, 2003, $365.3 million of investment securities were classified as available for sale and recorded at
fair value (cost basis of $364.2 million). The trust preferred securities represent investments in several different pools of collateral debt securities consisting of primarily 30- year capital securities issued by various banks, thrifts and
insurance companies. The underlying pool of issuers of the collateral debt securities are well diversified as to asset size and geography. These securities are primarily Libor-indexed floating rate securities and contain an issuer call provision at
par after five years. The individual issuers of trust preferred securities have the ability to defer interest payments in certain circumstances. At December 31, 2002, $308.2 million of investment securities were classified as available for sale
(cost basis of $307.6 million).



During 2003, the Bank recorded
$10.0 million of other than temporary impairment on two floating rate debt securities. One of the securities, written down by $6.9 million to $1.0 million was collateralized by aircraft leased to several different airlines, and the other security,
written down by $3.1 million to $4.9 million, was a collateralized bond obligation secured by various less than investment grade high yield securities. In the fourth quarter of 2002, the Bank had recorded a $3.0 million other than temporary
impairment on a third $8.5 million floating rate debt security backed by aircraft and related leases to a major



25



---

##### Table of Contents

airline. That security matured on December 2, 2002 and went into default due to the principal not being repaid and the airline filing for bankruptcy under
Chapter 11 of the U.S. Bankruptcy Code on December 9, 2002. All impairment writedowns were based on market value quotes received from independent broker/dealers. The three securities were sold during the first quarter of 2004 at net gain of $2.7
million.



Sources of Funds



The Banks primary sources of funds are deposits, amortization and
prepayment of loan principal (including mortgage-backed securities), borrowings from the FHLB of Chicago, other borrowings, sales of mortgage loans, sales or maturities of investment securities, mortgage-backed securities and short-term investments,
and funds provided from operations.



Deposits.
The Bank offers a variety of deposit accounts having a wide range of interest rates and terms. The Banks deposits consist of passbook accounts, NOW and checking accounts, money market and certificate accounts. The Bank has historically only
solicited deposits from its market areas and has not used brokered deposits. At December 31, 2003, the Bank had $70.0 million of brokered deposits that were acquired in the St. Francis acquisition. The Bank relies primarily on competitive pricing
policies, advertising, and customer service to attract and retain these deposits. The flow of deposits is influenced significantly by general economic conditions, changes in money market and prevailing interest rates and competition. Recently, the
Bank has emphasized growth in core accounts, defined as commercial and non-interest checking accounts, NOW accounts, money market accounts, and passbooks by increased advertising and marketing of checking accounts, and the addition of a more
competitively priced money market product. At December 31, 2003, the ratio of core deposits to total deposits increased to 58.2% compared to 56.4% at December 31, 2002, primarily due to strong internal core deposit increases.



The following table sets forth the balances and percentages of the various
types of deposits offered by the Bank at the date indicated and the change in the dollar amount of deposits between such dates:



|                          |  |                        |           |                   |       |   |                     |   |           |  |              |           |  |                    |   |  |   |         |  
|------------------------- |  | ---------------------- | --------- | ----------------- | ----- | - | ------------------- | - | --------- |  | ------------ | --------- |  | ------------------ | - |  | - | ------- | -
|                          |  | December 31, 2003      |           | December 31, 2002 |      
|                          |  | Amount                 |           | % of Deposits     |       |   | Increase (Decrease) |   | Amount    |  | % ofDeposits |           |  | Increase(Decrease) |  
|                          |  | (Dollars in thousands) |          
|Commercial checking       |  | $                      | 216,489   |                   | 3.9   | % |                     | $ | 66,484    |  | $            | 150,005   |  | 4.0                | % |  | $ | 21,791  |  
|Non-interest checking     |  |                        | 218,446   |                   | 3.9   |   |                     |   | 79,327    |  |              | 139,119   |  | 3.7                |   |  |   | 18,053  |  
|NOW accounts              |  |                        | 555,675   |                   | 10.0  |   |                     |   | 192,786   |  |              | 362,889   |  | 9.7                |   |  |   | 37,898  |  
|Money market accounts     |  |                        | 904,728   |                   | 16.2  |   |                     |   | 446,584   |  |              | 458,144   |  | 12.2               |   |  |   | 89,472  |  
|Passbook accounts         |  |                        | 1,353,881 |                   | 24.2  |   |                     |   | 347,291   |  |              | 1,006,590 |  | 26.8               |   |  |   | 108,517 |  
|                          |  |                        |           |                   |       |   |                     |   |           |  |              |           |  |                    |   |  |   |         |  
|Total core deposits       |  |                        | 3,249,219 |                   | 58.2  |   |                     |   | 1,132,472 |  |              | 2,116,747 |  | 56.4               |   |  |   | 275,731 |  
|Certificate accounts, net |  |                        | 2,331,236 |                   | 41.8  |   |                     |   | 696,746   |  |              | 1,634,490 |  | 43.6               |   |  |   | (82,491 | )
|                          |  |                        |           |                   |       |   |                     |   |           |  |              |           |  |                    |   |  |   |         |  
|Total deposits            |  | $                      | 5,580,455 |                   | 100.0 | % |                     | $ | 1,829,218 |  | $            | 3,751,237 |  | 100.0              | % |  | $ | 193,240 |  
|                          |  |                        |           |                   |       |   |                     |   |           |  |              |           |  |                    |   |  |   |         |  



|                          |  |                   |           |               |       |  
|------------------------- |  | ----------------- | --------- | ------------- | ----- | -
|                          |  | December 31, 2001 |          
|                          |  | Amount            |           | % of Deposits |      
|Commercial checking       |  | $                 | 128,214   |               | 3.6   | %
|Non-interest checking     |  |                   | 121,066   |               | 3.4   |  
|NOW accounts              |  |                   | 324,991   |               | 9.1   |  
|Money market accounts     |  |                   | 368,672   |               | 10.4  |  
|Passbook accounts         |  |                   | 898,073   |               | 25.3  |  
|                          |  |                   |           |               |       |  
|Total core deposits       |  |                   | 1,841,016 |               | 51.8  |  
|Certificate accounts, net |  |                   | 1,716,981 |               | 48.2  |  
|                          |  |                   |           |               |       |  
|Total deposits            |  | $                 | 3,557,997 |               | 100.0 | %
|                          |  |                   |           |               |       |  



26



---

##### Table of Contents

Deposit Portfolio. The following table sets forth the distribution and the weighted average nominal interest rates
of the Banks average deposit accounts for the years indicated:



|                                                   |  |                        |           |                           |                   |   |                               |      |   |                 |   |                           |  |        |                               |  |      |  
|-------------------------------------------------- |  | ---------------------- | --------- | ------------------------- | ----------------- | - | ----------------------------- | ---- | - | --------------- | - | ------------------------- |  | ------ | ----------------------------- |  | ---- | -
|                                                   |  | Year Ended             |          
|                                                   |  | December 31, 2003      |           |                           | December 31, 2002 |  
|                                                   |  | Average Balance        |           | Percent of Total Deposits |                   |   | Weighted Average Nominal Rate |      |   | Average Balance |   | Percent of Total Deposits |  |        | Weighted Average Nominal Rate | 
|                                                   |  | (Dollars in thousands) |          
|Commercial checking accounts                       |  | $                      | 167,743   |                           | 4.07              | % |                               |     | % |                 | $ | 124,801                   |  | 3.41   | %                             |  |     | %
|Non-interest bearing checking                      |  |                        | 161,400   |                           | 3.91              |   |                               |     |   |                 |   | 124,726                   |  | 3.41   |                               |  |     |  
|Interest bearing NOW accounts                      |  |                        | 410,261   |                           | 9.95              |   |                               | .59  |   |                 |   | 334,882                   |  | 9.15   |                               |  | .81  |  
|Money market accounts                              |  |                        | 514,827   |                           | 12.49             |   |                               | 1.07 |   |                 |   | 462,773                   |  | 12.64  |                               |  | 1.95 |  
|Passbook accounts                                  |  |                        | 1,144,729 |                           | 27.76             |   |                               | .81  |   |                 |   | 936,512                   |  | 25.58  |                               |  | 1.68 |  
|                                                   |  |                        |           |                           |                   |   |                               |      |   |                 |   |                           |  |        |                               |  |      |  
|Total checking, money market and passbook accounts |  |                        | 2,398,960 |                           | 58.18             |   |                               | .72  |   |                 |   | 1,983,694                 |  | 54.19  |                               |  | 1.39 |  
|                                                   |  |                        |           |                           |                   |   |                               |      |   |                 |   |                           |  |        |                               |  |      |  
|Certificate accounts with original maturities of:  |  |                        |           |                           |                   |   |                               |      |   |                 |   |                           |  |        |                               |  |      |  
|6 months or less                                   |  |                        | 383,347   |                           | 9.30              |   |                               | 1.20 |   |                 |   | 357,187                   |  | 9.76   |                               |  | 2.23 |  
|7 to 12 months                                     |  |                        | 380,965   |                           | 9.24              |   |                               | 2.49 |   |                 |   | 248,200                   |  | 6.78   |                               |  | 3.36 |  
|Greater than 1 to 3 years                          |  |                        | 784,688   |                           | 19.03             |   |                               | 2.75 |   |                 |   | 944,075                   |  | 25.79  |                               |  | 4.28 |  
|Greater than 3 years                               |  |                        | 175,126   |                           | 4.25              |   |                               | 4.61 |   |                 |   | 127,410                   |  | 3.48   |                               |  | 5.31 |  
|                                                   |  |                        |           |                           |                   |   |                               |      |   |                 |   |                           |  |        |                               |  |      |  
|Total certificates of deposits                     |  |                        | 1,724,126 |                           | 41.82             |   |                               | 2.54 |   |                 |   | 1,676,872                 |  | 45.81  |                               |  | 3.79 |  
|                                                   |  |                        |           |                           |                   |   |                               |      |   |                 |   |                           |  |        |                               |  |      |  
|Total deposits                                     |  | $                      | 4,123,086 |                           | 100.00            | % |                               | 1.48 | % |                 | $ | 3,660,566                 |  | 100.00 | %                             |  | 2.48 | %
|                                                   |  |                        |           |                           |                   |   |                               |      |   |                 |   |                           |  |        |                               |  |      |  



|                                                   |  |                        |           |                           |        |   |                               |      |  
|-------------------------------------------------- |  | ---------------------- | --------- | ------------------------- | ------ | - | ----------------------------- | ---- | -
|                                                   |  | Year Ended             |          
|                                                   |  | December 31, 2001      |          
|                                                   |  | Average Balance        |           | Percent of Total Deposits |        |   | Weighted Average Nominal Rate |     
|                                                   |  | (Dollars in thousands) |          
|Commercial checking accounts                       |  | $                      | 70,359    |                           | 2.25   | % |                               |     | %
|Non-interest bearing checking                      |  |                        | 93,632    |                           | 3.00   |   |                               |     |  
|Interest bearing NOW accounts                      |  |                        | 245,719   |                           | 7.87   |   |                               | 1.03 |  
|Money market accounts                              |  |                        | 279,281   |                           | 8.94   |   |                               | 3.49 |  
|Passbook accounts                                  |  |                        | 775,419   |                           | 24.83  |   |                               | 2.32 |  
|                                                   |  |                        |           |                           |        |   |                               |      |  
|Total checking, money market and passbook accounts |  |                        | 1,464,410 |                           | 46.89  |   |                               | 1.73 |  
|                                                   |  |                        |           |                           |        |   |                               |      |  
|Certificate accounts with original maturities of:  |  |                        |           |                           |        |   |                               |      |  
|6 months or less                                   |  |                        | 506,087   |                           | 16.21  |   |                               | 4.50 |  
|7 to 12 months                                     |  |                        | 238,010   |                           | 7.62   |   |                               | 5.31 |  
|Greater than 1 to 3 years                          |  |                        | 809,134   |                           | 25.91  |   |                               | 6.05 |  
|Greater than 3 years                               |  |                        | 105,097   |                           | 3.37   |   |                               | 5.69 |  
|                                                   |  |                        |           |                           |        |   |                               |      |  
|Total certificates of deposits                     |  |                        | 1,658,328 |                           | 53.11  |   |                               | 5.45 |  
|                                                   |  |                        |           |                           |        |   |                               |      |  
|Total deposits                                     |  | $                      | 3,122,738 |                           | 100.00 | % |                               | 3.86 | %
|                                                   |  |                        |           |                           |        |   |                               |      |  



27



---

##### Table of Contents

The following table presents, by various interest rate categories, the amount of certificate accounts
outstanding at December 31, 2003, 2002, and 2001, and the periods to maturity of the certificate accounts outstanding at December 31, 2003:



|                      |  |                        |           |                                      |           |      |           |                |           |             |         |              |         |       |          
|--------------------- |  | ---------------------- | --------- | ------------------------------------ | --------- | ---- | --------- | -------------- | --------- | ----------- | ------- | ------------ | ------- | ----- | ---------
|                      |  | December 31,           |           | Period to Maturity December 31, 2003
|                      |  | 2003                   |           | 2002                                 |           | 2001 |           | WithinOne Year |           | 1 to 3Years |         | Over 3 Years |         | Total
|                      |  | (Dollars in thousands)
|Certificate accounts: |  |                        |           |                                      |           |      |           |                |           |             |         |              |         |       |          
|0.75% to 1.99%        |  | $                      | 1,056,024 |                                      | 330,189   |      | 974       |                | 916,395   |             | 139,604 |              | 25      |       | 1,056,024
|2.00% to 2.99%        |  |                        | 479,922   |                                      | 543,576   |      | 338,133   |                | 234,594   |             | 237,540 |              | 7,788   |       | 479,922  
|3.00% to 3.99%        |  |                        | 433,245   |                                      | 338,585   |      | 394,800   |                | 231,982   |             | 144,824 |              | 56,439  |       | 433,245  
|4.00% and greater     |  |                        | 354,534   |                                      | 421,927   |      | 982,471   |                | 130,730   |             | 147,130 |              | 76,674  |       | 354,534  
|                      |  |                        |           |                                      |           |      |           |                |           |             |         |              |         |       |          
|Total                 |  | $                      | 2,323,725 |                                      | 1,634,277 |      | 1,716,378 |                | 1,513,701 |             | 669,098 |              | 140,926 |       | 2,323,725
|                      |  |                        |           |                                      |           |      |           |                |           |             |         |              |         |       |          



At December 31, 2003,
the Bank had outstanding $536.5 million in certificate accounts in amounts of $100,000 or more maturing as follows:



|                              |  |                        |        
|----------------------------- |  | ---------------------- | -------
|Period to Maturity            |  | Amount                
|                              |  | (Dollars in thousands)
|Three months or less          |  | $                      | 163,991
|Over three through six months |  |                        | 75,906 
|Over six through 12 months    |  |                        | 118,594
|Over 12 months                |  |                        | 177,976
|                              |  |                        |        
|Total                         |  | $                      | 536,467
|                              |  |                        |        



Borrowings. Although deposits are the Banks primary source of funds, the Banks policy has been to utilize borrowings, such as advances from FHLB of Chicago, and to a lesser extent, reverse repurchase agreements,
when they are a less costly source of funds or can be reinvested at a positive rate of return.



Federal Home Loan Bank of Chicago Advances.The Bank obtains advances from the FHLB of Chicago upon the security of its capital stock in the FHLB of Chicago and a blanket pledge of certain of its mortgage
loans. See Regulation and Supervision - Federal Home Loan Bank System. Such advances are made pursuant to several different credit programs, each of which has its own interest rate and range of maturities. The maximum amount that the
FHLB of Chicago will advance to member institutions, including the Bank, for purposes other than meeting withdrawals, fluctuates from time to time in accordance with the policies of the FHLB of Chicago. The maximum amount of FHLB of Chicago advances
to a member institution generally is reduced by secured borrowings from any other source. At December 31, 2003, the Banks FHLB of Chicago advances totaled $2.10 billion, or 23.6% of total assets, compared to $1.51 billion, or 25.4% of total
assets at December 31, 2002.



Included in FHLB of Chicago
advances at December 31, 2003 are $710.0 million of fixed-rate advances with original scheduled maturities of 5 to 10 years, putable at the discretion of the FHLB of Chicago as follows: $505.0 million at 5.66% in 2004, $130.0 million at 3.51% in
2005, $75.0 million at 2.94% in 2006. The average term to maturity on these advances is 3.8 years, while the average term to put is 9 months. At inception, the Bank receives a lower cost of borrowing on such advances than on similar termed
non-putable advances, in return for granting the FHLB of Chicago the option to put the advances prior to their final maturity. If put, the FHLB of Chicago will provide replacement funding, should the Bank want or need to refinance the borrowing, at
the then prevailing market rate of interest for the remaining term to maturity of the advances, subject to standard terms and conditions. At December 31, 2003, management expects $30.0 million (with an average rate of 1.75%) of the $505.0 million
putable in 2004, to be put. On December 2, 2003, the Bank restructured a part of its putable advances portfolio, obtained from St. Francis, and paid off $155.0 million of advances for $170.8 million, that had a weighted average term to



28



---

##### Table of Contents

put of 3 months, and term to maturity of 67 months. The Company subsequently obtained putable advances with an average term to put of 25 months and term to
maturity of 68 months. There was no gain or loss recognized on the transaction due to the putable advances having been recorded at fair value on December 1, 2003, the date of the acquisition.



Unsecured Term Bank Loan and Line of Credit.In November 2001, the
Company borrowed $55.0 million under an unsecured term bank loan agreement in connection with funding the purchase price of the Mid Town acquisition. The loan provides interest rates of one, two, three, six or twelve-month LIBOR, at the option of
the borrower, plus 110 basis points, payable at the end of the repricing period. At December 31, 2003, the interest rate is currently one-month LIBOR plus 110 basis points, or 2.26%. The remaining principal amount outstanding at December 31, 2003
was $45.0 million. The loan requires increasing annual principal payments with $11.0 million due at the final maturity of the loan on December 31, 2008. Prepayments of principal are allowed without penalty at the end of any repricing period. The
Company made its scheduled $6.0 million principal payment on December 31, 2003.



In conjunction with the unsecured term bank loan, the Company also maintains a $55.0 million one-year unsecured revolving line of credit that matures annually on November 30. The loan provides for an interest rate of
one, two, three, six or twelve-month LIBOR at the option of the borrower plus 100 basis points and payable at the end of the repricing period. At December 31, 2003, there is a $10.0 million outstanding balance on the line of credit at an interest
rate of 2.17%.



The credit agreement contains covenants that,
among other things, require the Company to maintain a minimum stockholders equity balance and to obtain certain minimum operating results, as well as requiring the Bank to maintain well capitalized regulatory capital levels and
certain non-performing asset ratios. In addition, the Company has agreed to certain restrictions on additional indebtedness and agreed not to pledge any stock of the Bank or MAFD for any purpose. At December 31, 2003, the Company was in compliance
with these covenants.



Other borrowings:



Reverse Repurchase Agreements.The Bank enters into sales of
securities under agreements to repurchase the identical securities (reverse repurchase agreements) with nationally recognized primary securities dealers and are treated as financings. The securities underlying the agreements are
delivered to the dealers who arrange the transaction and are reflected as assets. The usual terms of agreements require the seller, generally after a short period of time, to repurchase the same securities as a predetermined price or yield. In
conjunction with the St. Francis acquisition, the Bank assumed $105.0 million of reverse repurchase agreements. The following table presents certain information regarding reverse repurchase agreements as of and for the periods indicated:



|                                         |  |                         |         |   |      |     |      |    
|---------------------------------------- |  | ----------------------- | ------- | - | ---- | --- | ---- | ---
|                                         |  | Year Ended December 31,
|                                         |  | 2003                    |         |   | 2002 |     | 2001
|                                         |  | (In thousands)         
|Balance at end of period                 |  | $                       | 105,000 |   |      |    |      |   
|Maximum month-end balance                |  |                         | 105,000 |   |      |    |      |   
|Average balance                          |  |                         | 105,000 |   |      |    |      |   
|Weighted average rate at end of period   |  |                         | 1.64    | % |      | N/A |      | N/A
|Weighted average rate on average balance |  |                         | 1.64    |   |      | N/A |      | N/A



At December 31, 2003,
reverse repurchase agreements were collateralized by investment and mortgage-backed securities with a carrying value of $113.3 million and a market value of $112.8 million. At December 31, 2003, the reverse repurchase agreements have maturities
ranging from two to twenty-seven months. Securities sold under



29



---

##### Table of Contents

agreements to repurchase were delivered for escrow to the broker-dealer who arranged the transactions. The Company continues to use reverse repurchase
agreements as an additional funding source.



Retail
Repurchase Agreements.The Bank also has implemented a sweep program for its large commercial deposit customers. The Bank in return must provide adequate collateral for the deposit accounts in the form of U.S. government or agency securities.
The retail repurchase agreements, which totaled $13.5 million at December 31, 2003, are collateralized by two mortgage backed securities with a carrying value of $14.2 and market value of $14.4 million.



Other. The remaining balance in other borrowings is comprised mainly
of treasury tax and loan advances totaling $1.7 million at December 31, 2003, which are collateralized by $2.0 million of an investment security with a market value of $2.0 million.



30



---

##### Table of Contents

The following table is a summary of the Companys borrowed funds at December 31, 2003 and 2002. The
weighted average rates are contractual rates and are not adjusted for purchase accounting adjustments. The unamortized premium was created as purchase accounting adjustments in the acquisitions of Fidelity and St. Francis. Based on the amortization
at December 31, 2003 the effective cost was 3.80%.



|                                        |  |                        |  |                       |   |  |        |           |                       |      |   |        |   |          
|--------------------------------------- |  | ---------------------- |  | --------------------- | - |  | ------ | --------- | --------------------- | ---- | - | ------ | - | ---------
|                                        |  | December 31, 2003      |  | December 31, 2002    
|                                        |  | Interest Rate Range    |  | Weighted Average Rate |   |  | Amount |           | Weighted Average Rate |      |   | Amount
|                                        |  | (Dollars in thousands)
|Fixed-rate advances from FHLB due:      |  |                        |  |                       |   |  |        |           |                       |      |   |        |   |          
|Within 1 year                           |  | 1.27%   -   7.22%      |  | 5.32                  | % |  | $      | 390,000   |                       | 6.08 | % |        | $ | 135,500  
|1 to 2 years                            |  | 2.24       -   7.20    |  | 5.34                  |   |  |        | 619,375   |                       | 5.87 |   |        |   | 310,000  
|2 to 3 years                            |  | 1.75       -   6.82    |  | 4.30                  |   |  |        | 210,000   |                       | 5.33 |   |        |   | 295,000  
|3 to 4 years                            |  | 3.23       -   4.34    |  | 3.82                  |   |  |        | 150,000   |                       | 4.66 |   |        |   | 155,000  
|4 to 5 years                            |  | 2.49       -   5.86    |  | 4.90                  |   |  |        | 375,000   |                       | 3.82 |   |        |   | 150,000  
|5 to 6 years                            |  | 2.54       -   5.86    |  | 4.67                  |   |  |        | 75,000    |                       | 5.07 |   |        |   | 350,000  
|6 to 7 years                            |  | 2.77       -   5.42    |  | 3.65                  |   |  |        | 105,000   |                       | 5.73 |   |        |   | 50,000   
|7 to 8 years                            |  |           -          |  |                      |   |  |        |          |                       | 5.42 |   |        |   | 30,000   
|                                        |  |                        |  |                       |   |  |        |           |                       |      |   |        |   |          
|Total fixed rate advances               |  | 1.27       -   7.22    |  | 4.90                  |   |  |        | 1,924,375 |                       | 5.24 |   |        |   | 1,475,500
|Adjustable-rate advances from FHLB due: |  |                        |  |                       |   |  |        |           |                       |      |   |        |   |          
|Within 1 year                           |  | 1.16       -   1.16    |  | 1.16                  |   |  |        | 30,000    |                       |     |   |        |   |         
|1 to 2 years                            |  | 1.18       -   1.20    |  | 1.19                  |   |  |        | 100,000   |                       | 1.39 |   |        |   | 30,000   
|2 to 3 years                            |  | 1.21       -   1.21    |  | 1.21                  |   |  |        | 50,000    |                       |     |   |        |   |         
|                                        |  |                        |  |                       |   |  |        |           |                       |      |   |        |   |          
|Total adjustable rate advances          |  | 1.16       -   1.21    |  | 1.19                  |   |  |        | 180,000   |                       | 1.39 |   |        |   | 30,000   
|                                        |  |                        |  |                       |   |  |        |           |                       |      |   |        |   |          
|Total advances from FHLB                |  | 1.16%   -   7.22%      |  | 4.58                  |   |  |        | 2,104,375 |                       | 5.17 |   |        |   | 1,505,500
|                                        |  |                        |  |                       |   |  |        |           |                       |      |   |        |   |          
|Unsecured term bank loan                |  |                        |  | 2.26                  |   |  |        | 45,000    |                       | 2.53 |   |        |   | 51,000   
|Unsecured line of credit                |  |                        |  | 2.17                  |   |  |        | 10,000    |                       |     |   |        |   |         
|Other borrowings                        |  |                        |  | 1.55                  |   |  |        | 120,977   |                       |     |   |        |   |         
|Unamortized premium                     |  |                        |  |                      |   |  |        | 19,075    |                       |     |   |        |   |         
|                                        |  |                        |  |                       |   |  |        |           |                       |      |   |        |   |          
|Total borrowed funds                    |  |                        |  | 4.36                  | % |  | $      | 2,299,427 |                       | 5.08 | % |        | $ | 1,556,500
|                                        |  |                        |  |                       |   |  |        |           |                       |      |   |        |   |          



Subsidiary Activities



MAF Developments.The Company engages in
the business of purchasing unimproved land for development into residential subdivisions of single-family lots primarily through MAFD, a wholly-owned subsidiary of the Company. The Company has been engaged in this activity since 1974, and since that
time has developed and sold over 6,200 lots in 23 different subdivisions primarily in the western suburbs of Chicago. The subsidiary acts as sole principal or as a joint venture partner in their developments. The subsidiary historically has provided
essentially all of the capital for a joint venture and receive in exchange an ownership interest in the joint venture which entitles it to a percentage of the profit or loss generated by the project, generally 50-60%, with the exact percentage based
upon a number of factors, including characteristics of the venture, the perceived risks involved, and the time to completion. The net profits are generally defined in the joint venture agreement as the gross profits of the joint venture from sales,
less all expenses, loan repayments and capital contributions. In addition, MAFD may from time to time invest in residential real estate projects, typically structured as limited partnership investments, managed by unaffiliated parties.



OTS regulations impose restrictions on the Banks participation in
real estate development activities. See Regulation and Supervision - Federal Savings Institution Regulation - Capital Requirements. In 1993, the Company formed a wholly-owned subsidiary, MAFD, to continue its land development activities.
As a subsidiary of the Company, the activities of MAFD are not restricted by OTS regulations as they are for the Bank.



31



---

##### Table of Contents

NW Financial, a wholly-owned subsidiary of the Bank, now inactive, which was acquired as part of a
previous merger, developed unimproved land into residential subdivisions, as well as constructed single-family homesites on the improved lots. Its final project also included commercial land for development. During 2001, NW Financial sold the final
commercial parcels in this project. Currently, the Company plans to conduct its future real estate development activity solely through MAFD, or joint ventures in which MAFD is a partner.



The following is a summary as of December 31, 2003, of the residential real estate projects MAFD currently has an interest
in:



|                                                                                                                                 |  |                        |  |            |  |                  |  |                            |  |                         |  |                    |       
|-------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------- |  | ---------- |  | ---------------- |  | -------------------------- |  | ----------------------- |  | ------------------ | ------
|Description of Project                                                                                                           |  | Date Land Acquired     |  | Total Lots |  | Number Lots Sold |  | Number Sold but Not Closed |  | Lots Available For Sale |  | Investment Balance
|                                                                                                                                 |  | (Dollars in thousands)
|Springbank                                                                                                                       |  |                        |  |            |  |                  |  |                            |  |                         |  |                    |       
|Proposed 1,600 residential lots and 300 multi-family units and a yet to be determined amount of commercial acreage               |  | 12/02-12/03            |  | 1,600      |  |                 |  |                           |  |                        |  | $                  | 26,411
|Shenandoah                                                                                                                       |  | 6/00                   |  | 326        |  | 196              |  | 15                         |  | 115                     |  |                    | 3,451 
|326 residential lots                                                                                                             |  |                        |  |            |  |                  |  |                            |  |                         |  |                    |       
|Tallgrass of Naperville                                                                                                          |  | 11/96-8/01             |  | 952        |  | 936              |  |                           |  | 16                      |  |                    | 2,231 
|                                                                                                                                 |  |                        |  |            |  |                  |  |                            |  |                         |  |                    |       
|952 residential lots; 19.3 acres for multi-family homes of which 15.8 are sold; 12.8 acres for commercial, all of which are
sold |  |                        |  |            |  |                  |  |                            |  |                         |  |                    |       
|                                                                                                                                 |  |                        |  |            |  |                  |  |                            |  |                         |  | $                  | 32,093
|                                                                                                                                 |  |                        |  |            |  |                  |  |                            |  |                         |  |                    |       



The following is a
description of the projects currently under development:



Springbank.MAFD has entered into various contracts to purchase approximately 950 acres of vacant land for a planned development in Plainfield, Illinois. This project is expected to have approximately 1,600 single-family residential
lots and 300 multi-family units, pending zoning approvals from the municipality. There is additional acreage, in an undetermined amount, to be designated as commercial. The first lot closings in this development are expected to occur in this
development in late 2004. The aggregate purchase price of these contracts for land is $39.2 million, of which $24.5 million has been disbursed to date, including $21.0 million disbursed in 2003. The purchase contracts contain various contingencies
regarding soil tests, environmental testing, zoning etc., and provide for the takedown of the land in staggered closings over a four-year period. The remaining increase in the development balance is attributable to engineering, survey and other
preliminary development costs. The Company is actively pursuing and expects to receive the required zoning and desired plat with the local planning commission to develop this project with a joint venture partner. Based on the current plans for this
project and the existing land purchase contracts, current estimated future developments costs (including land acquisition) are approximately $68 million.



Shenandoah.MAFD purchased land for a planned development of approximately 326 single-family lots in Plainfield, Illinois. Development began in mid
2002, and there are 15 lots under contract at December 31, 2003. Currently, the Company estimates an additional $3.5 million of disbursements will be made to complete this project. Such amounts are not recorded in the consolidated financial
statements.



32



---

##### Table of Contents

Tallgrass of Naperville.MAFD with a venture partner who shares in 40% of the profits, has
invested in 447 acres in three separate parcels for the development of 952 residential lots in Naperville, Illinois. In addition, the project originally had 19.3 acres available for multi-family units, as well as 12.8 acres of commercially-zoned
land to be sold in bulk to developers. The remaining 31/2acre portion of the multi-family parcel is under
contract at December 31, 2003 and expected to close mid-2004 at an estimated profit of $1.1 million. The other portions of this multi-family parcel were sold in the last quarters of 2003 and 2002 at a profit of $1.4 million and $2.2 million,
respectively. The commercial bulk land was sold in the fourth quarter of 2003 at a profit of $1.2 million. As the project nears completion, a majority of the residential lots are closed and there are only 16 lots remaining at December 31, 2003. As
of December 31, 2003, the Companys investment was $2.2 million. Currently, the Company estimates an additional $1.8 million of disbursements will be necessary to complete this project.



Mid America Insurance Agency.Mid America Insurance Agency,
Inc. (Mid America Insurance) is an indirect wholly-owned subsidiary of the Bank that provides insurance brokerage services, including personal and commercial insurance products, to the Banks customers. For the years ended December
31, 2003, 2002 and 2001, Mid America Insurance generated pre-tax income (loss) of $(67,000), $(84,000), and $64,000, respectively.



Mid America Investments. The Bank, through its wholly-owned subsidiary Mid America Investments, has an affiliation with INVEST, a registered
broker-dealer that provides certain securities brokerage and investment advisory services under its INVEST service mark to the general public. Through this program and licensed dual employees, these services are offered to customers of the Bank.
Presently, 24 investment executives are employed and operate from certain Bank locations. Revenues are generated from the sales of securities products in the form of commissions which are apportioned between INVEST and the Bank. For the years ended
December 31, 2003, 2002 and 2001, pre-tax income from INVEST operations was $274,000, $176,000 and $220,000, respectively.



Mid America Re, Inc.The Bank, through Mid America Investments, formed Mid America Re., Inc. (Mid America Re), as a wholly-owned
mortgage reinsurance subsidiary to share in a portion of the insurance premiums earned by various private mortgage insurance companies on loans originated by the Bank, in return for assuming a second-tier layer of risk of loss on insured portions of
these loans. The Bank generally requires a borrower to obtain private mortgage insurance to cover excess principal amounts if the loan principal exceeds certain loan-to-value ratios, typically 80%. At December 31, 2003, the Bank had second-tier
mortgage insurance risk of $19.1 million. For the year ended December 31, 2003, pre-tax income from Mid America Re was $2.0 million compared to pre-tax income of $906,000 for the year ended December 31, 2002. Most of the income in 2002 was not
subject to income tax due to special tax rules applicable to small insurance companies. These provisions do not apply in 2003 and net income of Mid America Re is subject to federal income taxes.



MAF Realty Co. L.L.C.  IV.The Bank formed MAF Realty Co.
L.L.C.  IV (Realty IV) as a real estate investment trust in July 1999. Realty IV was capitalized through the contribution of participation interests in mortgage loans owned by the Bank. The primary assets of Realty IV as of
December 31, 2003 consist of the remaining balances of these participation interests and balances attributable to loans purchased from the Bank. The common membership interests and 89% of the preferred membership interests in Realty IV are owned by
MAF Realty Co. L.L.C.  III, which was formed in July 1999 as a holding company for Realty IV. The remaining 11% preferred membership interests, valued at approximately $110,000, were distributed equally in 2000 to 110 individuals who are
directors, former directors, employees or former employees of the Company and its subsidiaries. All of the assets of Realty IV are included in loans and accrued interest receivable on the Companys consolidated balance sheet, and the value
attributable to the minority interest is included in other liabilities. The



33



---

##### Table of Contents

distribution of the dividends paid to the minority interest holders are included in the Companys income statement.
These amounts totaled $8,800 in both 2003 and 2002.



SF
Insurance Services Corporation.SF Insurance Services Corporation (SF Insurance), a Wisconsin corporation, is a wholly-owned subsidiary of the Bank acquired in the St. Francis acquisition. SF Insurance offers fixed and indexed
annuities, life insurance, disability income and survivorship life sold exclusively through licensed agents. At December 31, 2003, the Banks total investment in SF Insurance was $351,000, and SF Insurances assets of $351,000 consisted
primarily of cash.



St. Francis Equity Properties, Inc.St. Francis Equity Properties, Inc, (SFEP), a Wisconsin corporation, and wholly-owned subsidiary of the Bank acquired in the St. Francis acquisition, invests in affordable housing properties throughout the State of Wisconsin. The
properties qualify for tax credits under Section 42 of the Internal Revenue Code. Each property is structured as a limited liability partnership (LLP) or limited liability corporation (LLC), with SFEP being a 98% or 99%
partner or member in each individual LLP or LLC. The financial condition, results of operations and cash flows of each LLP or LLC is consolidated in the Companys financial statements. The operations of the properties are not expected to
contribute significantly to the Companys pre-tax income. However, the properties do contribute in the form of income tax credits, which lower the Companys effective tax rate. Once established, the credits on each property last for ten
years and are passed through the LLP or LLC to SFEP and reduce the consolidated federal tax liability of the Company. SFEP is currently a limited partner in 14 projects within the state of Wisconsin. Additionally, the Bank has provided financing to
all of the projects. However, the primary benefit to the Company on these projects is in the form of tax credits earned over the first ten years of the projects life. At December 31, 2003, SFEPs assets of $33.3 million consisted
primarily of its interest in the properties developed.



SF Investment Corporation. SF Investment Corporation, a Nevada corporation, is a wholly-owned subsidiary of the Bank acquired in the St. Francis acquisition. This Nevada subsidiary holds and manages investment securities in a
structure that is similar to that of many financial institutions located in Wisconsin. At December 31, 2003, the Banks total investment in SF Investment was approximately $402.7 million and SF Investments assets of $419.5 million
consisted primarily of mortgage-backed and related securities.



Wisconsin does not require consolidated tax returns and because the subsidiary is out of state, its income has not been subject to state income tax in Wisconsin. From time to time legislation has been proposed that would adopt consolidated
reporting requirements in Wisconsin; however, no such proposals have been adopted. Representatives of the Wisconsin Department of Revenue, or Department, have recently indicated that the Department may revoke its previously issued favorable tax
rulings relating to such Nevada subsidiaries, even though there has not been any intervening change in law. The Department also has implemented a program for the audit of Wisconsin financial institutions that have subsidiaries incorporated and
located in Nevada, and may seek to assert a basis for imposition of Wisconsin income taxes on income from those operations, either retroactively or prospectively. The Company is not currently under audit by the Department.



While it is likely the Departments actions and interpretations will be
challenged, MAFs net income in future periods would be reduced if the Department succeeds in those actions. MAF might also need to incur costs in the future to address actions taken by the Department. Additionally, the Company could be
assessed taxes and interest relating to the operations of St. Francis Investment Corporation for the periods prior to the merger. If assessed and agreed to, the payment of taxes for periods prior to the merger may result in an increase in goodwill
attributable to the St. Francis acquisition.



34



---

##### Table of Contents

REGULATION AND SUPERVISION



General



The Company, as a savings and loan holding company, is required to file certain reports with, and otherwise comply with the rules and regulations of the
OTS under the Home Owners Loan Act (the HOLA). In addition, the activities of savings institutions, such as the Bank, are governed by the HOLA and the Federal Deposit Insurance Act (FDI Act).



The Bank is subject to extensive regulation, examination and supervision by
the OTS, as its primary federal regulator, and the FDIC, as the deposit insurer. The Bank is a member of the Federal Home Loan Bank (FHLB) System and its deposit accounts are insured up to applicable limits by the Savings Association
Insurance Fund (SAIF) managed by the FDIC. The Bank must file reports with the OTS and the FDIC concerning its activities and financial condition in addition to obtaining regulatory approvals prior to entering into certain transactions
such as mergers with, or acquisitions of, other savings institutions. The OTS and/or the FDIC conduct periodic examinations to test the Banks compliance with various regulatory requirements. This regulation and supervision establishes a
comprehensive framework of activities in which an institution can engage and is intended primarily for the protection of the insurance fund and depositors. The regulatory structure also gives the regulatory authorities extensive discretion in
connection with their supervisory and enforcement activities and examination policies, including policies with respect to the classification of assets and the establishment of adequate loan loss reserves for regulatory purposes. Any change in such
regulatory requirements and policies, whether by the OTS, the FDIC or the Congress, could have a material adverse impact on the Company, the Bank and their operations. Certain regulatory requirements applicable to the Bank and to the Company are
referred to below or elsewhere herein. The description of statutory provisions and regulations applicable to savings institutions and their holding companies set forth in this Form 10-K does not purport to be a complete description of such statutes
and regulations and their effects on the Bank and the Company.



Holding
Company Regulation



The Company is a nondiversified
unitary savings and loan holding company within the meaning of the HOLA. As a unitary savings and loan holding company, the Company generally will not be restricted under existing laws as to the types of business activities in which it may engage,
provided that the Bank continues to be a qualified thrift lender (QTL). See Federal Savings Institution Regulation - QTL Test. Upon any non-supervisory acquisition by the Company of another savings institution or savings bank
that meets the QTL test and is deemed to be a savings institution by the OTS, the Company would become a multiple savings and loan holding company (if the acquired institution is held as a separate subsidiary) and would be subject to limitations on
the types of business activities in which it could engage. The HOLA limits the activities of a multiple savings and loan holding company and its non-insured institution subsidiaries primarily to activities permissible for bank holding companies
under Section 4(c)(8) of the Bank Holding Company Act of 1956, as amended (BHC Act), subject to the prior approval of the OTS, and activities authorized by OTS regulation. No multiple savings and loan holding company may acquire more
than 5% of the voting stock of a company engaged in impermissible activities.



The HOLA prohibits a savings and loan holding company, directly or indirectly, or through one or more subsidiaries, from acquiring more than 5% of the voting stock of another savings institution or holding company
thereof, without prior written approval of the OTS; or acquiring or retaining control of a depository institution that is not insured by the FDIC. In evaluating applications by holding companies to acquire savings institutions, the OTS must consider
the financial and managerial resources and future prospects of the company and institution involved and the effect of the acquisition of the institution on the



35



---

##### Table of Contents

risk to the insurance funds, the convenience and needs of the community and competitive factors.



Although savings and loan holding companies are not subject to specific
capital requirements or specific restrictions on the payment of dividends or other capital distributions, HOLA does prescribe such restrictions on subsidiary savings institutions, as described below. The Bank must notify the OTS 30 days before
declaring any dividend to the Company. In addition, the financial impact of a holding company on its subsidiary institution is a matter that is evaluated by the OTS and the agency has authority to order cessation of activities or divestiture of
noninsured subsidiaries deemed to pose a threat to the safety and soundness of the institution.



Federal Savings Institution Regulation



Capital Requirements. The OTS capital regulations require savings institutions to meet three minimum capital standards: a 1.5% tangible capital ratio, a 3% leverage (core capital) ratio for institutions
receiving the highest rating on the CAMEL financial institution rating system, and 4% leverage (core capital) ratio for all other institutions, and an 8% risk-based capital ratio. In addition, the prompt corrective action standards discussed below
also establish, in effect, a minimum 2% tangible capital standard, a 4% leverage (core) capital ratio (3% for institutions receiving the highest rating on the CAMEL financial institution rating system), and, together with the risk-based capital
standard itself, a 4% Tier I risk-based capital standard. The OTS regulations also require that, in meeting the leverage ratio, tangible and risk-based capital standards, institutions must generally deduct investments in and loans to subsidiaries
engaged in activities as principal that are not permissible for a national bank. For the Bank, this includes its $252,000 investment in NW Financial at December 31, 2003, which the Bank must deduct from regulatory capital for purposes of calculating
its capital requirements. The risk-based capital standard for savings institutions requires the maintenance of Tier I (core) and total capital (which is defined as core capital and supplementary capital) to risk-weighted assets of at least 4% and
8%, respectively. The acquisitions of Fidelity and St. Francis did not have a significant impact on capital adequacy levels.



At December 31, 2003 and 2002, the Bank was in compliance with the current capital requirements as follows:



|                                    |  |                        |           |                   |                   |   |        |   |                   |  |       |  
|----------------------------------- |  | ---------------------- | --------- | ----------------- | ----------------- | - | ------ | - | ----------------- |  | ----- | -
|                                    |  | December 31, 2003      |           |                   | December 31, 2002 |  
|                                    |  | Amount                 |           | Percent of Assets |                   |   | Amount |   | Percent of Assets | 
|                                    |  | (Dollars in thousands) |          
|Stockholders equity of the Bank    |  | $                      | 896,783   |                   | 10.10             | % |        | $ | 500,746           |  | 8.47  | %
|                                    |  |                        |           |                   |                   |   |        |   |                   |  |       |  
|Tangible capital                    |  | $                      | 615,582   |                   | 7.16              |   |        | $ | 392,995           |  | 6.78  | %
|Tangible capital requirement        |  |                        | 129,000   |                   | 1.50              |   |        |   | 86,971            |  | 1.50  |  
|                                    |  |                        |           |                   |                   |   |        |   |                   |  |       |  
|Excess                              |  | $                      | 486,582   |                   | 5.66              | % |        | $ | 306,024           |  | 5.28  | %
|                                    |  |                        |           |                   |                   |   |        |   |                   |  |       |  
|Core capital                        |  | $                      | 615,582   |                   | 7.16              |   |        | $ | 392,995           |  | 6.78  | %
|Core capital requirement            |  |                        | 343,999   |                   | 4.00              |   |        |   | 231,923           |  | 4.00  |  
|                                    |  |                        |           |                   |                   |   |        |   |                   |  |       |  
|Excess                              |  | $                      | 271,583   |                   | 3.16              | % |        | $ | 161,072           |  | 2.78  | %
|                                    |  |                        |           |                   |                   |   |        |   |                   |  |       |  
|Core and supplementary capital      |  | $                      | 640,413   |                   | 11.45             |   |        | $ | 405,959           |  | 11.85 | %
|Risk-based capital requirement      |  |                        | 443,732   |                   | 8.00              |   |        |   | 274,114           |  | 8.00  |  
|                                    |  |                        |           |                   |                   |   |        |   |                   |  |       |  
|Excess                              |  | $                      | 196,681   |                   | 3.45              | % |        | $ | 131,845           |  | 3.85  | %
|                                    |  |                        |           |                   |                   |   |        |   |                   |  |       |  
|Total Bank assets                   |  | $                      | 8,882,976 |                   |                   |   |        | $ | 5,909,865         |  |       |  
|Adjusted total Bank assets          |  |                        | 8,599,968 |                   |                   |   |        |   | 5,798,064         |  |       |  
|Total risk-weighted assets          |  |                        | 5,875,087 |                   |                   |   |        |   | 3,538,222         |  |       |  
|Adjusted total risk-weighted assets |  |                        | 5,592,079 |                   |                   |   |        |   | 3,426,421         |  |       |  



36



---

##### Table of Contents

The following table reflects the Banks regulatory capital as of December 31, 2003 as it relates to
these three capital requirements:



|                                                                |  |                |          |   |      |          |   |             |          |  
|--------------------------------------------------------------- |  | -------------- | -------- | - | ---- | -------- | - | ----------- | -------- | -
|                                                                |  | Tangible       |          |   | Core |          |   | Risk- Based |         
|                                                                |  | (In thousands) |         
|Stockholders equity of the Bank                                |  | $              | 896,783  |   |      | 896,783  |   |             | 896,783  |  
|Goodwill and core deposit intangibles                           |  |                | (276,549 | ) |      | (276,549 | ) |             | (276,549 | )
|Non-permissible subsidiary deduction                            |  |                | (252     | ) |      | (252     | ) |             | (252     | )
|Non-includible purchased mortgage servicing rights              |  |                | (2,413   | ) |      | (2,413   | ) |             | (2,413   | )
|Regulatory capital adjustment for available for sale securities |  |                | (1,987   | ) |      | (1,987   | ) |             | (1,987   | )
|Recourse on loan sales                                          |  |                |         |   |      |         |   |             | (9,682   | )
|General allowance for loan losses                               |  |                |         |   |      |         |   |             | 34,513   |  
|                                                                |  |                |          |   |      |          |   |             |          |  
|Regulatory capital                                              |  | $              | 615,582  |   |      | 615,582  |   |             | 640,413  |  
|                                                                |  |                |          |   |      |          |   |             |          |  



Prompt Corrective
Regulatory Action.Under the OTS prompt corrective action regulations, the OTS is required to take certain supervisory actions against undercapitalized institutions, the severity of which depends upon the institutions degree of
undercapitalization. Generally, a savings institution is considered well capitalized if its ratio of total capital to risk-weighted assets is at least 10%, its ratio of Tier I (core) capital to risk-weighted assets is at least 6%, its
ratio of core capital to total assets is at least 5%, and it is not subject to any order or directive by the OTS to meet a specific capital level. A savings institution generally is considered adequately capitalized if its ratio of total
capital to risk-weighted assets is at least 8%, its ratio of Tier I (core) capital to risk-weighted assets is at least 4%, and its ratio of core capital to total assets is at least 4% (3% if the institution receives the highest CAMEL rating). A
savings institution that has a ratio of total capital to weighted assets of less than 8%, a ratio of Tier I (core) capital to risk-weighted assets of less than 4% or a ratio of core capital to total assets of less than 4% (3% or less for
institutions with the highest examination rating) is considered to be undercapitalized. A savings institution that has a total risk-based capital ratio less than 6%, a Tier 1 risk-based capital ratio of less than 3% or a leverage ratio
that is less than 3% is considered to be significantly undercapitalized, and a savings institution that has a tangible capital to assets ratio equal to or less than 2% is deemed to be critically undercapitalized. Subject to a
narrow exception, the banking regulator is required to appoint a receiver or conservator for an institution that is critically undercapitalized. The regulation also provides that a capital restoration plan must be filed with the OTS
within 45 days of the date a savings institution receives notice that it is undercapitalized, significantly undercapitalized or critically undercapitalized. Compliance with the plan must be guaranteed by any
parent holding company. In addition, numerous mandatory supervisory actions become immediately applicable to an undercapitalized institution, including, but not limited to, increased monitoring by regulators and restrictions on growth, capital
distributions and expansion. The OTS could also take any one of a number of discretionary supervisory actions, including the issuance of a capital directive and the replacement of senior executive officers and directors.



Insurance of Deposit Accounts. The FDIC has adopted a
risk-based deposit insurance system that assesses deposit insurance premiums according to the level of risk involved in an institutions activities. An institutions risk category is based upon whether the institution is classified as
well capitalized, adequately capitalized or undercapitalized and one of three supervisory subcategories within each capital group. The supervisory subgroup to which an institution is assigned is based on a
supervisory evaluation and information which the FDIC determines to be relevant to the institutions financial condition and the risk posed to the deposit insurance fund. Based on its capital and supervisory subgroups, each Bank Insurance Fund
(BIF) and SAIF member institution is assigned an annual FDIC assessment rate, with an institution in the highest category (i.e., well-capitalized and healthy) receiving the lowest rates and an institution in the lowest category
(i.e., undercapitalized and posing substantial supervisory concern) receiving the highest rates. The FDIC has authority to



37



---

##### Table of Contents

further raise premiums if deemed necessary. If such action is taken, it could have an adverse effect on the earnings of the Bank.



The Deposit Insurance Funds Act of 1996 (the Funds Act) imposed a
special one-time assessment on SAIF members, including the Bank, to recapitalize the SAIF. The SAIF was undercapitalized due primarily to a statutory requirement that SAIF members make payments on bonds issued in the late 1980s by the
Financing Corporation (FICO) to recapitalize the predecessor to SAIF. The Funds Act spreads the obligations for payment of the FICO bonds across all SAIF and BIF members. As of December 31, 2003, BIF and SAIF deposits were assessed for a
FICO payment of 1.54 basis points.



As a result of the Funds
Act and the FDI Act, the FDIC voted to effectively lower SAIF assessments to 0 to 27 basis points as of January 1, 1997. The Banks assessment rate for the year ended December 31, 2003 was the lowest available to well-capitalized financial
institutions. A significant increase in SAIF insurance premiums would likely have an adverse effect on the operating expenses and results of operations of the Bank.



Under the FDI Act, insurance of deposits may be terminated by the FDIC upon a finding that the institution has engaged in
unsafe or unsound practices, is in an unsafe or unsound condition to continue operations or has violated any applicable law, regulation, rule, order or condition imposed by the FDIC or the OTS. The management of the Bank does not know of any
practice, condition or violation that might lead to termination of deposit insurance.



Community Reinvestment. Under the Community Reinvestment Act, or the CRA, a financial institution has a continuing and affirmative obligation, consistent with its safe and sound operation, to help meet the
credit needs of its entire community, including low- and moderate-income neighborhoods. The CRA does not establish specific lending requirements or programs for financial institutions, or limit an institutions discretion to develop the types
of products and services that it believes are best suited to its particular community that are consistent with the CRA. Institutions are rated on their performance in meeting the needs of their communities. Performance is tested in three areas: (a)
lending, which evaluates the institutions record of making loans in its assessment areas; (b) investment, which evaluates the institutions record of investing in community development projects, affordable housing and programs benefiting
low or moderate income individuals and businesses; and (c) service, which evaluates the institutions delivery of services to residents of its communities through its branches, ATMs and other offices. The CRA requires each federal banking
agency, in connection with its examination of a financial institution, to assess and assign one of four ratings to the institutions record of meeting the credit needs of its community and to take this record into account in evaluating certain
applications by the institution, including applications for charters, branches and other deposit facilities, relocations, mergers, consolidations, acquisitions of assets or assumptions of liabilities, and savings and loan holding company
acquisitions. The CRA also requires that all institutions publicly disclose their CRA ratings. The Bank received a satisfactory rating on its CRA performance evaluation prepared by the OTS on August 13, 2002, the most recent report the
Bank has received.



Impact of the Gramm-Leach-Bliley
Act. The Gramm-Leach-Bliley Act, or the GLB Act, significantly reformed various aspects of the financial services business, including, but not limited to: (i) the establishment of a new framework under which bank holding companies and, subject
to numerous restrictions, banks can own securities firms, insurance companies and other financial companies; (ii) subjecting banks to the same securities regulation as other providers of securities products; and (iii) prohibiting new unitary savings
and loan holding companies from engaging in nonfinancial activities or affiliating with nonfinancial entities.



38



---

##### Table of Contents

The provisions in the GLB Act permitting full affiliations between bank holding companies or banks and
other financial companies do not increase the Companys authority to affiliate with securities firms, insurance companies or other financial companies. As a unitary savings and loan holding company, the Company was generally permitted to have
such affiliations prior to the enactment of the GLB Act. It is expected, however, that these provisions will benefit the Companys competitors.



The prohibition on the ability of new unitary savings and loan holding companies to engage in nonfinancial activities or affiliating with nonfinancial
entities generally applies only to savings and loan holding companies that were not, or had not submitted an application to become, savings and loan holding companies as of May 4, 1999. Since the Company was treated as a unitary savings and loan
holding company prior to that date, the GLB Act will not prohibit the Company from engaging in nonfinancial activities or acquiring nonfinancial subsidiaries. However, the GLB Act generally restricts any nonfinancial entity from acquiring the
Company unless such nonfinancial entity was, or had submitted an application to become a savings and loan holding company as of May 4, 1999.



The GLB Act imposed new requirements on financial institutions with respect to customer privacy by generally prohibiting disclosure of customer
information to non-affiliated third parties unless the customer has been given the opportunity to object and has not objected to such disclosure. Financial institutions are further required to disclose their privacy policies to customers annually.
The Company has developed policies and procedures to comply with the implementing regulations promulgated by the OTS and the other federal regulators with regard to customer privacy.



To the extent the GLB Act permits banks, securities firms and insurance companies to affiliate, the financial services
industry may experience further consolidation. This could result in a growing number of larger financial institutions that offer a wider variety of financial services than the Company currently offers and that can aggressively compete in the markets
the Company currently serves.



Bank Secrecy Act. Under
the Bank Secrecy Act (BSA), a financial institution is required to have systems in place to detect certain transactions, based on the size and nature of the transaction. Financial institutions are generally required to report cash
transactions involving more than $10,000 to the United States Treasury. In addition, a financial institution is required to file suspicious activity reports for transactions that involve $5,000 or more and which the financial institution knows,
suspects or has reason to suspect the transaction involves illegal funds, is designed to evade the requirements of the BSA or has no lawful purpose. The USA Patriot Act of 2001, enacted in response to the September 11, 2001 terrorist attacks,
requires bank regulators to consider a financial institutions compliance with the BSA when reviewing applications from financial institutions.



Loans to One Borrower. Under the HOLA, savings institutions are generally subject to the limits on loans to one borrower applicable to national
banks. Generally, savings institutions may not make a loan or extend credit to a single or related group of borrowers in excess of 15% of its unimpaired capital and surplus. An additional amount may be lent, equal to 10% of unimpaired capital and
surplus, if such loan is secured by readily-marketable collateral, which is defined to include certain financial instruments and bullion. At December 31, 2003, the Banks limit on loans to one borrower was $96.1 million. At December 31, 2003,
the Banks largest aggregate outstanding balance of loans to any one borrower was $25.0 million.



QTL Test. The HOLA requires savings institutions to meet a QTL test. Under the QTL test, a savings and loan association is required
to either qualify as a domestic building and loan association under the Internal Revenue Code or maintain at least 65% of its portfolio assets (total assets less (i) specified liquid assets up to 20% of total assets; (ii)
intangibles,



39



---

##### Table of Contents

including goodwill; and (iii) the value of property used to conduct business) in certain qualified thrift
investments (primarily residential mortgages and related investments, including certain mortgage-backed securities) in at least 9 months out of each 12 month period. A savings institution that fails the QTL test is subject to certain operating
restrictions and may be required to convert to a bank charter. As of December 31, 2003, the Bank maintained 87.7% of its portfolio assets in qualified thrift investments and, therefore, met the QTL test.



Limitation on Capital Distributions. OTS regulations
impose limitations upon all capital distributions by a savings institution, such as cash dividends, payments to repurchase or otherwise acquire its shares, payments to shareholders of another institution in a cash-out merger and other distributions
charged against capital, if the institution would not be well-capitalized after the distribution. The regulations provide that an institution (i) which is not eligible for expedited treatment; or (ii) which its total amount of capital distributions
for the applicable calendar year exceeds its net income for that year to date plus its retained income for the preceding two years; or (iii) which would not be at least adequately capitalized following the distribution; or (iv) which would violate a
prohibition contained in a statute, regulation or agreement between the institution and the OTS by performing the capital distribution, must submit an application to the OTS to receive approval of the capital distribution. Under any other
circumstances, the Bank would be required to provide a written notice to the OTS 30 days prior to the capital distribution.



Assessments. Savings institutions are required to pay assessments to the OTS to fund the agencys operations. The general
assessment, paid on a semi-annual basis, is computed upon the savings institutions total assets, including consolidated subsidiaries, as reported in the Banks latest quarterly thrift financial report. The assessments paid by the Bank
were $1.0 million, $820,000 and $755,000 in 2003, 2002 and 2001, respectively.



Branching. OTS regulations permit nationwide branching by federally chartered savings institutions to the extent allowed by federal statute. Generally, a federal savings institution which meets the QTL test,
may establish or acquire branches in states other than its home state. This permits federal savings institutions to establish interstate networks and to geographically diversify their loan portfolios and lines of business. The OTS authority preempts
any state law purporting to regulate branching by federal savings institutions.



Transactions with Related Parties. The Banks authority to engage in transactions with related parties or affiliates (e.g., any company that controls or is under common
control with an institution, including the Company and its non-savings institution subsidiaries) is limited by Sections 23A and 23B of the Federal Reserve Act (FRA). Section 23A limits the aggregate amount of covered transactions with
any individual affiliate to 10% of the capital and surplus of the savings institution. The aggregate amount of covered transactions with all affiliates is limited to 20% of the savings institutions capital and surplus. Certain transactions
with affiliates are required to be secured by collateral in an amount and of a type described in Section 23A, and the purchase of low quality assets from affiliates is generally prohibited. Section 23B generally provides that certain transactions
with affiliates, including loans and asset purchases, must be on terms and under circumstances, including credit standards, that are substantially the same or at least as favorable to the institution as those prevailing at the time for comparable
transactions with non-affiliated companies. In addition, savings institutions are prohibited from lending to any affiliate that is engaged in activities that are not permissible for bank holding companies and no savings institution may purchase the
securities of any affiliate other than a subsidiary.



The
Banks authority to extend credit to executive officers, directors and 10% shareholders, as well as entities such persons control, is governed by Sections 22(g) and 22(h) of the FRA and Regulation O thereunder. Among other things, such loans
are generally required to be made on terms substantially the same as those offered to



40



---

##### Table of Contents

unaffiliated individuals and to not involve more than the normal risk of repayment. Regulation O also places individual
and aggregate limits on the amount of loans the Bank may make to such persons based, in part, on the Banks capital position and requires certain board approval procedures to be followed.



Enforcement. Under the FDI Act, the OTS has primary
enforcement responsibility over savings institutions and has the authority to bring actions against the institution and all institution-affiliated parties, including stockholders, and any attorneys, appraisers and accountants who
knowingly or recklessly participate in wrongful action likely to have an adverse effect on an insured institution. Formal enforcement action may range from the issuance of a capital directive or cease and desist order to removal of officers and/or
directors to institution of proceedings for receivership, conservatorship or termination of deposit insurance. Civil penalties cover a wide range of violations and may amount to as much as $1 million per day in certain circumstances. Under the FDI
Act, the FDIC has the authority to recommend to the Director of the OTS enforcement action to be taken with respect to a particular savings institution. If action is not taken by the Director, the FDIC has authority to take such action under certain
circumstances. Federal law also establishes criminal penalties for certain violations.



Standards for Safety and Soundness. The federal banking agencies have adopted Interagency Guidelines Prescribing Standards for Safety and Soundness (Guidelines) and a final rule to
implement safety and soundness standards required under the FDI Act. The Guidelines set forth the safety and soundness standards that the federal banking agencies use to identify and address problems at insured depository institutions before capital
becomes impaired. The standards set forth in the Guidelines address internal controls and information systems; internal audit system; credit underwriting; loan documentation; interest rate risk exposure; asset growth; asset quality; earnings and
compensation; fees and benefits. If the appropriate federal banking agency determines that an institution fails to meet any standard prescribed by the Guidelines, the agency may require the institution to submit to the agency an acceptable plan to
achieve compliance with the standard, as required by the FDI Act. The OTS requires that a savings association file a written safety and soundness compliance plan within 30 days of receiving a request for a compliance plan from the OTS.



Consumer Lending Laws



Our subsidiaries also are subject to many federal and state consumer
protection statutes and regulations including the Equal Credit Opportunity Act, the Fair Housing Act, the Truth in Lending Act, the Truth in Savings Act, the Real Estate Settlement Procedures Act and the Home Mortgage Disclosure Act. Among other
things, these acts:



| |  | require lenders to disclose credit terms in meaningful and consistent ways;
| | - | ---------------------------------------------------------------------------



| |  | prohibit discrimination against an applicant in any consumer or business credit transaction;
| | - | --------------------------------------------------------------------------------------------



| |  | prohibit discrimination in housing-related lending activities;
| | - | --------------------------------------------------------------



| |  | require certain lenders to collect and report applicant and borrower data regarding loans for home purchases or improvement projects;
| | - | -------------------------------------------------------------------------------------------------------------------------------------



| |  | require lenders to provide borrowers with information regarding the nature and cost of real estate settlements;
| | - | ---------------------------------------------------------------------------------------------------------------



| |  | prohibit certain lending practices and limit escrow account amounts with respect to real estate transactions; and
| | - | -----------------------------------------------------------------------------------------------------------------



41



---

##### Table of Contents

| |  | prescribe possible penalties for violations of the requirements of consumer protection statutes and regulations.
| | - | ----------------------------------------------------------------------------------------------------------------



Federal Fair Lending Laws. The federal fair lending laws prohibit
discriminatory lending practices. The Equal Credit Opportunity Act prohibits discrimination against an applicant in any credit transaction, whether for consumer or business purposes, on the basis of race, color, religion, national origin, sex,
marital status, age (except in limited circumstances), receipt of income from public assistance programs or good faith exercise of any rights under the Consumer Credit Protection Act. Under the Fair Housing Act, it is unlawful for any lender to
discriminate in its housing-related lending activities against any person because of race, color, religion, national origin, sex, handicap or familial status. Among other things, these laws prohibit a lender from denying or discouraging credit on a
discriminatory basis, making excessively low appraisals of property based on racial considerations, or charging excessive rates or imposing more stringent loan terms or conditions on a discriminatory basis. In addition to private actions by
aggrieved borrowers or applicants for actual and punitive damages, the U.S. Department of Justice and other regulatory agencies can take enforcement action seeking injunctive and other equitable relief for alleged violations. The Bank is subject to
an Agreed Consent Order that it entered into on December 30, 2002, to resolve allegations by the Department of Justice that the Bank had violated the fair lending laws based on the level of the Banks lending in minority areas during the period
1996-2000. The Bank denied all alleged violations. The Agreed Consent Order required the Bank to undertake a number of actions over the next five years to promote its home mortgage lending in communities with significant minority populations,
including:



| |  | Open or acquire two branch offices in minority areas within 30 months.
| | - | ----------------------------------------------------------------------



| |  | Implement a targeted advertising campaign to increase home mortgage lending.
| | - | ----------------------------------------------------------------------------



| |  | Provide $10 million in benefits to borrowers over the next five years under special lending programs to help residents of minority areas achieve home ownership (which may include
subsidized interest rates, down payment and closing cost assistance, and prime rate loans to borrowers with below prime credit).
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Contribute $500,000 over the next five years to homebuyer education and counseling programs, and conduct an assessment of the home mortgage credit needs of residents in minority
areas.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The Bank is in compliance with all terms
of the Order. Since the Order was entered by the court, the Bank has opened two branch offices within minority areas, conducted an assessment of home mortgage credit needs of residents in minority areas, and implemented a targeted marketing campaign
to increase mortgage lending. In 2003, the Bank provided financial benefits in excess of the $10 million requirement through special lending programs that satisfy the terms of the Order, to help minority residents achieve homeownership, including
$441,000 of downpayment and closing cost assistance charged to other non-interest expense in 2003. In addition, the Bank contributed $128,000 to homebuyer education and counseling programs during 2003.



Home Mortgage Disclosure Act. The federal Home Mortgage Disclosure Act
grew out of public concern over credit shortages in certain urban neighborhoods. One purpose of the Home Mortgage Disclosure Act is to provide public information that will help show whether financial institutions are serving the housing credit needs
of the neighborhoods and communities in which they are located. The Home Mortgage Disclosure Act also includes a fair lending aspect that requires the collection and disclosure of data about applicant and



42



---

##### Table of Contents

borrower characteristics as a way of identifying possible discriminatory lending patterns and enforcing
anti-discrimination statutes. The Home Mortgage Disclosure Act requires institutions to report data regarding applications for loans for the purchase or improvement of one- to-four family and multifamily dwellings, as well as information concerning
originations and purchases of such loans. Federal bank regulators rely, in part, upon data provided under the Home Mortgage Disclosure Act to determine whether depository institutions engage in discriminatory lending practices.



The appropriate federal banking agency, or in some cases, HUD, enforces
compliance with the Home Mortgage Disclosure Act and implements its regulations. Administrative sanctions, including civil money penalties, may be imposed by supervisory agencies for violations of this act.



Real Estate Settlement Procedures Act. The federal Real Estate
Settlement Procedures Act, or RESPA, requires lenders to provide borrowers with disclosures regarding the nature and cost of real estate settlements. RESPA also prohibits certain abusive practices, such as kickbacks, and place limitations on the
amount of escrow accounts. Violations of RESPA may result in imposition of penalties, including: (1) civil liability equal to three times the amount of any charge paid for the settlement services or civil liability of up to $1,000 per claimant,
depending on the violation; (2) awards of court costs and attorneys fees; and (3) fines of not more than $10,000 or imprisonment for not more than one year, or both.



Truth in Lending Act. The federal Truth in Lending Act is designed to ensure that credit terms are disclosed in a
meaningful way so that consumers may compare credit terms more readily and knowledgeably. As result of the act, all creditors must use the same credit terminology and expressions of rates, the annual percentage rate, the finance charge, the amount
financed, the total of payments and the payment schedule.



Violations of the Truth in Lending Act may result in regulatory sanctions and in the imposition of both civil and, in the case of willful violations, criminal penalties. Under certain circumstances, the Truth in Lending Act and Federal
Reserve Regulation Z also provide a consumer with a right of rescission, which relieves the consumer of the obligation to pay amounts to the creditor or to a third party in connection with the offending transaction, including finance charges,
application fee, commitment fees, title search fees and appraisal fees. Consumers may also seek actual and punitive damages for violations in the Truth in Lending Act.



Federal Home Loan Bank System



The Bank is a member of the FHLB System, which consists of 12 regional FHLBs. The FHLB provides a central credit facility primarily for member
institutions. The Bank, as a member of the FHLB of Chicago, is required to acquire and hold shares of capital stock in the FHLB of Chicago in an amount at least equal to 1% of the aggregate principal amount of its unpaid residential mortgage loans
and similar obligations at the beginning of each year, or 1/20 of its advances (borrowings) from the FHLB-Chicago, whichever is greater. At December 31, 2003, the Banks investment in FHLB of Chicago stock of $384.6 million was $279.4 million
in excess of its minimum requirement. FHLB of Chicago advances must be secured by specified types of collateral and are available to member institutions primarily for the purpose of providing funds for residential housing finance. FHLB of Chicago
also purchases mortgages in the secondary market through its MPF program. The Bank has sold loans to MPF since 1998. See discussion on page 15.



The FHLBs are required to provide funds to cover certain obligations on bonds issued by the Resolution Funding Corporation to fund the resolution of
insolvent thrifts and to contribute funds for affordable housing programs. These requirements could reduce the



43



---

##### Table of Contents

amount of dividends that the FHLBs pay to their members and could also result in the FHLBs imposing a higher rate of interest on advances to their members.
For the years ended December 31, 2003, 2002, and 2001, stock dividends paid by the FHLB of Chicago to the Bank amounted to $13.9 million, $8.3 million and $6.7 million, respectively. If FHLB dividends were reduced, or interest on future FHLB
advances increased, the Banks net interest income might also be reduced.



Allen H. Koranda, Chief Executive Officer of the Company, was elected in 1997 by the Illinois member institutions to serve as one of their allotted representatives on the 16-member Board of Directors of the FHLB of
Chicago. In January 2004, the Board of Directors of the FHLB of Chicago elected Mr. Koranda to serve as its Chairman for a two-year term.



Federal Reserve System



The Federal Reserve Board regulations require savings institutions to maintain non-interest earning reserves against their transaction accounts (primarily
NOW and regular checking accounts). The Federal Reserve Board regulations generally require that reserves be maintained against aggregate transaction accounts as follows: for accounts aggregating $45.4 million or less (subject to adjustment by the
Federal Reserve Board) the reserve requirement is 3%; and for accounts greater than $45.4 million, the reserve requirement is currently $1,362,000 plus 10% (subject to adjustment by the Federal Reserve Board) against that portion of total
transaction accounts in excess of $45.4 million. The first $6.6 million of otherwise reserveable balances (subject to adjustments by the Federal Reserve Board) are exempted from the reserve requirements. The Bank is in compliance with the foregoing
requirements. The balances maintained to meet the reserve requirements imposed by the Federal Reserve Board may be used to satisfy liquidity requirements imposed by the OTS.



Executive Officers of the Registrant



The executive officers of the Company are listed below.



|                   |  |     |  |                                                                                            
|------------------ |  | --- |  | -------------------------------------------------------------------------------------------
|Name               |  | Age |  | Position(s) Held                                                                           
|Allen H. Koranda   |  | 57  |  | Chairman of the Board and Chief Executive Officer of the Company and the Bank              
|Kenneth Koranda    |  | 54  |  | Vice Chairman of the Board and President of the Company; President and Director of the Bank
|Jerry A. Weberling |  | 52  |  | Executive Vice President, Chief Financial Officer and Director of the Company and the Bank 
|James Allen        |  | 45  |  | Senior Vice President of the Company and the Bank                                          
|Gerard J. Buccino  |  | 42  |  | Senior Vice President of the Company and the Bank                                          
|William Haider     |  | 53  |  | Senior Vice President of the Company and the Bank; President of MAFD                       
|Michael J. Janssen |  | 44  |  | Senior Vice President of the Company and the Bank                                          
|David W. Kohlsaat  |  | 49  |  | Senior Vice President of the Company and the Bank                                          



44



---

##### Table of Contents

|                 |  |    |  |                                                                
|---------------- |  | -- |  | ---------------------------------------------------------------
|Thomas Miers     |  | 52 |  | Senior Vice President of the Company and the Bank              
|Kenneth Rusdal   |  | 62 |  | Senior Vice President of the Company and the Bank              
|Sharon Wheeler   |  | 51 |  | Senior Vice President of the Company and the Bank              
|Christine Roberg |  | 52 |  | First Vice President and Controller of the Company and the Bank



Biographical Information



Set forth below is certain information with respect to
executive officers of the Company and the Bank. Unless otherwise indicated, the principal occupation listed for each person below has been their principal occupation for the past five years.



Allen H. Koranda has been Chairman of the Board and Chief Executive Officer
of the Company since August 1989, and of the Bank since May 1984. He joined the Bank in 1972. Mr. Koranda holds Bachelor of Arts and Juris Doctor degrees from Northwestern University. Mr. Koranda is the brother of Kenneth Koranda.



Kenneth Koranda has been Vice Chairman of the Board of the Company since May
1999, President of the Company since August 1989, and President of the Bank since July 1984. He joined the Bank in 1972. Mr. Koranda holds a Bachelor of Arts degree from Stanford University and a Juris Doctor degree from Northwestern University. Mr.
Koranda is the brother of Allen Koranda.



Jerry A. Weberling
has been Executive Vice President and Chief Financial Officer of the Company and the Bank since July 1993. He joined the Bank in 1984. He is a certified public accountant. Mr. Weberling holds a Bachelor of Science degree from Northern Illinois
University.



James Allen has been Senior Vice President 
Business Banking since March 2001. He was previously Senior Vice President-Corporate Banking at Old Kent Bank from 1997 to 2001. Mr. Allen holds a Bachelor of Business Administration degree from the University of Notre Dame, and a Master of Business
Administration from University of Wisconsin-Whitewater.



Gerard
J. Buccino has been Senior Vice President  Risk Management of the Company and the Bank since July 2000. Prior to that he was Senior Vice President and Controller of the Company and the Bank since July 1996. He joined the Bank in 1990. He is a
certified public accountant. Mr. Buccino holds a Bachelor of Science degree from Marquette University and a Master of Business Administration degree from the University of Chicago Graduate School of Business.



William Haider has been Senior Vice President of the Company and the Bank
since July 1996. He joined the Bank in 1984. He is President of MAFD, managing the real estate development activities of the Company. Mr. Haider holds a Bachelor of Science degree from Southern Illinois University.



Michael J. Janssen has been Senior Vice President - Investor Relations and
Taxation of the Company and the Bank since July 1996. He joined the Bank in 1989. He is a certified public accountant. Mr. Janssen holds a Bachelor of Business Administration degree from the University of Notre Dame, and a Master of Science in
Taxation degree from DePaul University.



David W. Kohlsaat has
been Senior Vice President - Administration since July 1996. He is responsible for retail deposit administration and human resources. He joined the Bank in 1976. Mr. Kohlsaat holds a Bachelor of Science degree from Southern Methodist University.



45



---

##### Table of Contents

Thomas Miers has been Senior Vice President of the Company since April 1993 and Senior Vice
President-Retail Banking of the Bank since January 1992. He joined the Bank in 1979. Mr. Miers holds a Bachelor of Science degree from George Williams College.



Kenneth Rusdal has been Senior Vice President of the Company since April 1993 and Senior Vice President-Operations and Information Systems since
January 1992. He joined the Bank in 1987.



Sharon Wheeler has
been Senior Vice President of the Company since April 1993 and has been Senior Vice President - Residential Lending of the Bank since July 1986. She joined the Bank in 1971.



Christine Roberg has been First Vice President and Controller of the Company and the Bank since July 2000. Prior to that
time, she was Assistant Controller since July 1992. She joined the Bank in 1980. She is a certified public accountant. Ms. Roberg holds a Bachelor of Arts degree from Benedictine University and a Master of Business Administration degree from
Northern Illinois University.



Employees



The Bank employed a total of 1,969 full-time equivalent employees as of
December 31, 2003. Management considers its relationship with its employees to be excellent.



Item 2. Properties



The
Companys business is conducted primarily through 67 retail banking offices, including the Companys executive office location in Clarendon Hills, Illinois. Additionally, the Bank has two loan production offices and four loan processing
and servicing centers, which are leased. The Bank has its own data processing equipment that consists primarily of mainframe hardware, network servers, personal computers and ATMs. At December 31, 2003, the data processing equipment has a net book
value of $9.9 million.



At December 31, 2003, the Bank owns the
buildings and land for 39 of its bank branch offices and owned the buildings but leased the land for eleven of its bank branch offices. The properties related to the bank branch offices owned by the Bank had a depreciated cost of approximately $46.3
million at December 31, 2003. The Bank leases the remaining 17 bank branch offices, all of which are well maintained. At December 31, 2003, the aggregate net book value of leasehold improvements associated with leased bank branch facilities was $7.5
million. See Note 9 in Item 8. Financial Statement and Supplementary Data.



The Bank, as the successor to Mid Town, leases a portion of a commercial and residential building consisting of approximately 30,789 square feet on a triple net lease basis. The term of the lease is set to expire on
June 30, 2024. The property is beneficially-owned by a limited partnership in which the former Chief Executive Officer of Mid Town, who is currently a director of the Bank has a limited partnership interest. The Company incurred rental expense on
this property of $435,000 in 2003 and $348,000 in 2002.



Item 3. Legal Proceedings



There
are various other actions pending against the Company or its subsidiaries in the normal course of business but in the opinion of management, these actions are unlikely, individually or in the aggregate, to have a material adverse effect on the
Companys financial statements.



46



---

##### Table of Contents

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



The Company held a special meeting of shareholders on November 25, 2003 to, approve the merger agreement providing for the Company to acquire St. Francis Capital Corporation and the MAF Bancorp, Inc. Incentive
Compensation Plan. The votes were as follows:



|                                              |  |            |  |           |  |         |  |                 
|--------------------------------------------- |  | ---------- |  | --------- |  | ------- |  | ----------------
|                                              |  | For        |  | Against   |  | Abstain |  | Broker Non-Votes
|Acquisition of St. Francis                    |  | 19,540,124 |  | 78,440    |  | 69,411  |  |                
|MAF Bancorp, Inc. Incentive Compensation Plan |  | 12,354,458 |  | 7,109,030 |  | 224,487 |  | 6               



PART II



Item 5. Market for the Registrants Common Stock and Related Stockholder Matters



The Companys common stock trades on the Nasdaq Stock Market under the symbol MAFB. As of March 8, 2004, the Company had 3,097
shareholders of record. The table below shows the reported high and low sales prices of the common stock during the periods indicated as well as the period end closing sales prices.



|               |  |                   |       |                   |       |       |       |          |     |      |       |     |       |       |       |          |    
|-------------- |  | ----------------- | ----- | ----------------- | ----- | ----- | ----- | -------- | --- | ---- | ----- | --- | ----- | ----- | ----- | -------- | ---
|               |  | December 31, 2003 |       | December 31, 2002
|               |  | High              |       | Low               |       | Close |       | Dividend |     | High |       | Low |       | Close |       | Dividend
|First Quarter  |  | $                 | 35.43 |                   | 32.61 |       | 33.65 |          | .18 |      | 35.29 |     | 28.70 |       | 35.25 |          | .15
|Second Quarter |  |                   | 38.09 |                   | 32.90 |       | 37.07 |          | .18 |      | 40.11 |     | 34.37 |       | 37.60 |          | .15
|Third Quarter  |  |                   | 40.40 |                   | 36.97 |       | 38.20 |          | .18 |      | 38.04 |     | 29.60 |       | 30.90 |          | .15
|Fourth Quarter |  |                   | 44.80 |                   | 38.20 |       | 41.90 |          | .18 |      | 35.41 |     | 28.60 |       | 34.00 |          | .15



The Company declared
$0.72 per share in dividends during the year ended December 31, 2003, and $0.60 per share in dividends for the year ended December 31, 2002. The Companys ability to pay cash dividends primarily depends on cash dividends received from the Bank.
Dividend payments from the Bank are subject to various regulatory restrictions. See Item 1. Business - Regulation and Supervision - Federal Savings Institution Regulation - Limitation on Capital Distributions.



The Companys current stock repurchase plan, announced in May 2003,
authorizes the purchase of up to 1.6 million shares of common stock. At December 31, 2003, 795,000 shares remain to be repurchased under the plan. The following table sets forth information in connection with purchases made by, or on behalf of, the
Company, or any affiliated purchaser of the Company, of shares of the Companys common stock within the fourth quarter of the fiscal year ended December 31, 2003.



47



---

##### Table of Contents

|                                           |  |                                             |  |                                        |  |                                                                                             |  |                                                                                                                       
|------------------------------------------ |  | ------------------------------------------- |  | -------------------------------------- |  | ------------------------------------------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------
|Period                                     |  | Total Number of Shares (or Units) Purchased |  | Average Price Paid per Share (or Unit) |  | Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs |  | Maximum Number (or Approximate Dollar Value) of Shares (or Unit) that May Yet be Purchased under the Plans
or Programs
|October 1, 2003 through October 31, 2003   |  | 5,000                                       |  | 38.33                                  |  | 5,000                                                                                       |  | 795,000                                                                                                               
|November 1, 2003 through November 30, 2003 |  |                                            |  | N/A                                    |  | N/A                                                                                         |  | 795,000                                                                                                               
|December 1, 2003 through December 31, 2003 |  |                                            |  | N/A                                    |  | N/A                                                                                         |  | 795,000                                                                                                               
|                                           |  |                                             |  |                                        |  |                                                                                             |  |                                                                                                                       
|Total                                      |  | 5,000                                       |  | 38.33                                  |  | 5,000                                                                                       |  | 795,000                                                                                                               
|                                           |  |                                             |  |                                        |  |                                                                                             |  |                                                                                                                       



48



---

##### Table of Contents

Item 6. Selected Financial Data



The following table sets forth certain summary consolidated financial data at or for the periods indicated. This information should be read in conjunction with the Consolidated Financial Statements and notes thereto included herein. See
Item 8. Financial Statements and Supplementary Data.



|                                                                                   |  |                                               |           |   |      |           |   |      |           |   |      |           |   |      |           |  
|---------------------------------------------------------------------------------- |  | --------------------------------------------- | --------- | - | ---- | --------- | - | ---- | --------- | - | ---- | --------- | - | ---- | --------- | -
|                                                                                   |  | December 31,                                  |          
|                                                                                   |  | 2003                                          |           |   | 2002 |           |   | 2001 |           |   | 2000 |           |   | 1999 |          
|                                                                                   |  | (Dollars in thousands, except per share data) |          
|Selected Financial Data:                                                           |  |                                               |           |   |      |           |   |      |           |   |      |           |   |      |           |  
|Total assets                                                                       |  | $                                             | 8,933,585 |   |      | 5,937,181 |   |      | 5,595,039 |   |      | 5,195,588 |   |      | 4,658,065 |  
|Loans receivable, net                                                              |  |                                               | 6,369,107 |   |      | 4,530,932 |   |      | 4,447,575 |   |      | 4,328,114 |   |      | 3,884,569 |  
|Mortgage-backed securities                                                         |  |                                               | 971,969   |   |      | 365,638   |   |      | 142,158   |   |      | 104,385   |   |      | 133,954   |  
|Interest-bearing deposits                                                          |  |                                               | 57,988    |   |      | 28,210    |   |      | 29,367    |   |      | 53,392    |   |      | 51,306    |  
|Federal funds sold                                                                 |  |                                               | 19,684    |   |      | 100,205   |   |      | 112,765   |   |      | 139,268   |   |      | 35,013    |  
|Investment securities                                                              |  |                                               | 365,334   |   |      | 477,943   |   |      | 487,542   |   |      | 271,902   |   |      | 281,129   |  
|Real estate held for development or sale                                           |  |                                               | 32,093    |   |      | 14,938    |   |      | 12,993    |   |      | 12,718    |   |      | 15,889    |  
|Deposits                                                                           |  |                                               | 5,580,455 |   |      | 3,751,237 |   |      | 3,557,997 |   |      | 2,974,213 |   |      | 2,699,242 |  
|Borrowed funds                                                                     |  |                                               | 2,299,427 |   |      | 1,556,500 |   |      | 1,470,500 |   |      | 1,728,900 |   |      | 1,526,363 |  
|Stockholders equity                                                               |  |                                               | 901,604   |   |      | 501,458   |   |      | 435,873   |   |      | 387,729   |   |      | 352,921   |  
|Book value per share                                                               |  |                                               | 27.27     |   |      | 21.57     |   |      | 18.97     |   |      | 16.78     |   |      | 14.76     |  
|                                                                                   | 
|                                                                                   |  | Year Ended December 31,                       |          
|                                                                                   |  | 2003                                          |           |   | 2002 |           |   | 2001 |           |   | 2000 |           |   | 1999 |          
|                                                                                   |  | (Dollars in thousands, except per share data) |          
|Selected Operating Data:                                                           |  |                                               |           |   |      |           |   |      |           |   |      |           |   |      |           |  
|Interest income                                                                    |  | $                                             | 316,430   |   |      | 329,490   |   |      | 345,736   |   |      | 343,103   |   |      | 285,092   |  
|Interest expense                                                                   |  |                                               | 136,952   |   |      | 171,465   |   |      | 214,489   |   |      | 217,173   |   |      | 168,401   |  
|                                                                                   |  |                                               |           |   |      |           |   |      |           |   |      |           |   |      |           |  
|Net interest income                                                                |  |                                               | 179,478   |   |      | 158,025   |   |      | 131,247   |   |      | 125,930   |   |      | 116,691   |  
|                                                                                   |  |                                               |           |   |     
|Provision for loan losses                                                          |  |                                               |          |   |      | 300       |   |      |          |   |      | 1,500     |   |      | 1,100     |  
|                                                                                   |  |                                               |           |   |      |           |   |      |           |   |      |           |   |      |           |  
|Net interest income after provision for loan losses                                |  |                                               | 179,478   |   |      | 157,725   |   |      | 131,247   |   |      | 124,430   |   |      | 115,591   |  
|Non-interest income:                                                               |  |                                               |           |   |      |           |   |      |           |   |      |           |   |      |           |  
|Gain on sale of loans receivable                                                   |  |                                               | 25,948    |   |      | 16,330    |   |      | 8,691     |   |      | 1,108     |   |      | 2,448     |  
|Net gain (loss) on sale and writedown of investment and mortgage-backed securities |  |                                               | (937      | ) |      | 119       |   |      | 877       |   |      | (444      | ) |      | 1,911     |  
|Gain on sale of loan servicing rights                                              |  |                                               |           |   |      |          |   |      |          |   |      | 4,442     |   |      |          |  
|Income from real estate operations                                                 |  |                                               | 11,325    |   |      | 9,717     |   |      | 11,484    |   |      | 9,536     |   |      | 9,630     |  
|Deposit account service charges                                                    |  |                                               | 24,552    |   |      | 22,239    |   |      | 16,535    |   |      | 12,715    |   |      | 10,200    |  
|Loan servicing fee income (expense)                                                |  |                                               | (5,939    | ) |      | (2,472    | ) |      | (371      | ) |      | 1,686     |   |      | 1,761     |  
|Valuation (allowance) recovery of mortgage servicing rights                        |  |                                               | 1,130     |   |      | (2,300    | ) |      | (904      | ) |      |          |   |      | 900       |  
|Foreclosed real estate                                                             |  |                                               | 365       |   |      | 179       |   |      | 347       |   |      | 258       |   |      | (57       | )
|Brokerage commissions                                                              |  |                                               | 3,587     |   |      | 2,702     |   |      | 2,371     |   |      | 2,322     |   |      | 2,566     |  
|Other                                                                              |  |                                               | 11,602    |   |      | 9,849     |   |      | 8,088     |   |      | 5,820     |   |      | 5,485     |  
|                                                                                   |  |                                               |           |   |      |           |   |      |           |   |      |           |   |      |           |  
|Total non-interest income                                                          |  |                                               | 71,633    |   |      | 56,363    |   |      | 47,118    |   |      | 37,443    |   |      | 34,844    |  
|Non-interest expense:                                                              |  |                                               |           |   |      |           |   |      |           |   |      |           |   |      |           |  
|Compensation and benefits                                                          |  |                                               | 70,573    |   |      | 59,098    |   |      | 48,221    |   |      | 41,197    |   |      | 37,845    |  
|Office occupancy and equipment                                                     |  |                                               | 15,410    |   |      | 11,670    |   |      | 9,011     |   |      | 8,124     |   |      | 7,274     |  
|Advertising and promotion                                                          |  |                                               | 6,466     |   |      | 4,844     |   |      | 4,355     |   |      | 3,569     |   |      | 3,149     |  
|Amortization of goodwill and core deposit intangibles                              |  |                                               | 1,732     |   |      | 1,649     |   |      | 4,578     |   |      | 4,475     |   |      | 3,884     |  
|Other                                                                              |  |                                               | 26,016    |   |      | 22,081    |   |      | 17,259    |   |      | 15,638    |   |      | 15,528    |  
|                                                                                   |  |                                               |           |   |      |           |   |      |           |   |      |           |   |      |           |  
|Total non-interest expense                                                         |  |                                               | 120,197   |   |      | 99,342    |   |      | 83,424    |   |      | 73,003    |   |      | 67,680    |  
|                                                                                   |  |                                               |           |   |      |           |   |      |           |   |      |           |   |      |           |  
|Income before income taxes                                                         |  |                                               | 130,914   |   |      | 114,746   |   |      | 94,941    |   |      | 88,870    |   |      | 82,755    |  
|Income taxes                                                                       |  |                                               | 47,481    |   |      | 40,775    |   |      | 35,466    |   |      | 32,311    |   |      | 31,210    |  
|                                                                                   |  |                                               |           |   |      |           |   |      |           |   |      |           |   |      |           |  
|Net income                                                                         |  | $                                             | 83,433    |   |      | 73,971    |   |      | 59,475    |   |      | 56,559    |   |      | 51,545    |  
|                                                                                   |  |                                               |           |   |      |           |   |      |           |   |      |           |   |      |           |  
|Basic earnings per share                                                           |  | $                                             | 3.35      |   |      | 3.19      |   |      | 2.62      |   |      | 2.43      |   |      | 2.13      |  
|                                                                                   |  |                                               |           |   |      |           |   |      |           |   |      |           |   |      |           |  
|Diluted earnings per share                                                         |  |                                               | 3.26      |   |      | 3.11      |   |      | 2.56      |   |      | 2.40      |   |      | 2.07      |  
|                                                                                   |  |                                               |           |   |      |           |   |      |           |   |      |           |   |      |           |  



49



---

##### Table of Contents

|                                                                             |  |                                               |           |   |      |           |   |      |           |   |      |           |   |      |           |  
|---------------------------------------------------------------------------- |  | --------------------------------------------- | --------- | - | ---- | --------- | - | ---- | --------- | - | ---- | --------- | - | ---- | --------- | -
|                                                                             |  | At or For the Year Ended December 31,         |          
|                                                                             |  | 2003                                          |           |   | 2002 |           |   | 2001 |           |   | 2000 |           |   | 1999 |          
|                                                                             |  | (Dollars in thousands, except per share data) |          
|Selected Financial Ratios and Other Data:                                    |  |                                               |           |   |      |           |   |      |           |   |      |           |   |      |           |  
|Return on average assets                                                     |  |                                               | 1.29      | % |      | 1.29      |   |      | 1.14      |   |      | 1.14      |   |      | 1.20      |  
|Return on average equity                                                     |  |                                               | 14.18     |   |      | 15.83     |   |      | 14.82     |   |      | 15.57     |   |      | 14.98     |  
|Average stockholders equity to average assets                               |  |                                               | 9.09      |   |      | 8.14      |   |      | 7.70      |   |      | 7.34      |   |      | 8.03      |  
|Stockholders equity to total assets                                         |  |                                               | 10.09     |   |      | 8.45      |   |      | 7.79      |   |      | 7.46      |   |      | 7.58      |  
|Tangible and core capital to total assets (Bank only)                        |  |                                               | 7.16      |   |      | 6.78      |   |      | 6.44      |   |      | 6.32      |   |      | 6.32      |  
|Risk-based capital ratio (Bank only)                                         |  |                                               | 11.45     |   |      | 11.85     |   |      | 11.31     |   |      | 11.98     |   |      | 12.32     |  
|Interest rate spread for the period                                          |  |                                               | 2.69      |   |      | 2.59      |   |      | 2.22      |   |      | 2.30      |   |      | 2.52      |  
|Net interest margin                                                          |  |                                               | 2.96      |   |      | 2.92      |   |      | 2.64      |   |      | 2.68      |   |      | 2.88      |  
|Average interest-earning assets to average interest-bearing liabilities      |  |                                               | 111.90    |   |      | 110.50    |   |      | 109.62    |   |      | 108.10    |   |      | 108.56    |  
|Non-interest expense to average assets                                       |  |                                               | 1.86      |   |      | 1.73      |   |      | 1.60      |   |      | 1.48      |   |      | 1.58      |  
|Non-interest expense to average assets and average loans serviced for others |  |                                               | 1.46      |   |      | 1.33      |   |      | 1.33      |   |      | 1.22      |   |      | 1.25      |  
|Efficiency ratio(1)                                                          |  |                                               | 47.69     |   |      | 46.36     |   |      | 47.00     |   |      | 44.56     |   |      | 45.19     |  
|Ratio of earnings to fixed charges:                                          |  |                                               |           |   |      |           |   |      |           |   |      |           |   |      |           |  
|Including interest on deposits                                               |  |                                               | 1.93      | x |      | 1.66      | x |      | 1.44      | x |      | 1.41      | x |      | 1.48      | x
|Excluding interest on deposits                                               |  |                                               | 2.65      | x |      | 2.38      | x |      | 2.00      | x |      | 1.86      | x |      | 2.18      | x
|Non-performing loans to total loans                                          |  |                                               | .51       | % |      | .58       |   |      | .45       |   |      | .39       |   |      | .40       |  
|Non-performing assets to total assets                                        |  |                                               | .49       |   |      | .47       |   |      | .37       |   |      | .36       |   |      | .50       |  
|Cumulative one-year gap                                                      |  |                                               | (1.59     | ) |      | 10.23     |   |      | (3.57     | ) |      | (5.18     | ) |      | (11.47    | )
|Number of deposit accounts                                                   |  |                                               | 564,696   |   |      | 393,801   |   |      | 377,015   |   |      | 339,340   |   |      | 314,396   |  
|Mortgage loans serviced for others                                           |  | $                                             | 3,330,987 |   |      | 2,021,512 |   |      | 1,401,607 |   |      | 785,350   |   |      | 1,226,874 |  
|Loan originations and purchases                                              |  |                                               | 4,993,675 |   |      | 3,691,170 |   |      | 2,827,594 |   |      | 1,484,220 |   |      | 1,711,337 |  
|Retail banking offices                                                       |  |                                               | 66        |   |      | 34        |   |      | 32        |   |      | 27        |   |      | 25        |  
|                                                                             |  |                                               |           |   |     
|Stock Price and Dividend Information:                                        |  |                                               |           |   |      |           |   |      |           |   |      |           |   |      |           |  
|High                                                                         |  | $                                             | 44.80     |   |      | 40.11     |   |      | 32.73     |   |      | 30.00     |   |      | 27.50     |  
|Low                                                                          |  |                                               | 32.61     |   |      | 28.60     |   |      | 24.30     |   |      | 15.50     |   |      | 18.88     |  
|Close                                                                        |  |                                               | 41.90     |   |      | 34.00     |   |      | 29.50     |   |      | 28.44     |   |      | 20.94     |  
|                                                                             |  |                                               |           |   |     
|Cash dividends declared per share                                            |  |                                               | .72       |   |      | .60       |   |      | .46       |   |      | .39       |   |      | .34       |  
|Dividend payout ratio                                                        |  |                                               | 22.09     | % |      | 19.29     |   |      | 17.56     |   |      | 16.05     |   |      | 15.96     |  

---

|(1) | The efficiency ratio is calculated by dividing non-interest expense by the sum of net
interest income and non-interest income, excluding net gain/(loss) on sale and writedown of mortgage-backed and investment securities.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



50



---

##### Table of Contents

Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations



Overview and Outlook



The following section highlights significant factors impacting the consolidated operations and financial condition of the Company and its subsidiaries.
The following discussion should be read in conjunction with Item 6. Selected Financial Data and Item 8. Financial Statements and Supplementary Data.



|                           |  |                                               |        |   |      |   |        |  
|-------------------------- |  | --------------------------------------------- | ------ | - | ---- | - | ------ | -
|                           |  | Year ended December 31,                       |       
|                           |  | 2003                                          |        |   | 2002 |  
|                           |  | (Dollars in thousands, except per share data) |       
|Net income                 |  | $                                             | 83,433 |   |      | $ | 73,971 |  
|Diluted earnings per share |  |                                               | 3.26   |   |      |   | 3.11   |  
|Return on average assets   |  |                                               | 1.29   | % |      |   | 1.29   | %
|Return on average equity   |  |                                               | 14.18  |   |      |   | 15.83  |  



The net income
increase of $9.5 million, or 12.8%, in 2003 was driven by the following significant items:



| |  | The completion of two acquisitions adding $3.0 billion in assets, $1.8 billion in deposits, and 28 banking centers. The impact on earnings per share was flat to slightly dilutive in
2003, but is expected to be accretive in 2004 and beyond.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Net interest income grew to a record $179.5 million, primarily from the growth in earning assets from the acquisitions and a slight improvement in the net interest margin to 2.96%
in 2003 compared to 2.92% in 2002.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Record loan origination volume of $5.0 billion, due to falling interest rates through mid-2003. This fueled record gains on the sale of loans, offset in part by loan servicing fee
expense, and decreased asset yields due to the heavy refinance activity.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Gain on the sale of mortgage-backed securities increased to $6.0 million due to the sale of $259.0 million of mortgage-backed securities.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------



| |  | The Companys land development operations posted income from real estate operations of $11.3 million in 2003, an increase of 16.5% compared to 2002, from the Companys
Tallgrass of Naperville and Shenandoah residential projects.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Continued growth in deposit service charges, which grew 10.4% in 2003, despite the negative impact of the Visa debit card settlement.
| | - | -------------------------------------------------------------------------------------------------------------------------------------



| |  | On the negative side, the Company recorded a $6.9 million net loss on sale and writedown of investment securities, which included $10.0 million of other than temporary impairment
writedowns on two debt securities.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Outlook for 2004



The Company currently expects earnings for 2004 to be in
the range of $3.52 to $3.65 per diluted share, or an increase of 8-12% over 2003. These projections for 2004 assume balance sheet growth in the 10-12% range. Mortgage loan originations are expected to be significantly lower during the year due to
reduced refinancing activity. Due to the market shifting toward adjustable rate loans and increased price competition, the Company expects lower loan sale volumes and reduced profit margins compared to 2003. Assuming modest



51



---

##### Table of Contents

Federal Reserve tightening in the second half of 2004 and in light of an expected change in loan mix, management expects
the net interest margin to be in a range of 3.00%-3.15%. The Company expects to report continued growth in most fee income categories in 2004 and is currently estimating income from real estate operations in the range of $9.0-$10.5 million for 2004,
with the income heavily weighted in the second half of the year. The projections incorporate $2.7 million of realized gains in the first quarter of 2004 on the sale of investment securities previously written down and also assume a strong housing
purchase market, continued good credit quality, completion of the Companys previously authorized stock buyback program, and successful conversion and integration of St. Francis systems in late May 2004. The majority of expected cost savings
related to the St. Francis merger will not begin to be realized until the second half of 2004. Based on these timing expectations and projection of loan originations, loan sales and income from real estate development, management expects that
earnings will be stronger in later quarters than in earlier quarters of 2004. Due to the timing of the St. Francis merger, and planned additions of management personnel and infrastructure to accommodate the Companys growth, it is expected that
the Companys efficiency ratio will be near 50% in 2004 before trending back down in 2005.



Acquisitions



The
Company has completed the following acquisitions during the past three years:



|                         |  |                    |  |                |  |                  |           |                |           |                     |        
|------------------------ |  | ------------------ |  | -------------- |  | ---------------- | --------- | -------------- | --------- | ------------------- | -------
|Selling Entity           |  | Transaction        |  | Date Completed |  | AcquiredDeposits |           | AcquiredLoans  |           | IntangiblesRecorded
|                         |  |                    |  |                |  |                  |           | (In thousands) |           |                    
|St. Francis Capital Corp |  | Merger             |  | December 2003  |  | $                | 1,361,170 |                | 1,243,549 |                     | 131,218
|Fidelity Bancorp         |  | Merger             |  | July 2003      |  |                  | 434,573   |                | 338,123   |                     | 44,840 
|UmbrellaBank             |  | Branch acquisition |  | March 2003     |  |                  | 8,452     |                | 269       |                     | 670    
|Mid Town Bancorp         |  | Merger             |  | November 2001  |  |                  | 270,318   |                | 210,020   |                     | 39,328 
|                         |  |                    |  |                |  |                  |           |                |           |                     |        



On March 28, 2003, the
Company purchased a branch of UmbrellaBank, fsb in Chicago, IL. The transaction involved the purchase of approximately $8.5 million in deposits.



On July 21, 2003, the Company acquired Fidelity Bancorp, Inc. in an all-stock transaction, valued at $115 million. In connection with the merger,
Fidelitys bank subsidiary, Fidelity Federal Savings Bank, was merged into the Bank. The merger provided five additional branch locations in the Chicago area. At July 21, 2003, Fidelity had assets of $612.9 million, deposits of $434.6 million
and stockholders equity of $59.6 million.



On December 1,
2003 the Company completed a $358 million all-stock acquisition of St. Francis Capital Corporation, which gave the Company 23 new branch offices in the Milwaukee, Wisconsin area. In connection with the merger, St. Franciss bank subsidiary St.
Francis Bank, was merged into the Bank. At acquisition, St. Francis had assets of $2.19 billion, deposits of $1.36 billion, and stockholders equity of $191.1 million.



In addition, the Bank also purchased approximately $6.0 million in deposits from Second Federal Savings and Loan Association
of Chicago on November 15, 2003.



As a result of the completion
of these transactions, the current year results, other than per share amounts and ratio analyses, are not generally comparable to the reported results for the corresponding 2002 period.



As it has in recent years, the Company expects to continue to search for and evaluate potential acquisition opportunities
that will enhance franchise value and may periodically be presented with opportunities to acquire other institutions, branches or deposits in the market it serves, or which allow the Company to expand outside its current primary market areas of
Chicago, Milwaukee and their surrounding areas. Management intends to review acquisition opportunities across a variety of parameters, including the potential impact on its financial condition as well as its financial performance in the future. It
is anticipated that



52



---

##### Table of Contents

future acquisitions, if any, will likely be valued at a premium to book value, and at a premium to current market value.
As such, management anticipates that acquisitions made by the Company may include some book value per share dilution and possible short-term earnings per share dilution for the Companys shareholders depending on the Companys success and
timing in integrating the operations of businesses acquired, the level of cost savings and revenue enhancements that may be achieved, and the nature of the purchase price consideration.



Critical Accounting Policies and Estimates



The Companys discussion and analysis of its financial condition and results of operations are based upon its consolidated financial
statements, which have been prepared in conformity with accounting principles generally accepted in the United States of America, and are more fully described in Note 1 of the consolidated financial statements found in Item 8. Financial
Statements and Supplementary Data. The preparation of these consolidated financial statements require that management make estimates and assumptions that affect the reported amounts of assets, liabilities, income and expense, as well as
related disclosures of contingencies. Managements judgment is based on historical experience, terms of existing contracts, market trends, and other information available to management. The Company believes that of its significant accounting
policies, the following may involve a higher degree of judgment and complexity.



Allowance for loan losses. In evaluating the adequacy of the allowance for loan losses and determining, if any, the related provision for loan losses, management considers: (1) subjective factors, including
local and general economic business factors and trends, portfolio concentrations and changes in the size and/or general terms of the loan portfolio, (2) historical loss experience and the change in the mix of the overall portfolio composition over
the last five years, (3) specific allocations based upon probable losses identified during the review of the portfolio, and (4) delinquency in the portfolio and the composition of non-performing loans including the percent of non-performing loans
with supplemental mortgage insurance. The allowance for loan losses is established through a provision for loan losses to provide a reserve against estimated losses in the Banks loans receivable portfolio. The allowance for loan losses
reflects managements estimate of the reserves needed to cover probable losses inherent in the Banks loan portfolio.



Valuation of mortgage servicing rights.The Bank capitalizes the estimated value of mortgage servicing rights upon the sale of loans. The
Banks estimated value takes into consideration contractually known amounts, such as loan balance, term, contract rate, and whether the customer escrows funds with the Bank for the payment of taxes and insurance. These estimates are impacted by
loan prepayment speeds, earnings on escrow funds, as well as the discount rate used to present value the cash flow stream. Subsequent to the establishment of this asset, management reviews the fair value of mortgage servicing rights on a quarterly
basis using current prepayment speed, cash flow and discount rate estimates. Changes in these estimates impact fair value, and could require the Bank to record a valuation allowance or recovery. A net recovery of $1.1 million was recorded in 2003
and a valuation allowance of $2.3 million was established in 2002. Should estimates assumed by management regarding future prepayment speeds on the underlying loans supporting the mortgage servicing rights prove to be incorrect, additional valuation
allowances could occur, or contrarily, valuation allowances could be recovered if changing estimates increase the fair value of mortgage servicing rights.



Real estate held for development.Profits from lot sales in the Companys real estate developments are based on cash received less the cost of
sales per lot, including capitalized interest and an estimate of future costs to be incurred. This is especially true at the outset



53



---

##### Table of Contents

of a project, where few actual costs have been incurred in the project as a whole. The estimate of total project costs is
reviewed on a quarterly basis by project management. Estimates are subject to change for various reasons, including the duration of the project, changes in rules or requirements of the communities where the projects reside, soil and weather
conditions, increased project budgets, as well as the general level of inflation. Changes in future estimated costs are recognized in the period of change as either a charge or an addition to income from real estate operations. Additionally,
management periodically evaluates the net realizable value from each project by considering other factors, such as pace of lot absorption, sources of funding and timing of disbursements in evaluating the net realizable value of a development at the
end of a reporting period. A charge to current earnings would occur if this evaluation indicated a projects net realizable value did not exceed its recorded cost. Currently, the net realizable value of each land development project the Company
is engaged in exceeds the recorded cost of the project.



Results of
Operations



Net Income.Net income for the
Company was $83.4 million, or $3.26 per diluted share ($3.35 per basic share) for the year ended December 31, 2003, an increase of 12.8% over the prior years net income of $74.0 million, or $3.11 per diluted share ($3.19 per basic share) and
$59.5 million, or $2.56 per diluted share ($2.62 per basic share) for the year ended December 31, 2001.



Net Interest Income.Net interest income is the principal source of earnings for the Company, and consists primarily of interest income on loans
receivable and mortgage-backed and investment securities, offset by interest expense on deposits and borrowed funds. Net interest income fluctuates due to a variety of reasons, most notably due to the size of the balance sheet, changes in interest
rates, and to a lesser extent asset quality. The Company seeks to increase net interest income without materially mismatching maturities of the interest-earning assets it invests in, compared to the interest-bearing liabilities that fund such
investments.



Generally, the Bank is able to increase net
interest income at a faster pace when the spread between short-term and long-term U.S. Treasury rates is positive, due to funding costs being more directly tied to shorter-term rates, while loans are tied to intermediate to longer-term rates. Net
interest income before the provision for loan losses was $179.5 million in 2003, $158.0 million in 2002, and $131.2 million in 2001. The net interest margin (net interest income divided by average interest-earning assets) for the same periods was
2.96%, 2.92%, and 2.64%, respectively.



The following table is
a summary of 6-month and 10-year U.S. Government yields meant to provide information about the market rates related to the Banks pricing of interest-earning assets and interest-bearing liabilities.



U. S. Treasury Rates



|        |  |          |   |  |          |   |  |        |   |  |          |   |  |          |   |  |        |   |  |          |   |  |          |   |  |        |  
|------- |  | -------- | - |  | -------- | - |  | ------ | - |  | -------- | - |  | -------- | - |  | ------ | - |  | -------- | - |  | -------- | - |  | ------ | -
|        |  | 2003     |   |  | 2002     |   |  | 2001   |  
|        |  | 6 months |   |  | 10 years |   |  | Spread |   |  | 6 months |   |  | 10 years |   |  | Spread |   |  | 6 months |   |  | 10 years |   |  | Spread |  
|Average |  | 1.07     | % |  | 4.00     | % |  | 2.93   | % |  | 1.70     | % |  | 4.59     | % |  | 2.89   | % |  | 3.44     | % |  | 5.00     | % |  | 1.56   | %
|Close   |  | 1.02     | % |  | 4.25     | % |  | 3.23   | % |  | 1.21     | % |  | 3.82     | % |  | 2.61   | % |  | 1.80     | % |  | 5.05     | % |  | 3.25   | %



During 2003, U.S.
Treasury rates continued their decline to historic lows through June. Continued economic weakness, and very low inflation fueled continued low federal funds rates, and rallied the rate on 10-year Treasury notes to 3.11% at mid-year. In the second
half of the year, the 10-year Treasury note sold off in reaction to improving economic conditions and increasing U.S. budget deficits to close the year at 4.25%. During this time, however, short-term interest rates stayed at their historic low
levels, leading to the large



54



---

##### Table of Contents

spread of 3.23% between the rate on 6-month Treasury bills and 10-year Treasury notes at the end of the year. On an
average basis, the spread was very consistent with 2002, which is part of the reason the Banks net interest margin remained stable. The interest rate scenario in 2003 enabled the Bank to continue to reprice certificate of deposits lower,
refinance maturing borrowings at lower rates, and lower the rates offered on its core deposits. However, the very high level of refinance activity fueled by lower long-term interest rates offset most of the lower funding costs achieved.



During 2002, the U.S. Treasury curve maintained the steepness between
short and long-term rates that had begun during 2001. This allowed the Bank to benefit from the impact of low short-term rates on its cost of funds more so than in 2001, as the Bank aggressively reduced rates offered on its core accounts and
experienced a decline in certificate of deposit costs as high rate certificates of deposit matured and repriced to lower rates. Each of these factors was more than enough to offset the decline in asset yields due to refinance activity driven by
declining long-term interest rates, as well as the decline in yield on ARM loans, which generally reprice off of short-term Treasury rates, and continued decreases in yield on equity lines of credit tied to the Prime rate.



During 2001, the U.S. Treasury yield curve went through a dramatic change
from 2000 in both the general level of interest rates and the spread between short term and long-term interest rates, as shown above. Beginning in early 2001, with the slowing of the U.S. economy, the Federal Reserve Board began aggressively
lowering its target federal funds rate in an effort to stimulate the economy. These cuts were exacerbated by the attacks on the U.S. in September 2001. By the end of 2001, the slope in the U.S. Treasury yield curve between the 6-month Treasury bill
and 10-year Treasury Note was 325 basis points, from being inverted by 60 basis points at the beginning of 2001. The impact on the Banks net interest income in 2001 was a combination of a decrease in the cost of core deposits, such as
passbooks, money markets, and NOW accounts, the downward repricing of maturing certificates of deposits, the downward repricing of ARM loans, as well as shift in loan origination activity towards long-term fixed rate mortgages. Loan prepayments and
sales soared with the drop in mortgage rates, and slowed the growth of the banks loan portfolio. However, the deposit inflows, coupled with the slower loan growth, allowed the Bank to reduce its reliance on higher cost advances from the FHLB
of Chicago. The overall impact of these effects was a relatively flat net interest margin for 2001, when compared to 2000.



55



---

##### Table of Contents

Average Balance Sheets



The following table sets forth certain information relating to the Companys consolidated statements of financial condition and reflects the average yield on
assets and average cost of liabilities for the periods indicated. Such yields and costs are derived by dividing income or expense by the average balance of assets or liabilities. Average balances are derived from average daily balances, and include
non-performing loans. The yield/cost at December 31, 2003 includes fees which are considered adjustments to yield.



|                                                                 |  |                         |           |          |                      |         |                     |      |      |         |  |          |           |  |                     |         |   |         |      |          |  |   |                     |  |   |         |   |  |             |   |  |   |           |   |  |      |  
|---------------------------------------------------------------- |  | ----------------------- | --------- | -------- | -------------------- | ------- | ------------------- | ---- | ---- | ------- |  | -------- | --------- |  | ------------------- | ------- | - | ------- | ---- | -------- |  | - | ------------------- |  | - | ------- | - |  | ----------- | - |  | - | --------- | - |  | ---- | -
|                                                                 |  | Year Ended December 31, |           |          | At December 31, 2003 |        
|                                                                 |  | 2003                    |           |          | 2002                 |         |                     | 2001 |      |        
|                                                                 |  | Balance                 |           | Interest |                      |         | Average Yield/ Cost |      |      | Balance |  | Interest |           |  | Average Yield/ Cost |         |   | Balance |      | Interest |  |   | Average Yield/ Cost |  |   | Balance |   |  | Yield/ Cost |  
|                                                                 |  | (Dollars in thousands)  |          
|Assets:                                                          |  |                         |           |          |                      |         |                     |      |      |         |  |          |           |  |                     |         |   |         |      |          |  |   |                     |  |   |         |   |  |             |   |  |   |           |   |  |      |  
|Interest-earning assets:                                         |  |                         |           |          |                      |         |                     |      |      |         |  |          |           |  |                     |         |   |         |      |          |  |   |                     |  |   |         |   |  |             |   |  |   |           |   |  |      |  
|Loans receivable                                                 |  | $                       | 4,917,662 |          |                      | 272,687 |                     |      | 5.55 | %       |  | $        | 4,446,989 |  |                     | 288,790 |   |         | 6.49 | %        |  | $ | 4,319,795           |  |   | 307,780 |   |  | 7.12        | % |  | $ | 6,403,662 |   |  | 5.22 | %
|Mortgage-backed securities                                       |  |                         | 407,012   |          |                      | 14,651  |                     |      | 3.60 |         |  |          | 239,299   |  |                     | 11,295  |   |         | 4.72 |          |  |   | 123,616             |  |   | 7,229   |   |  | 5.85        |   |  |   | 971,969   |   |  | 4.04 |  
|Investment securities(1)                                         |  |                         | 532,751   |          |                      | 24,266  |                     |      | 4.55 |         |  |          | 502,971   |  |                     | 24,368  |   |         | 4.84 |          |  |   | 377,164             |  |   | 22,680  |   |  | 6.01        |   |  |   | 749,977   |   |  | 4.93 |  
|Interest-bearing deposits                                        |  |                         | 94,087    |          |                      | 2,474   |                     |      | 2.63 |         |  |          | 93,647    |  |                     | 2,131   |   |         | 2.28 |          |  |   | 39,139              |  |   | 1,914   |   |  | 4.89        |   |  |   | 57,988    |   |  | 1.13 |  
|Federal funds sold                                               |  |                         | 114,260   |          |                      | 2,352   |                     |      | 2.06 |         |  |          | 126,971   |  |                     | 2,906   |   |         | 2.29 |          |  |   | 115,564             |  |   | 6,133   |   |  | 5.31        |   |  |   | 19,684    |   |  | 0.96 |  
|                                                                 |  |                         |           |          |                      |         |                     |      |      |         |  |          |           |  |                     |         |   |         |      |          |  |   |                     |  |   |         |   |  |             |   |  |   |           |   |  |      |  
|Total interest-earning assets                                    |  |                         | 6,065,772 |          |                      | 316,430 |                     |      | 5.22 |         |  |          | 5,409,877 |  |                     | 329,490 |   |         | 6.09 |          |  |   | 4,975,278           |  |   | 345,736 |   |  | 6.95        |   |  |   | 8,203,280 |   |  | 5.02 |  
|Non-interest earning assets                                      |  |                         | 403,926   |          |                      |         |                     |      |      |         |  |          | 329,522   |  |                     |         |   |         |      |          |  |   | 239,197             |  |   |         |   |  |             |   |  |   | 730,305   |   |  |      |  
|                                                                 |  |                         |           |          |                      |         |                     |      |      |         |  |          |           |  |                     |         |   |         |      |          |  |   |                     |  |   |         |   |  |             |   |  |   |           |   |  |      |  
|Total assets                                                     |  | $                       | 6,469,698 |          |                      |         |                     |      |      |         |  | $        | 5,739,399 |  |                     |         |   |         |      |          |  | $ | 5,214,475           |  |   |         |   |  |             |   |  | $ | 8,933,585 |   |  |      |  
|                                                                 |  |                         |           |          |                      |         |                     |      |      |         |  |          |           |  |                     |         |   |         |      |          |  |   |                     |  |   |         |   |  |             |   |  |   |           |   |  |      |  
|Liabilities and stockholders equity:                            |  |                         |           |          |                      |         |                     |      |      |         |  |          |           |  |                     |         |   |         |      |          |  |   |                     |  |   |         |   |  |             |   |  |   |           |   |  |      |  
|Interest-bearing liabilities:                                    |  |                         |           |          |                      |         |                     |      |      |         |  |          |           |  |                     |         |   |         |      |          |  |   |                     |  |   |         |   |  |             |   |  |   |           |   |  |      |  
|Deposits                                                         |  |                         | 3,794,205 |          |                      | 61,011  |                     |      | 1.61 |         |  |          | 3,413,331 |  |                     | 90,963  |   |         | 2.66 |          |  |   | 2,958,748           |  |   | 120,664 |   |  | 4.08        |   |  |   | 5,147,236 |   |  | 1.42 |  
|Borrowed funds                                                   |  |                         | 1,626,695 |          |                      | 75,941  |                     |      | 4.67 |         |  |          | 1,482,487 |  |                     | 80,502  |   |         | 5.43 |          |  |   | 1,580,106           |  |   | 93,825  |   |  | 5.94        |   |  |   | 2,299,427 |   |  | 3.80 |  
|                                                                 |  |                         |           |          |                      |         |                     |      |      |         |  |          |           |  |                     |         |   |         |      |          |  |   |                     |  |   |         |   |  |             |   |  |   |           |   |  |      |  
|Total interest-bearing liabilities                               |  |                         | 5,420,900 |          |                      | 136,952 |                     |      | 2.53 |         |  |          | 4,895,818 |  |                     | 171,465 |   |         | 3.50 |          |  |   | 4,538,854           |  |   | 214,489 |   |  | 4.73        |   |  |   | 7,446,663 |   |  | 2.15 |  
|Non-interest bearing deposits                                    |  |                         | 328,881   |          |                      |         |                     |      |      |         |  |          | 247,235   |  |                     |         |   |         |      |          |  |   | 163,990             |  |   |         |   |  |             |   |  |   | 433,219   |   |  |      |  
|Other liabilities                                                |  |                         | 131,654   |          |                      |         |                     |      |      |         |  |          | 129,164   |  |                     |         |   |         |      |          |  |   | 110,333             |  |   |         |   |  |             |   |  |   | 152,099   |   |  |      |  
|                                                                 |  |                         |           |          |                      |         |                     |      |      |         |  |          |           |  |                     |         |   |         |      |          |  |   |                     |  |   |         |   |  |             |   |  |   |           |   |  |      |  
|Total liabilities                                                |  |                         | 5,881,435 |          |                      |         |                     |      |      |         |  |          | 5,272,217 |  |                     |         |   |         |      |          |  |   | 4,813,177           |  |   |         |   |  |             |   |  |   | 8,031,981 |   |  |      |  
|Stockholders equity                                             |  |                         | 588,263   |          |                      |         |                     |      |      |         |  |          | 467,182   |  |                     |         |   |         |      |          |  |   | 401,298             |  |   |         |   |  |             |   |  |   | 901,604   |   |  |      |  
|                                                                 |  |                         |           |          |                      |         |                     |      |      |         |  |          |           |  |                     |         |   |         |      |          |  |   |                     |  |   |         |   |  |             |   |  |   |           |   |  |      |  
|Liabilities and stockholders equity                             |  | $                       | 6,469,698 |          |                      |         |                     |      |      |         |  | $        | 5,739,399 |  |                     |         |   |         |      |          |  | $ | 5,214,475           |  |   |         |   |  |             |   |  |   | 8,933,585 |   |  |      |  
|                                                                 |  |                         |           |          |                      |         |                     |      |      |         |  |          |           |  |                     |         |   |         |      |          |  |   |                     |  |   |         |   |  |             |   |  |   |           |   |  |      |  
|Net interest income/interest rate spread                         |  |                         |           |          | $                    | 179,478 |                     |      | 2.69 | %       |  |          |           |  | $                   | 158,025 |   |         | 2.59 | %        |  |   |                     |  | $ | 131,247 |   |  | 2.22        | % |  |   |           |   |  | 2.86 | %
|                                                                 |  |                         |           |          |                      |         |                     |      |      |         |  |          |           |  |                     |         |   |         |      |          |  |   |                     |  |   |         |   |  |             |   |  |   |           |   |  |      |  
|Net earning assets/net yield on average interest-earning assets  |  | $                       | 644,872   |          |                      |         |                     |      | 2.96 | %       |  | $        | 514,059   |  |                     |         |   |         | 2.92 | %        |  | $ | 436,424             |  |   |         |   |  | 2.64        | % |  | $ | 756,617   |   |  |      |  
|                                                                 |  |                         |           |          |                      |         |                     |      |      |         |  |          |           |  |                     |         |   |         |      |          |  |   |                     |  |   |         |   |  |             |   |  |   |           |   |  |      |  
|Ratio of interest-earning assets to interest-bearing liabilities |  |                         |           |          |                      | 111.90  | %                   |      |      |         |  |          |           |  |                     | 110.50  | % |         |      |          |  |   |                     |  |   | 109.62  | % |  |             |   |  |   | 110.16    | % |  |      |  
|                                                                 |  |                         |           |          |                      |         |                     |      |      |         |  |          |           |  |                     |         |   |         |      |          |  |   |                     |  |   |         |   |  |             |   |  |   |           |   |  |      |  

---

|(1) | Includes average balances of $239.4 million, $157.1 million and $106.9 million stock in Federal Home Loan Bank of Chicago for the years ended December 31, 2003, 2002
and 2001, respectively. At December 31, 2003, the Bank owned $384.6 million of FHLB stock.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



56



---

##### Table of Contents

Rate/Volume Analysis



The table below describes the extent to which changes in interest rates and changes in the volume of interest-earning assets and interest-bearing
liabilities have affected the Banks interest income and interest expense during the periods indicated. Information is provided in each category with respect to (i) changes attributable to changes in volume (changes in volume multiplied by
prior rate), (ii) changes attributable to changes in rate (changes in rates multiplied by prior volume), and (iii) the net change. Changes attributable to the combined impact of volume and rate have been allocated proportionately to the changes due
to volume and the changes due to rate.



|                              |  |                                       |         |   |                                       |        |   |              |         |        |               |   |         |   |  |        |   |  |         |  
|----------------------------- |  | ------------------------------------- | ------- | - | ------------------------------------- | ------ | - | ------------ | ------- | ------ | ------------- | - | ------- | - |  | ------ | - |  | ------- | -
|                              |  | Year Ended December 31, 2003 vs. 2002 |         |   | Year Ended December 31, 2002 vs. 2001 |       
|                              |  | Total Change                          |         |   | Change Due To                         |        |   | Total Change |         |        | Change Due To |  
|                              |  |                                       | Volume  |   |                                       | Rate   |   |              |         | Volume |               |   | Rate    |  
|                              |  | (In thousands)                        |        
|Interest-earning assets:      |  |                                       |         |   |                                       |        |   |              |         |        |               |   |         |   |  |        |   |  |         |  
|Loans receivable              |  | $                                     | (16,103 | ) |                                       | 28,690 |   |              | (44,793 | )      |               | $ | (18,990 | ) |  | 8,862  |   |  | (27,852 | )
|Mortgage-backed securities    |  |                                       | 3,356   |   |                                       | 6,512  |   |              | (3,156  | )      |               |   | 4,066   |   |  | 5,683  |   |  | (1,617  | )
|Investment securities         |  |                                       | (102    | ) |                                       | 1,400  |   |              | (1,502  | )      |               |   | 1,980   |   |  | 6,746  |   |  | (4,766  | )
|Interest-bearing deposits     |  |                                       | 343     |   |                                       | 10     |   |              | 333     |        |               |   | 217     |   |  | 1,636  |   |  | (1,419  | )
|Federal funds sold            |  |                                       | (554    | ) |                                       | (276   | ) |              | (278    | )      |               |   | (3,227  | ) |  | 554    |   |  | (3,781  | )
|                              |  |                                       |         |   |                                       |        |   |              |         |        |               |   |         |   |  |        |   |  |         |  
|Total interest income         |  |                                       | (13,060 | ) |                                       | 36,336 |   |              | (49,396 | )      |               |   | (15,954 | ) |  | 23,481 |   |  | (39,435 | )
|                              |  |                                       |         |   |                                       |        |   |              |         |        |               |   |         |   |  |        |   |  |         |  
|Interest-bearing liabilities: |  |                                       |         |   |                                       |        |   |              |         |        |               |   |         |   |  |        |   |  |         |  
|Deposits                      |  |                                       | (29,952 | ) |                                       | 9,266  |   |              | (39,218 | )      |               |   | (29,701 | ) |  | 16,553 |   |  | (46,254 | )
|Borrowed funds                |  |                                       | (4,561  | ) |                                       | 7,381  |   |              | (11,942 | )      |               |   | (13,323 | ) |  | (5,589 | ) |  | (7,734  | )
|                              |  |                                       |         |   |                                       |        |   |              |         |        |               |   |         |   |  |        |   |  |         |  
|Total interest expense        |  |                                       | (34,513 | ) |                                       | 16,647 |   |              | (51,160 | )      |               |   | (43,024 | ) |  | 10,964 |   |  | (53,988 | )
|                              |  |                                       |         |   |                                       |        |   |              |         |        |               |   |         |   |  |        |   |  |         |  
|Net change                    |  | $                                     | 21,453  |   |                                       | 19,689 |   |              | 1,764   |        |               | $ | 27,070  |   |  | 12,517 |   |  | 14,553  |  
|                              |  |                                       |         |   |                                       |        |   |              |         |        |               |   |         |   |  |        |   |  |         |  



Interest income on
loans receivable decreased $16.1 million in 2003 to $272.7 million when compared to $288.9 million in 2002 and $307.8 million in 2001. The decrease in 2003 is due to a 94 basis point decline in the average yield on loans receivable offset by a
$470.7 million increase in the average balance of loans receivable. The decrease in interest income and average yield on loans receivable was mitigated by the receipt of $4.1 million of prepayment penalty fee income on one- to four-family mortgage
and consumer loans for 2003 compared to $3.8 million and $1.9 million for the years ended December 31, 2002 and 2001, respectively. It is expected that a significant slowdown in refinance activity, together with the much smaller portfolio of loans
containing prepayment penalties, will result in a significant reduction in prepayment penalty fee income in 2004. Average loans receivable increased approximately $243.0 million due to the balances and timing of the acquisitions of Fidelity and St.
Francis, with the remainder of the growth due to higher balances of equity lines of credit and other mortgage loans. Although the Bank originated record one- to four family loan volume in 2003, average loans receivable, exclusive of loans acquired
in acquisitions, increased only modestly due to the high level of refinance activity, and increased level of sales of long-term fixed rate loan originations. The decline in average yield was due to the repayment of higher-yielding loans, as well as
the impact of an additional 25 basis point reduction in the prime rate during the year. During 2002, interest income on loans decreased $19.0 million, or 6.2%, to $288.8 million, as the impact of the $127.2 million increase in average balances was
more than offset by a 63 basis point decrease in average yield on loans. Refinance activity during the year due to falling interest rates accelerated prepayments on high yielding loans.



Interest income from mortgage-backed securities increased in 2003 to $14.7 million, from $11.3 million in 2002, and $7.2
million in 2001. The increase in mortgage-backed securities income in 2003 is due to a $167.7 million increase in average balances offset by a 112 basis point decrease in the average yield. The increase in average balance is primarily due to the
impact of the Banks acquisitions in 2003, adding approximately $134.0 million to the average balance of mortgage-backed securities. In addition to this increase, the Bank purchased $14.8 million in mortgage-backed securities in 2003, primarily
with cash from excess prepayments in the Banks loan portfolio. The large increase in interest income in 2002 was due to management deploying excess cash from the high level of loan prepayments into mortgage-backed securities as a means of
limiting interest rate risk, but



57



---

##### Table of Contents

increasing returns over other investment opportunities. Average balances increased $115.7 million in 2002 as a result, while the average yield decreased 113
basis points.



Interest income from investment securities
decreased $102,000 in 2003 to $24.3 million, after increasing $1.7 million in 2002 and $3.0 million in 2001. In 2003, the decrease was due to a 29 basis point decrease in the average yield on investments, offset by a $29.8 million, or 5.9%, increase
in average balances. The Banks acquisitions accounted for approximately $48.0 million of the increase in average balances for the year. The decrease in average yield (or net interest margin) is attributable to lower interest rates prevailing
during the year as the Bank investment portfolio has a relatively short duration, causing maturing cash flows during 2003 to be reinvested at lower interest rates. A major investment security of the Bank is its investment in stock of the FHLB of
Chicago, totaling $384.6 million at December 31, 2003. The FHLB of Chicago has been paying strong dividends over the past few years, and these dividends provided interest income of $14.4 million, $8.3 million, and $6.7 million in 2003, 2002 and
2001, respectively. Due to an expected change in the capital structure of the FHLB of Chicago in the fourth quarter of 2004, or early 2005, the Bank expects to begin reducing its investment in mid-2004. Currently, this investment is yielding 6.5%
and it is unlikely that the Bank will be able to replace this yield in the short term.



Interest expense on deposits decreased by $30.0 million, or 32.9%, to $61.0 million in 2003, due to a 106 basis point decrease in average cost of deposits, offset by a 11.2%, or $380.9 million increase in average
balances. Average deposit balances increased approximately $295 million due to the acquisition of Fidelity and St. Francis, while the remainder was due to continued increases in core deposit balances at the Bank. The decline in the average cost of
deposits was due to the maturity of higher coupon certificates of deposits being rolled into lower cost certificates of deposit, as well as a reduction in amounts paid on checking, money market and passbook accounts. Interest expense on deposits
decreased by $29.7 million to $91.0 million in 2002, due to an increase in average balances of $456.5 million offset by a decrease in the average cost of deposits of 142 basis points. The increase in average balances was due to the acquisition of
Mid Town in 2001, adding $215.9 million in interest-bearing deposits on November 30, 2001, as well as strong internal generation of core deposits accounts. The average rate decrease was due to lower short-term interest rates from easing U.S.
monetary policy, as well as the Bank aggressively lowering its cost of core deposits.



Interest expense on borrowed funds decreased $4.6 million to $75.9 million in 2003, due to a 9.7%, or $144.2 million increase in the average balance, offset by a decline in the average cost of 76 basis points or
14.0%. Approximately $100 million of the increase in average balance is attributable to the acquisitions of Fidelity and St. Francis. The decrease in the average cost is due to the repayment of higher costing borrowings being replaced with lower
costing borrowings due to historic low interest rates, as well as the impact of purchase accounting on acquired borrowed funds. Based on the amortization at December 31, 2003 the effective cost at December 31, 2003 was 3.80%. In 2002, interest
expense on borrowed funds decreased $13.3 million, or 14.2%, due to a 51 basis point, or 8.6%, decrease in the average cost and a decrease in average balances of $97.6 million, or 6.2%. The decrease in average balances was due to increased deposit
balances used to fund relatively moderate asset growth in 2002 due to heavy refinance activity. The decline in average cost was due to continued falling interest rates, and the maturity of higher costing borrowings.



The rapid increase in long-term interest rates in the second half of 2003 has
impacted the Banks operations by dramatically reducing the level of loan originations, while also



58



---

##### Table of Contents

slowing the level of prepayments in the Banks loan portfolio. Additionally, the continued monetary policy accommodation by the Federal Reserve Board
has led to a very steep yield curve, which is expected to benefit the Banks net interest margin.



Provision for loan losses.A provision for loan losses is recorded as necessary to maintain a loan loss reserve management considers adequate to
provide coverage for probable losses

inherent in the Banks loan portfolio. The company recorded a provision for loan losses and net charge-offs as
follows for the three years ended December 31, 2003:



|                          |  |                         |     |      |   |      |  |   |   
|------------------------- |  | ----------------------- | --- | ---- | - | ---- |  | - | --
|                          |  | Year ended December 31,
|                          |  | 2003                    |     | 2002 |   | 2001
|                          |  | (Dollars in thousands) 
|Provision for loan losses |  | $                       |    |      | $ | 300  |  | $ |  
|Net charge-offs           |  |                         | 299 |      |   | 424  |  |   | 59



In evaluating the
adequacy of the allowance for loan losses and determining, if any, the related provision for loan losses, management considers: (1) subjective factors, including local and general economic business factors and trends, portfolio concentrations and
changes in the size and/or general terms of the loan portfolio, (2) historical loss experience and the change in the mix of the overall portfolio composition over the last five years, (3) specific allocations based upon probable losses identified
during the review of the portfolio, and (4) delinquency in the portfolio and the composition of non-performing loans including the percent of non-performing loans with supplemental mortgage insurance. The table below shows the total allowance for
loan losses and selected percentages for the periods indicated:



|                                                                                           |  |                        |        |   |      |   |        |      |  |   |        |  
|------------------------------------------------------------------------------------------ |  | ---------------------- | ------ | - | ---- | - | ------ | ---- |  | - | ------ | -
|                                                                                           |  | At December 31,        |       
|                                                                                           |  | 2003                   |        |   | 2002 |   |        | 2001 | 
|                                                                                           |  | (Dollars in thousands) |       
|Allowance for loan losses                                                                  |  | $                      | 34,555 |   |      | $ | 19,483 |      |  | $ | 19,607 |  
|Percent of allowance for loan losses to nonperforming loans                                |  |                        | 105.4  | % |      |   | 76.7   | %    |  |   | 100.8  | %
|Percent of allowance for loan losses to loans receivable, exclusive of loans held for sale |  |                        | .54    |   |      |   | .44    |      |  |   | .45    |  



The $15.1 million
increase in the allowance for loan losses at December 31, 2003 resulted from additions to the allowance totaling $15.4 million in accounting for the acquisitions of Fidelity and St. Francis acquisitions.



Non-interest income.Non-interest income is another significant source of revenue for
the Company. It consists primarily of fees earned on deposit products and services, gains and losses from asset sale activity and income from real estate operations. Although changes in interest rates can have an impact on revenues from these
sources, the impact is generally less than the impact on net interest income. Non-interest income was $71.6 million, $56.4 million, and $47.1 million, for the years ended December 31, 2003, 2002 and 2001, respectively.



59



---

##### Table of Contents

The table below shows the composition of non-interest income for the periods indicated.



|                                                                    |  |                         |        |   |                                |        |   |      |        |   |      |       |   |      |       |  
|------------------------------------------------------------------- |  | ----------------------- | ------ | - | ------------------------------ | ------ | - | ---- | ------ | - | ---- | ----- | - | ---- | ----- | -
|                                                                    |  | Year Ended December 31, |        |   | Percentage Increase (Decrease) |       
|                                                                    |  | 2003                    |        |   | 2002                           |        |   | 2001 |        |   | 2003 |       |   | 2002 |      
|                                                                    |  | (In thousands)          |       
|Gain (loss) on sale and writedown of assets:                        |  |                         |        |   |                                |        |   |      |        |   |      |       |   |      |       |  
|Loans receivable                                                    |  | $                       | 25,948 |   |                                | 16,330 |   |      | 8,689  |   |      | 58.9  | % |      | 87.9  | %
|Mortgage-backed securities                                          |  |                         | 6,006  |   |                                | 39     |   |      |       |   |      | N/M   |   |      | 20.5  |  
|Investment securities                                               |  |                         | (6,943 | ) |                                | 80     |   |      | 879    |   |      | N/M   |   |      | (90.9 | )
|Foreclosed real estate                                              |  |                         | 365    |   |                                | 179    |   |      | 347    |   |      | 103.9 |   |      | (48.4 | )
|Income from real estate operations                                  |  |                         | 11,325 |   |                                | 9,717  |   |      | 11,484 |   |      | 16.5  |   |      | (15.4 | )
|                                                                    |  |                         |        |   |                                |        |   |      |        |   |      |       |   |      |       |  
|Total gain on sale of assets and income from real estate operations |  |                         | 36,701 |   |                                | 26,345 |   |      | 21,399 |   |      | 39.3  |   |      | 23.1  |  
|                                                                    |  |                         |        |   |                                |        |   |      |        |   |      |       |   |      |       |  
|Deposit account service charges                                     |  |                         | 24,552 |   |                                | 22,239 |   |      | 16,535 |   |      | 10.4  |   |      | 34.5  |  
|Brokerage commissions                                               |  |                         | 3,587  |   |                                | 2,702  |   |      | 2,371  |   |      | 32.8  |   |      | 14.0  |  
|Late charge income                                                  |  |                         | 1,312  |   |                                | 975    |   |      | 1,128  |   |      | 34.6  |   |      | (13.6 | )
|Other loan fees                                                     |  |                         | 3,455  |   |                                | 2,660  |   |      | 1,822  |   |      | 29.9  |   |      | 46.0  |  
|Loan servicing fee expense                                          |  |                         | (5,939 | ) |                                | (2,472 | ) |      | (371   | ) |      | 140.3 |   |      | N/M   |  
|Valuation recovery (allowance) on mortgage servicing rights         |  |                         | 1,130  |   |                                | (2,300 | ) |      | (904   | ) |      | 149.1 |   |      | 154.4 |  
|Bank owned life insurance                                           |  |                         | 1,315  |   |                                | 1,440  |   |      | 1,440  |   |      | (8.7  | ) |      |      |  
|Insurance commissions                                               |  |                         | 480    |   |                                | 461    |   |      | 596    |   |      | 4.1   |   |      | (0.1  | )
|Safe deposit box fees                                               |  |                         | 656    |   |                                | 612    |   |      | 476    |   |      | 7.2   |   |      | 28.6  |  
|Title agency fees                                                   |  |                         | 1,329  |   |                                | 805    |   |      | 541    |   |      | 65.1  |   |      | 48.8  |  
|Real estate owned operations, net                                   |  |                         | (149   | ) |                                | (86    | ) |      | (166   | ) |      | 73.3  |   |      | (48.2 | )
|Assumed premium income                                              |  |                         | 1,482  |   |                                | 981    |   |      | 83     |   |      | 51.1  |   |      | N/M   |  
|Other                                                               |  |                         | 1,722  |   |                                | 2,001  |   |      | 2,168  |   |      | (13.9 | ) |      | (7.7  | )
|                                                                    |  |                         |        |   |                                |        |   |      |        |   |      |       |   |      |       |  
|                                                                    |  | $                       | 71,633 |   |                                | 56,363 |   |      | 47,118 |   |      | 27.1  | % |      | 19.6  | %
|                                                                    |  |                         |        |   |                                |        |   |      |        |   |      |       |   |      |       |  



Gain on sale of
loans.The Bank recorded a net gain on the sale of loans receivable of $25.9 million in 2003, compared to $16.3 million in 2002, and $8.7 million in 2001. Loan sales were $1.77 billion, $1.31 billion and $1.02 billion in 2003, 2002 and 2001,
respectively. Sales in 2003 and 2002 were driven by the high level of fixed-rate loan originations due to falling interest rates. The Company believes that during 2004, interest rates will stabilize and trend higher, decreasing the percentage of
long-term fixed rate loan originations, thereby significantly reducing sales volumes and gains in 2004 compared to the amounts recorded in 2003. In addition, it is expected that the rising rates and increased competition in the market along with
increased sales of ARM loans will result in lower margin on sales.



Gains and losses on sales of loans receivable include gains and losses from the sale of loans originated by the Bank and swapped into mortgage-backed securities prior to sale. The Bank swapped and sold $76.9 million in 2003 compared to
$58.8 million in 2002 and $76.7 million in 2001. The decision to swap loans into mortgage-backed securities and sell versus sell whole loans to Fannie Mae or Freddie Mac is based primarily on price differences at the time of sale, and sales are
executed in the manner that maximizes profit to the Bank.



Gain on sale of mortgage-backed securities.The Bank recorded a net gain on the sale of mortgage-backed securities of $6.0 million in 2003, compared to $39,000 in 2002 and $0 in 2001. The Bank sold $259.0 million of mortgage-backed
securities in 2003 compared to $14.8 million in 2002. Included in the $259.0 million sold in 2003 were $85.3 million of prepayment-protected fixed rate mortgages swapped into mortgage-backed securities, which were subsequently sold along with an
additional $60.9 million of similar mortgage-backed securities. These sales were undertaken to improve the Banks interest rate risk position by lengthening its asset duration to better match the Banks increased liability duration at that
time, as average lives of these loans and related mortgage-backed securities had become very short due to high prepayment speeds.



Gains on sale of investment securities.The Company had a net loss on the sale and writedown of investment securities of $6.9 million in 2003, and
net gains of $80,000 and $879,000 in 2002 and 2001, respectively. Net gains on the sale of securities in 2003 of $3.1 million were offset by $10.0 million of other than temporary writedowns on $16.7



60



---

##### Table of Contents

million of floating-rate debt securities. During 2003, the Company wrote down a $9.3 million floating-rate debt security
by $6.9 million due to insufficient cash flow underlying the repayment of the security. This security was collateralized by various aircraft assets and leases. Another $7.4 million floating-rate collateralized debt obligation, which was secured by
various high yield debt securities, was written down by $3.1 million during 2003. Net gains on sale of $2.9 million in 2002 were offset by a $3.0 million other than temporary impairment writedown taken related to a third $8.5 million floating-rate
security that was in default following its maturity in December 2002. This security is collateralized by various aircraft leased to a major carrier that filed bankruptcy in the fourth quarter of 2002. During 2002 and 2001, gains generated were
primarily from the sales of equity securities and to a lesser extent, corporate debt securities.



Income from real estate operations.Income from real estate operations was $11.3 million in 2003, $9.7 million in 2002 and $11.5 million in 2001,
related to the projects shown below:



|                            |  |                         |  |               |        |           |     |               |   |           |  |               |  |   |       
|--------------------------- |  | ----------------------- |  | ------------- | ------ | --------- | --- | ------------- | - | --------- |  | ------------- |  | - | ------
|                            |  | Year Ended December 31,
|                            |  | 2003                    |  | 2002          |        | 2001     
|                            |  | Lots Sold               |  | Income (Loss) |        | Lots Sold |     | Income (Loss) |   | Lots Sold |  | Income (Loss)
|                            |  | (Dollars in thousands) 
|Tallgrass of Naperville:    |  |                         |  |               |        |           |     |               |   |           |  |               |  |   |       
|Single family               |  | 33                      |  | $             | 2,559  |           | 120 |               | $ | 7,409     |  | 205           |  | $ | 10,712
|Multi-family and commercial |  | 3                       |  |               | 2,584  |           | 1   |               |   | 2,161     |  |              |  |   |      
|Shenandoah                  |  | 196                     |  |               | 6,182  |           |    |               |   | 147       |  |              |  |   |      
|Woodbridge                  |  |                        |  |               |       |           |    |               |   |          |  |              |  |   | 501   
|Hannaford Farm              |  |                        |  |               |       |           |    |               |   |          |  |              |  |   | 271   
|                            |  |                         |  |               |        |           |     |               |   |           |  |               |  |   |       
|                            |  | 232                     |  | $             | 11,325 |           | 121 |               | $ | 9,717     |  | 205           |  | $ | 11,484
|                            |  |                         |  |               |        |           |     |               |   |           |  |               |  |   |       



The Shenandoah
development had 196 lots sold and closed during the current year, which was the first year of sales for the development. There are 326 lots in this development with 15 additional lots pending at December 31, 2003. The Shenandoah lot sales realize a
significantly lower profit margin than those received on Tallgrass lots due to much lower average selling prices. The $147,000 profit recognized in the Shenandoah project during 2002 represents a gain from the sale of undeveloped land to a park
district next to the development.



There were 33 lot sales and
three bulk land sales in the 952-lot Tallgrass of Naperville project generating $5.1 million in pre-tax income for the year ended December 31, 2003. To date, 936 lots have been sold. The decrease in lot sales is attributable to lower inventory
available for sale as the development nears completion. There are 16 lots remaining to be sold at December 31, 2003. In addition, Tallgrass had 12.8 acres of commercially-zoned land, as well as 19.3 acres zoned multi-family. In the last quarter of
2002, a multi-family parcel was sold for a pre-tax profit of $2.2 million, representing approximately half of the multi-family piece. During 2003, approximately three-quarters of the remaining multi-family parcel was sold at a profit of $1.4
million; the remaining one-quarter is under contract and expected to close in mid 2004. The project had two bulk commercial land sales in 2003, covering all of the commercially zoned land, resulting in profit of $1.2 million.



Based on the expected lot sales and closings, pre-tax income from real estate
development for 2004 is expected to be in the range of $9.0-$10.5 million, assuming that the pending sale of the multi-family parcel in the Tallgrass subdivision closes as expected, Shenandoah sales continue, and lot sales commence in the Springbank
of Plainfield development.



In 2001, the Bank sold its final
two commercial parcels in the Woodbridge subdivision, retaining one of the two parcels, with no profit recognized, that will be used for a future branch site. The $271,000 profit recognized in the Hannaford Farm project represents a gain from the
sale of undeveloped land after the Company decided not to develop this parcel into residential lots upon receiving unfavorable zoning.



61



---

##### Table of Contents

Deposit account service charges.Deposit account service charges increased to $24.6 million in
2003, compared to $22.2 million in 2002, and $16.5 million in 2001. The primary source of these fees is from checking account charges for non-sufficient funds, service charges, sustained overdraft fees, debit card usage, and automated teller machine
services. Increases are a function of a higher number of checking accounts, new fees charged for services, as well as increases in existing fee schedules. The number of checking accounts maintained by the Bank was 230,600, 154,000, and 140,700 at
December 31, 2003, 2002, and 2001, respectively. The Company intends to continue sales efforts to increase its checking base during 2004, which, together with the planned addition of new branches and acquisitions, are expected to result in continued
growth in service fee income in 2004. However, strong competitive pressures from an influx of new branches opened by other banks, together with the Banks introduction of a new high rate checking account product carrying higher average
balances, and the impact of the VISA debit card settlement, may prove to be a challenge to the Banks efforts to grow fee income at its historical double-digit rate.



In April 2003, Visa reached an agreement to settle merchant litigation regarding debit card acceptance, usage and
interchange reimbursement fees. The Bank issues Visa debit cards to a large percentage of its checking account customers. The amount of interchange revenue generated for a transaction depends on whether it is signature-based (offline) or PIN-based
(online). Signature-based transactions generate a higher amount of interchange revenue than PIN-based transactions. The settlement includes an initial reduction in the signature-based fee collected from merchants of approximately 33% for the period
August 1, 2003 through December 31, 2003. The Bank estimates the negative impact of the settlement in 2003 was approximately $800,000 of lost interchange revenue. The new interchange rates effective February 1, 2004 are a slight improvement to the
interchange rates previously in effect since August 2003.



Brokerage commissions.Through the Banks affiliation with INVEST, the Bank offers investment products to its customers such as mutual funds, annuities and other brokerage services. Commission revenue increased to $3.6 million
in 2003 compared to $2.7 million in 2002, and $2.4 million in 2001. The increase in revenue in 2003 is due to an increase in the sale of insurance products, which have higher commission percentages. Sales of equity and mutual fund products remained
static due to weak stock market performance. Flat revenues in 2002 were attributable to less than favorable equity markets and consumer desire for less risky investments, especially in the wake of the terrorist attacks on the U.S. in September 2001.



Loan related fees.Loan related fees include late
charge income on loans owned and serviced by the Bank, inspection fee income for construction loans, loan cancellation and commercial processing fees, and loan modification income for refinance transactions. Income from these sources was $4.8
million in 2003, $3.6 million in 2002, and $3.0 million in 2001. The increase in 2003 and 2002 was due to the high levels of refinance activity that the Bank was able to direct to its modification department. In lieu of a full refinance transaction,
the Bank, for a fee, will modify certain contractual terms of a customers loan. The Bank treats the modified loan as if it was paid off, and amortizes any remaining deferred fees or expenses to interest income. With the recent stabilizing
interest rate environment, management expects fee income from loan modifications to be significantly lower in 2004 compared to the current year.



Loan servicing fee expense.Loan servicing fee expense was $5.9 million in 2003, compared to expense of $2.5 million in 2002, and $371,000 in 2001.
Despite a 46% increase in the average balance of loans serviced for others during 2003, accelerated amortization of capitalized mortgage servicing rights due to much higher than estimated prepayments more than offset the loan servicing fees earned
in all three years. In addition to the expense recognized, a net mortgage servicing right valuation recovery was recorded in 2003 of $1.1 million, compared to allowances of $2.3 million and $904,000 recorded in 2002 and 2001, respectively. The
recovery in 2003 was a result of a $940,000 valuation



62



---

##### Table of Contents

allowance recorded in the second quarter as long term interest rates fell to 40-year lows, offset by a $2.1 million
recovery in the fourth quarter as refinance activity and prepayments slowed drastically as interest rates stabilized at the end of the year. The average balance of loans serviced for others was $2.51 billion, $1.72 billion, and $1.06 billion for the
years ended December 31, 2003, 2002, and 2001, respectively. Loans serviced for others that were acquired from St. Francis totaled $864.9 million.



Income from Bank owned life insurance.The Bank has a $27.2 million investment in bank owned life insurance (BOLI). The Banks
BOLI investment consists of the purchase of life insurance on the lives of certain employees, with their consent, from an insurance carrier with a Standard and Poors rating of AA+. The Bank is the sole beneficiary of the life insurance policies.
Income is recorded on this investment based on increases in the cash surrender value (CSV) of the life insurance policies. Income taxes are not recorded on this cash surrender value income due to the tax-free nature of future life
insurance death benefits. Death benefits paid to the Bank will be revenue in the periods received, if any; to date, no such revenue has been recorded. In 2003, CSV income recognized on these life insurance policies totaled $1.3 million, while in
2002 and 2001 it totaled $1.4 million.



Assumed premium
income.Through Mid America Re, a second-tier subsidiary of the Bank, the Bank shares in a portion of the insurance premiums earned by various private mortgage insurance companies on loans it originates, in return for assuming a second-tier
layer of risk of loss on insured portions of these loans. Income from premiums was $1.5 million, $981,000 and $83,000 for the years ended December 31, 2003, 2002 and 2001, respectively. The increase in 2003 compared to 2002 was due to higher new
loan volume during the year and an increase in the aggregate balance of loans covered under this reinsurance arrangement. The increase in 2002 compared to 2001 resulted from the subsidiary beginning in late 2001. Income from this source is expected
to grow as new business is added to the subsidiary.



Title
agency fees.The Bank offers limited title search services, primarily on refinance transactions, as agent. Income from this service is generated on a loan by loan basis, and totaled $1.3 million, $805,000 and $541,000 for the years
ended December 31, 2003, 2002 and 2001, respectively. The large increase in 2003 and 2002 is directly related to the increase in refinance activity in those years due to falling interest rates. Refinance activity is expected to drop significantly
and fee income is expected to be down between the 2002 and 2001 levels.



Other non-interest income.Other non-interest income includes various other fees charged to customers for money orders, savings bonds, travelers checks, and wire transfers.



63



---

##### Table of Contents

Non-interest expense. Non-interest expense was $120.2 million in 2003, $99.3 million in 2002 and $83.4 million in
2001. The table below shows the composition of non-interest expense for the periods indicated.



|                                                     |  |                         |         |                               |        |      |        |      |       |   |      |        |  
|---------------------------------------------------- |  | ----------------------- | ------- | ----------------------------- | ------ | ---- | ------ | ---- | ----- | - | ---- | ------ | -
|                                                     |  | Year Ended December 31, |         | PercentageIncrease (Decrease) |       
|                                                     |  | 2003                    |         | 2002                          |        | 2001 |        | 2003 |       |   | 2002 |       
|                                                     |  | (Dollars in thousands)  |        
|Compensation                                         |  | $                       | 54,344  |                               | 46,452 |      | 37,521 |      | 17.0  | % |      | 23.8   | %
|Employee benefits                                    |  |                         | 16,229  |                               | 12,646 |      | 10,700 |      | 28.3  |   |      | 18.2   |  
|                                                     |  |                         |         |                               |        |      |        |      |       |   |      |        |  
|Total compensation and benefits                      |  |                         | 70,573  |                               | 59,098 |      | 48,221 |      | 19.4  |   |      | 22.6   |  
|                                                     |  |                         |         |                               |        |      |        |      |       |   |      |        |  
|Occupancy expense                                    |  |                         | 10,510  |                               | 7,976  |      | 6,120  |      | 31.8  |   |      | 30.3   |  
|Furniture, fixture and equipment expense             |  |                         | 4,900   |                               | 3,694  |      | 2,891  |      | 32.6  |   |      | 27.8   |  
|Advertising and promotion                            |  |                         | 6,466   |                               | 4,844  |      | 4,355  |      | 33.5  |   |      | 11.2   |  
|Data processing                                      |  |                         | 4,255   |                               | 3,655  |      | 3,103  |      | 16.4  |   |      | 17.8   |  
|Amortization of goodwill                             |  |                         |        |                               |       |      | 3,245  |      |      |   |      | (100.0 | )
|Amortization of core deposit intangibles             |  |                         | 1,732   |                               | 1,649  |      | 1,333  |      | 5.0   |   |      | 23.7   |  
|Other expenses:                                      |  |                         |         |                               |        |      |        |      |       |   |      |        |  
|Professional fees                                    |  |                         | 2,696   |                               | 3,030  |      | 1,518  |      | (11.0 | ) |      | 99.6   |  
|Stationery, brochures and supplies                   |  |                         | 2,409   |                               | 1,983  |      | 1,641  |      | 21.5  |   |      | 20.8   |  
|Postage                                              |  |                         | 2,261   |                               | 1,899  |      | 1,473  |      | 19.1  |   |      | 28.9   |  
|Telephone                                            |  |                         | 2,172   |                               | 1,632  |      | 1,304  |      | 33.1  |   |      | 25.2   |  
|Bad check write-offs/debit card charge-offs          |  |                         | 1,896   |                               | 2,026  |      | 1,084  |      | (6.4  | ) |      | 86.9   |  
|Correspondent banking services                       |  |                         | 1,186   |                               | 1,050  |      | 767    |      | 13.0  |   |      | 36.9   |  
|Title fees, recording fees and credit report expense |  |                         | 1,003   |                               | 884    |      | 579    |      | 13.5  |   |      | 52.7   |  
|OTS assessment fees                                  |  |                         | 980     |                               | 820    |      | 755    |      | 19.5  |   |      | 8.6    |  
|Security expense                                     |  |                         | 979     |                               | 631    |      | 458    |      | 55.2  |   |      | 37.8   |  
|ATM network fees                                     |  |                         | 301     |                               | 522    |      | 600    |      | (42.3 | ) |      | (13.0  | )
|Insurance costs                                      |  |                         | 914     |                               | 497    |      | 491    |      | 83.9  |   |      | 1.2    |  
|Federal deposit insurance premiums                   |  |                         | 691     |                               | 667    |      | 617    |      | 3.6   |   |      | 8.1    |  
|Other                                                |  |                         | 4,273   |                               | 2,785  |      | 2,869  |      | 53.4  |   |      | (2.9   | )
|                                                     |  |                         |         |                               |        |      |        |      |       |   |      |        |  
|Total other expenses                                 |  |                         | 21,761  |                               | 18,426 |      | 14,156 |      | 18.1  |   |      | 30.2   |  
|                                                     |  |                         |         |                               |        |      |        |      |       |   |      |        |  
|                                                     |  | $                       | 120,197 |                               | 99,342 |      | 83,424 |      | 21.0  |   |      | 19.1   |  
|                                                     |  |                         |         |                               |        |      |        |      |       |   |      |        |  



Compensation
expense.Compensation expense was $54.3 million in 2003, compared to $46.5 million in 2002 and $37.5 million in 2001. Increases in 2003 are primarily a result of staff added due to the St. Francis and Fidelity mergers, five new branches opened
during the past year, increased mortgage loan department incentives and overtime compensation due to record loan origination and sales volumes and addition of personnel in business banking and other corporate departments necessary due to company
growth.



Employee benefits expense.Employee benefits
expense increased $3.6 million to $16.2 million in 2003 compared to $12.6 million in 2002. The increase is primarily due to the increased compensation expenses resulting in higher medical expense, employer taxes, and retirement plan contributions
due to higher headcount. The $1.9 million increase in 2002 compared to 2001 is also primarily attributable to increased medical expense, employer taxes and retirement plan contributions.



Occupancy and equipment expense.Occupancy and equipment expenses increased $3.7 million, or 32.0%, during 2003 due
to rent expense and depreciation on the branches acquired and opened, two additional loan processing centers as well as increased maintenance and operating costs throughout the Banks branch network. Occupancy and equipment expenses increased
$2.7 million, or 29.5%, between 2002 and 2001 primarily due to increased operating costs from branch acquisitions and real estate taxes. Occupancy expense is expected to increase significantly in 2004 due to the consolidation of four loan operation
offices and various other backroom operations in a new, 132,000-square-foot, leased office space in Downers Grove, Illinois.



Advertising and promotion expense.Advertising and promotion expenses increased $1.6 million to $6.5 million in 2003, compared to $4.8 million in
2002. The primary reason for the increase is higher market research, radio and newspaper advertising expenses related to the Banks efforts in promoting its brand recognition strategy in a much more competitive retail banking market, new branch
grand opening expenses, as well as increased public



64



---

##### Table of Contents

relations costs. Advertising and promotion expense increased $489,000, or 11.2%, between 2002 and 2001 due to higher newspaper and newspaper advertising
expenses.



Data processing expense.Data processing
expenses increased $600,000 to $4.3 million in 2003, compared to $3.7 million in 2002, and $3.1 million in 2001. Increases in this area are related to growth in the branch network in 2003 and two branches in 2002. The Bank maintains its own in-house
data processing center, and costs relate primarily to depreciation of equipment and communication costs for data transmission between branch locations, as well as the Companys networking infrastructure.



Amortization of core deposit intangible.Amortization of core deposit
intangibles was $1.7 million, $1.6 million, and $1.3 million for the years ended December 31, 2003, 2002 and 2001, respectively. Increases year over year are due to acquisitions. The Bank generally recognizes a core deposit intangible in acquisition
transactions, and amortizes the intangible on an accelerated basis over an estimated life of the core deposit which approximates ten years.



Other expenses.Other expenses include costs such as professional expense, stationery and supplies, postage, telephone and insurance expenses
incurred in the day-to-day operations of the Company. These costs totaled $21.8 million in 2003, compared to $18.4 million in 2002, and $14.2 million in 2001. Contributing to the large increase in 2003 was increased insurance costs primarily due to
the renewal at higher premiums of the Companys directors and officers policy that came off a three year policy period. The increase resulted from the hardening of the insurance market in the post-Enron and post-September 11thenvironment and growth in the Company. Other 2003 increases include $441,000 in down payment assistance and closing cost
subsides related to the DOJ settlement, additional costs related to branch openings, acquisitions, security costs and higher loan volume. The increase in 2002 compared to 2001 included an increase of $1.5 million in professional fees primarily due
to $800,000 of costs related to the Department of Justice inquiry.



Income taxes.Income tax expense was $47.5 million in 2003 (effective income tax rate of 36.3%) compared to $40.8 million in 2002 (effective income tax rate of 35.5%). The higher effective income tax rate in 2003 compared to 2002 is
primarily due to: (a) the income of Mid America Re, Inc. being subject to federal income tax in 2003, and (b) less income from bank-owned life insurance in 2003, which is not subject to income tax. The effective income tax rate in 2003 and 2002 was
lowered as a result of the recognition of income tax benefits relating to the resolution of certain prior years income tax issues. Income tax expense was $35.5 million in 2001, equal to an effective income tax rate of 37.4%.



Review of Financial Condition



Total assets increased $3.0 billion, or 50.5% to $8.93 billion at December
31, 2003, compared to $5.94 billion at December 31, 2002, primarily due to asset growth from the acquisitions of Fidelity and St. Francis of approximately $3.0 billion, including $176.1 million of goodwill and core deposit intangibles established at
the acquisition date.



At December 31, 2003, the balance of
investment securities classified as available for sale increased $57.1 million, or 18.5% to $365.3 million from $308.2 million at December 31, 2002. The increase is primarily due to the addition of $80.9 million of investments from the Fidelity and
St. Francis acquisitions, purchases of $142.8 million offset by sales of $50.3 million, maturities of $106.2 million and other than temporary impairment writedowns of $10.0 million. The Bank has been maintaining an increased amount of investment
securities on its balance sheet as a means of reinvesting higher liquidity brought on by the high level of refinance activity during the first three quarters of the year, as well as to help diversify interest-rate risk from mortgage-related cash
flows. The purchases during the current year were primarily preferred stock, US agency and FHLB notes. This portfolio is carried at fair value of $365.3 million at December 31, 2003.



65



---

##### Table of Contents

At December 31, 2003, the Bank held $384.6 million in stock in the FHLB of Chicago, compared to $169.7
million at December 31, 2002. The Bank acquired $168.5 million of FHLB stock with the Fidelity and St. Francis acquisitions. The Bank, during the first quarter of 2003, also made a discretionary purchase of $30.0 million of FHLB stock, seeking to
enhance its overall yield of interest-earning assets, as dividend rates over the past several quarters have been well above the short-term U.S. Treasury rates. In addition, the FHLB of Chicago is currently paying the dividends in stock, so the $14.4
million of dividends received by the Bank in 2003 also contributed to the increased FHLB stock investment. The Bank may at the FHLB of Chicagos discretion, redeem at par any capital stock greater than its required investment or sell it to
other FHLB of Chicago members. At December 31, 2003, the Banks required investment in the FHLB of Chicago was $105.2 million. Due to the expected implementation of a new capital structure at the FHLB of Chicago in the fourth quarter of 2004,
or early 2005, the Bank currently expects to begin reducing its investment in mid-2004, which will likely be reinvested in interest earning assets carrying a lower yield.



At December 31, 2003, mortgage-backed securities classified as available for sale increased $606.3 million to $972.0
million. The increase is primarily due to the addition of $804.9 million from its two Bank acquisitions and purchases of $309.6 million during the current year, offset by sales of $253.0 million and repayments of $242.6 million. A large part of the
$201.0 million of mortgage-backed securities acquired from Fidelity were long-term fixed-rate pass-through securities, which were subsequently sold by the Bank to maintain its interest-rate risk parameters. The $604 million acquired from St. Francis
consisted primarily of short-term fixed rate CMOs.



Included in
total mortgage-backed securities at December 31, 2003 are $608.9 million of CMOs with a weighted average life of 2.64 years that are primarily collateralized by the Federal National Mortgage Association (Fannie Mae), the Federal Home
Loan Mortgage Corporation (Freddie Mac) and the Government National Mortgage Association (Ginnie Mae) mortgage-backed securities, and by whole loans.



Investment securities and mortgage-backed securities acquired and classified as available-for-sale represent a secondary
source of liquidity to the Bank and the Company. The market value of these securities fluctuates with interest rate movements. Net interest income in future periods may be adversely impacted to the extent interest rates increase and these securities
are not sold in order to reinvest the proceeds at the higher market rates. The decision whether to sell the available for sale securities or not, is based on a number of factors, including but not limited to projected funding needs, reinvestment
alternatives and the relative cost of alternative liquidity sources.



Loans receivable increased 40.6%, or $2.0 billion to $6.37 billion at December 31, 2003. The Bank acquired $1.60 billion of loans in its acquisitions of Fidelity and St. Francis. The Bank originated $4.99 billion of mortgage loans during
the current year, which was offset by amortization and prepayments of $2.91 billion, as well as sales of $1.78 billion. The sold loans were primarily long-term fixed-rate mortgages that are sold as a means of limiting interest-rate risk, while
generating gains on sale of loans and servicing fee income in the future. Loans held for sale decreased to $44.5 million at December 31, 2003 compared to $167.8 million at December 31, 2002 due to lower levels of fixed-rate loan originations as the
year ended and refinance activity decreased. As a result of the two acquisitions during the year, the composition of the Banks loans receivable portfolio changed noticeably.



66



---

##### Table of Contents

The table below highlights the change in the composition of loans receivable from December 31, 2002 to
2003:



|                                         |  |              |   |  |       |  
|---------------------------------------- |  | ------------ | - |  | ----- | -
|                                         |  | December 31, |  
|                                         |  | 2003         |   |  | 2002  |  
|Real estate loans:                       |  |              |   |  |       |  
|One-to four- family residential          |  | 61.3         | % |  | 79.5  | %
|Multi-family                             |  | 9.6          |   |  | 5.7   |  
|Commercial                               |  | 8.3          |   |  | 3.1   |  
|Construction                             |  | 2.1          |   |  | 1.1   |  
|Land                                     |  | 1.2          |   |  | .9    |  
|                                         |  |              |   |  |       |  
|Total real estate loans                  |  | 82.5         |   |  | 90.3  |  
|                                         |  |              |   |  |       |  
|Consumer loans:                          |  |              |   |  |       |  
|Equity lines of credit/home equity loans |  | 14.9         |   |  | 9.2   |  
|Other                                    |  | .6           |   |  | .1    |  
|                                         |  |              |   |  |       |  
|Total consumer loans                     |  | 15.5         |   |  | 9.3   |  
|Commercial business loans                |  | 2.0          |   |  | .4    |  
|                                         |  |              |   |  |       |  
|Total loans                              |  | 100.0        | % |  | 100.0 | %
|                                         |  |              |   |  |       |  



The loan portfolio mix
of St. Francis had a greater percentage of shorter-duration, floating rate loans, such as commercial business loans, commercial real estate loans, multi-family loans, as well as equity lines of credit, than did the Bank historically. The Fidelity
loan portfolio had a large percentage of shorter-duration hybrid ARM multi-family loans. As a result, the Banks loan portfolio has less concentration in one-to four-family loans, less duration risk and is more adjustable rate in nature. The
Bank plans to continue to seek growth in equity lines of credit, multi-family, commercial real estate loan portfolio and commercial business loans in the future.



The allowance for loan losses increased $15.1 million to $34.6 million as of December 31, 2003. The Bank added $15.4 million
to the allowance for loan losses from its acquisitions. Net charge-offs were $299,000 for the year. The Bank provided no provision for loan losses in 2003. As a result of the acquisitions, the Banks allowance for loan losses as a percentage of
total non-performing loans increased to 105.4%, from 76.7% as of December 31, 2002. The ratio of the allowance for loan losses to total loans increased to .54% at December 31, 2003 compared to .44% at December 31, 2002. Management believes that the
allowance for loan losses is adequate.



Real estate held for
development or sale increased $17.2 million to $32.1 million at December 31, 2003. A summary of real estate held for development or sale is as follows:



|                         |  |                |        |      |       
|------------------------ |  | -------------- | ------ | ---- | ------
|                         |  | December 31,  
|                         |  | 2003           |        | 2002
|                         |  | (In thousands)
|Springbank of Plainfield |  | $              | 26,411 |      | 4,049 
|Shenandoah               |  |                | 3,451  |      | 7,794 
|Tallgrass of Naperville  |  |                | 2,231  |      | 3,095 
|                         |  |                |        |      |       
|                         |  | $              | 32,093 |      | 14,938
|                         |  |                |        |      |       



Springbank, a
residential development in Plainfield, Illinois, is currently planned to include approximately 1,600 single-family residential lots and 300 multi-family units, depending on final zoning ordinances and approvals. The large increase from 2002 to 2003
is attributable primarily to additional land purchases for future phases in the project. At December 31, 2003 the balance primarily represents raw land of $23.9 million. The first lot sales are expected to occur in the Springbank development in late
2004. The Shenandoah development consists of 326 lots in Plainfield, Illinois. The first lot closings occurred in 2003 and to date, 196 lots have been sold with 15 contracts pending at year end. The decrease in the 952-lot Tallgrass of Naperville
project is primarily due to continued lot sales offset by reduced expenditures in the project during the current year, as the project nears completion. The Company sold 33 lots during 2003 with 16 lots remaining to be sold. The Tallgrass development
also had three parcels approved for commercial and multi-family use.



67



---

##### Table of Contents

All of the commercial parcels and most of the multi-family parcels have been sold. The remaining portion of the
multi-family parcel is under contract and expected to close in mid 2004.



Premises and equipment increased $50.3 million to $122.8 million at December 31, 2003. The increase was primarily due to $36.4 million of assets acquired, purchases of $22.2 million offset by depreciation and
amortization of $7.7 million. The purchases in 2003 included construction of three new branch sites, data processing equipment as well as branch facility upgrades. The Bank currently has plans to build four to five new branch sites over the next
12-18 months.



Foreclosed real estate increased to $3.2 million
at December 31, 2003, compared to $2.4 million at December 31, 2002, a $834,000 or 35.3% increase. $1.8 million of foreclosed properties were acquired with the acquisition of St. Francis. Foreclosed real estate at December 31, 2003 consists of
fifteen single-family dwellings.



Other assets increased $62.9
million to $130.6 million at December 31, 2003 compared to $67.7 million at December 31, 2002. The increase was primarily due to other assets acquired in the acquisitions, including $31.2 million of affordable housing investments.



Goodwill increased $167.7 million to $262.5 million at December 31, 2003
compared to $94.8 million at December 31, 2002. The increase is due to three acquisitions during the year. Goodwill is subject to periodic impairment analysis and an evaluation was completed as of May 31, 2003. No impairment was deemed necessary as
a result of the Companys analysis. The Company evaluates goodwill for impairment at least annually.



Intangibles increased $18.1 to $38.2 million at December 31, 2003 compared to $20.1 million at December 31, 2002. The increase is due to $23.0 million in
additions to mortgage servicing rights, primarily due to the capitalized servicing related to the record volume of loan sales, $8.6 million of core deposit intangibles recorded in the three acquisitions and deposit purchase, a $1.1 million net
recovery of mortgage servicing rights, offset by amortization of core deposit intangibles and mortgage servicing rights totaling $14.7 million. Additions to mortgage servicing rights also included $6.4 million acquired in the St. Francis
acquisition.



Deposits increased $1.83 billion to $5.58 billion
as of December 31, 2003, an increase of 48.8% over the previous year end. This increase is primarily the result of the addition of $1.80 billion of deposits from acquisitions. Core deposits (passbooks, money market and NOW accounts) increased as a
percentage of total deposits from 56.4% to 58.2% year over year.



Borrowed funds increased $742.9 million, or 47.7%, to $2.30 billion at December 31, 2003. The increase in borrowings was due to the addition of $795.8 million through acquisitions, primarily in FHLB of Chicago advances and reverse
repurchase agreements. As of December 31, 2003, the Bank had $2.1 billion of FHLB of Chicago advances at a weighted average cost and term to maturity of 3.80% and 2.5 years, respectively, compared to $1.51 billion at a weighted average cost and term
to maturity of 5.17% and 3.4 years, respectively, as of December 31, 2002.



Stockholders equity of the Company grew to $901.6 million at December 31, 2003, compared to $501.5 million at December 31, 2002, an increase of $400.1 million. The increase in stockholders equity is
primarily due to 10.3 million shares of common stock issued for acquisitions, valued at $362.7 million, comprehensive income of $80.7 million, offset by treasury stock purchases of $30.9 million and cash dividends declared of $18.9 million.



Management expects total assets to increase by 8-12% during
2004, as a result of expected slowing in prepayments in loans receivable and a shift in the loan mix to more adjustable rate product, which is generally retained in the loan portfolio. The Bank expects to fund loan portfolio growth in 2004 primarily
with increased deposits and additional borrowings.



68



---

##### Table of Contents

Liquidity and Capital Resources



The Companys principal assets are its investments in the Bank and MAFD. To the extent that it does not generate
significant earnings outside of these subsidiaries, the Companys liquidity position is primarily dependent on dividends from the Bank and, to a lesser extent, dividends from MAFD as well as its unsecured line of credit facility with a
commercial bank.



The Banks ability to pay dividends to
the Company is dependent on its ability to generate earnings, and to meet regulatory restrictions. See Item 1. Business - Regulation and Supervision  Federal Savings Institution Regulation - Limitation on Capital Distributions for
a detail of these restrictions. The Bank has not been restricted by these limitations in funding the necessary amounts needed by the Company for its operations, and does not expect to be limited in the future. At December 31, 2003, under current OTS
dividend regulations, the Bank has $58.2 million of retained earnings available for dividend declarations. The Company received $55.0 million in dividends from the Bank in 2003, compared to $35.0 million in 2002, and $52.5 million in 2001.



The primary uses of funds at the Company consist of principal
and interest payments on borrowed funds, cash dividends, and stock repurchases. The Company has also funded loans to and investments in MAFD on an as needed basis. To the extent the Company has excess cash at any time, it will invest funds in
investment securities, marketable equity securities or short-term interest-earning assets.



The Company has used stock repurchase programs as a means of managing its capital level, stock option exercises, and for other general corporate purposes. The Company has periodically repurchased shares of its common
stock in the last several years. During the last six years, the Company has repurchased 5,048,100 shares for $134.1 million, or an average price of $26.57 per share. During 2003, 805,000 shares were repurchased, at an average price of $38.44 per
share. The Companys current stock repurchase program authorizes the repurchase of 1.6 million shares, of which 795,000 remain to be purchased at December 31, 2003. The Company has utilized shares repurchased primarily for acquisitions, and to
a lesser extent for stock option exercises. To date, no shares in treasury have been cancelled. See Item 5. Market for the Registrants Common Stock and Related Stockholders Matters, for further information regarding stock
repurchases for the fourth quarter of 2003.



Cash dividends
paid to common shareholders totaled $16.3 million ($.72 per share declared) in 2003, compared to $13.1 million ($.60 per share declared) in 2002. The increase is primarily due to a 25% increase in the cash dividend rate in 2003 compared to 2002. The
most recent quarterly dividend of $.18 per share was paid on January 2, 2004. The payment of cash dividends is subject to the discretion of the Board of Directors and depends on a variety of factors, including operating results, financial position,
and the ability of the Bank to pay dividends up to the holding company. In January 2004, the Company announced a 17% increase in the quarterly cash dividend to $.21 per share beginning with its next quarterly dividend payable in April 2004.



The Banks principal sources of funds are deposits,
advances from the FHLB of Chicago, principal repayments on loans and mortgage-backed securities, proceeds from the sale of loans, investment securities, and funds provided by operations. While scheduled loan and mortgage-backed securities
amortization and maturing certificates of deposit are a relatively predictable source of funds, core deposit flows and loan and mortgage-backed securities prepayments are greatly influenced by economic conditions, the general level of interest rates
and competition. The Bank utilizes particular sources of funds based on comparative costs and availability. The Bank expects to further diversify its funding sources in 2004 through increased use of other wholesale borrowing sources, including
reverse repurchase agreements and brokered certificates of deposits.



Operating Activities. Cash flows from operating activities primarily include net income for the year, adjusted for items in net income that did not impact cash, as well as cash flow



69



---

##### Table of Contents

activity from mortgage banking activity.The Bank originated for sale and sold $1.77 billion of loans during
2003.The Bank had $44.5 million of loans held for sale at December 31, 2003, down from $167.8 million at December 31, 2002.



Investing Activities. Cash used in investing activities reflects the impact of loans and investments acquired for the Banks interest-earning
asset portfolios, as well as cash flows from asset sales, real estate held for development activity and the impact of acquisitions. Cash provided by investing activities totaled a net use of $208.1 million in 2003, compared to $280.4 million in
2002. During the current year, the Bank originated and purchased $3.37 billion of loans for investment, which were offset by $2.91 billion of loan amortization and prepayments. The higher prepayments led to available liquidity, which was used to
purchase investment and mortgage-backed securities, as well as to repay certain maturing borrowings. Cash flow from the Companys land development operations was positive, as sales of property of $34.4 million were offset by expenditures for
land acquisition and development of $30.8 million.



Financing Activities. Cash used from financing activities totaled a net $35.6 million in 2003, compared to cash provided by financing activities of $268.0 million in 2002. During the current year net deposits (without acquisitions)
increased $12.5 million, and FHLB advances increased a net $39.5 million offset by treasury stock purchases of $30.9 million, net repayments of $43.7 million of other borrowings, and dividends to shareholders totaling $16.3 million.



Contractual Obligations and Commitments and Contingencies.



Contractual Obligations.The following table lists contractual
obligations coming due in the periods indicated at December 31, 2003:



|                                                   |  |                        |           |                  |           |             |           |             |         |              |        
|-------------------------------------------------- |  | ---------------------- | --------- | ---------------- | --------- | ----------- | --------- | ----------- | ------- | ------------ | -------
|                                                   |  | Total                  |           | Less than 1 Year |           | 1 to 3Years |           | 3 to 5Years |         | After 5Years
|                                                   |  | (Dollars in thousands)
|Certificates of deposit                            |  | $                      | 2,331,217 |                  | 1,519,065 |             | 670,933   |             | 127,111 |              | 14,108 
|FHLB of Chicago advances                           |  |                        | 2,104,375 |                  | 420,000   |             | 1,129,375 |             | 450,000 |              | 105,000
|Unsecured bank term loan and line of credit        |  |                        | 55,000    |                  | 17,000    |             | 16,000    |             | 22,000  |              |       
|Purchase obligations                               |  |                        | 6,529     |                  | 4,402     |             | 1,947     |             |        |              | 180    
|Real estate development land purchase contracts(1) |  |                        | 14,676    |                  | 9,274     |             | 3,000     |             | 2,402   |              | 3,236  
|Post retirement benefit plans                      |  |                        | 3,358     |                  | 33        |             | 190       |             | 397     |              | 2,738  
|Operating leases                                   |  |                        | 84,100    |                  | 7,300     |             | 12,400    |             | 11,600  |              | 52,800 
|                                                   |  |                        |           |                  |           |             |           |             |         |              |        
|Total                                              |  | $                      | 4,599,255 |                  | 1,977,074 |             | 1,833,845 |             | 613,510 |              | 174,826
|                                                   |  |                        |           |                  |           |             |           |             |         |              |        

---

|(1) | Reflects contractual obligations to purchase remaining land. Does not include additional
costs of land development projects currently, estimated at $53.3 million.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------



The Bank historically renews in excess of 80% of its certificates of deposit, a majority upon maturity, as its certificates of deposit are primarily retail orientated accounts rather than more rate-sensitive
brokered certificates. As such, the scheduled $1.52 billion of maturing certificates of deposit in 2004 are not expected to put a burden on the Banks cash needs. The Bank has the ability to refinance any advance coming due with the FHLB of
Chicago, which it will normally do in the course of business if its loan portfolio is growing. Should its loan portfolio growth be slower, due to prepayments in its loan portfolio, the Bank will have adequate liquidity to repay its maturing
advances. The unsecured bank term loan and line of credit amounts are repaid through the normal course of business primarily through dividends from the Bank. Net savings outflows, if any, as well as expected loan portfolio growth in 2004 could also
be met by additional advances from the FHLB of Chicago and other wholesale borrowing sources. At December 31, 2003, the Bank has approximately $906.6 million of potential additional borrowing capacity from the FHLB of Chicago and approximately
$918.8 million of available collateral capacity under its blanket pledge agreement, including consideration of the additional collateral capacity related to its excess investment in FHLB of Chicago stock. Additional borrowings from the FHLB of
Chicago are subject to the Banks compliance underwriting, collateral, capital stock and other policies set forth in the FHLB of Chicago credit guide at the time of the borrowing



70



---

##### Table of Contents

request. In addition, the Bank has $107 million of various lines of credit with the Federal Reserve Bank of Chicago and other correspondent banks. The Bank
also has additional capacity to obtain other borrowings through the pledge of investment or mortgage-backed securities. The Company has a $55.0 million unsecured bank line of credit, of which $10.0 million was used at December 31, 2003.



Purchase obligations include agreements to purchase goods or services that
are enforceable and legally binding on the Company. At December 31, 2003, they include items such as employment agreements, maintenance contracts, and contracts to purchase data processing equipment and services.



Real estate development costs are funded primarily by sales of previously
developed lots, and to a lesser extent, borrowings or investments from the Company. It is currently anticipated that the Company will be required to supplement the cash flow from the sales of developed lots and bulk land parcels in inventory with
borrowings from the Company, whos funding capacity is limited to its unsecured bank line of credit and additional dividends from the Bank. Real estate development costs include $14.7 million related to land purchase contracts that are legally
binding and $53.3 million representing estimated future disbursements related to current and future planned improvements, the majority of which, are not contractual obligations at the present time. In addition, MAFD would also be able to stop
incurring development costs related to future units. Post retirement benefits include benefits for employees and/or directors under the Companys Supplemental Executive Retirement Plan and Long Term Medical Plan.



Commitments and Contingencies. The following table lists certain
off-balance sheet financial obligations of the Company and the Bank as of December 31, 2003:



|                                          |  |                        |           |                  |         |             |         |             |         |              |        
|----------------------------------------- |  | ---------------------- | --------- | ---------------- | ------- | ----------- | ------- | ----------- | ------- | ------------ | -------
|                                          |  | Total                  |           | Less than 1 Year |         | 1 to 3Years |         | 3 to 5Years |         | After 5Years
|                                          |  | (Dollars in thousands)
|Mortgage loan commitments                 |  | $                      | 561,672   |                  | 561,672 |             |        |             |        |              |       
|Unused equity lines of credit balances(2) |  |                        | 830,748   |                  | 27,680  |             | 89,170  |             | 184,220 |              | 529,677
|Commercial business lines(2)              |  |                        | 134,989   |                  | 105,016 |             | 28,118  |             | 1,129   |              | 726    
|Letters of credit(1)                      |  |                        | 66,835    |                  | 21,556  |             | 9,572   |             | 12,477  |              | 23,230 
|Commercial business loan commitments      |  |                        | 31,803    |                  | 31,803  |             |        |             |        |              |       
|Recourse provisions                       |  |                        | 104,791   |                  | 104,791 |             |        |             |        |              |       
|                                          |  |                        |           |                  |         |             |         |             |         |              |        
|Total                                     |  | $                      | 1,781,172 |                  | 874,189 |             | 147,347 |             | 202,767 |              | 556,869
|                                          |  |                        |           |                  |         |             |         |             |         |              |        

---

|(1) | Letters of Credit include $5.0 million related to land development projects.
|--- | ----------------------------------------------------------------------------

|(2) | Balances shown are at the remaining maturity of the commitment.
|--- | ---------------------------------------------------------------



Mortgage loan commitments are funded in the normal course of business through existing liquidity, sales of long-term
fixed-rate loans, and prepayments of existing loans. These sources of funds change when ARM originations are higher, at which time the Bank will rely more on funding from the FHLB of Chicago and other wholesale borrowing sources. At December 31,
2003, the Bank has approximately $220.0 million of cash and liquidity, $66.4 million of commitments to sell loans, as well as additional borrowing capacity from the FHLB of Chicago and other wholesale borrowing sources. These sources are also
available for the funding of unused equity line of credits. However, the Bank does not expect all of these lines to be used based on historical levels of total line usage by its customers. Recourse provisions include credit risk related to $79.7
million of loans sold with recourse to investors, $10.4 million of credit risk relating to loans sold to the MPF program and $19.1 million of credit risk related to loans with private mortgage insurance in force in the Banks captive
reinsurance subsidiary.



Impact of Inflation and Changing Prices



The consolidated financial statements and related
consolidated information are prepared in accordance with generally accepted accounting principles, which require the measurement of financial position and operating results in terms of historical dollars without



71



---

##### Table of Contents

considering changes in the relative purchasing power of money over time due to inflation. Unlike most industrial companies, virtually all of the assets and
liabilities of a financial institution are monetary in nature. As a result, interest rates have a more significant effect

on a financial institutions
performance than the effects of general levels of inflation. Interest rates do not necessarily move in the same direction or in the same magnitude as the price of goods and services.



New Accounting Standards



In January 2003, the FASB issued Interpretation No. 46, Consolidation of Variable Interest Entities which was subsequently replaced by a
revised FIN 46 in December 2003. FIN 46 provides new accounting guidance on when to consolidate a variable interest entity. A variable interest entity exists when either the total equity investment at risk is not sufficient to permit the entity to
finance its activities by itself, or the equity investors lack one of three characteristics associated with owning a controlling financial interest. Those characteristics include the direct or indirect ability to make decisions about an
entitys activities through voting rights or similar rights, the obligation to absorb the expected loss of an entity if they occur, and the right to receive the expected residual return of the entity if they occur. FIN 46 is effective for the
first reporting period ending after December 15, 2003. Adoption of this Statement did not have a material impact on the Companys consolidated financial statements.



In April 2003, the FASB issued SFAS No. 149, Amendment of Statement 133 on Derivative Instruments and Hedging
Activities. The Statement amends and clarifies financial accounting and reporting for derivative instruments, including certain derivative instruments embedded in other contracts (collectively referred to as derivatives) and for hedging
activities under SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities. In general, this Statement should be applied prospectively. Adoption of this Statement did not have a material effect on the Companys
consolidated financial statements.



In May 2003, the FASB
issued SFAS No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity. This Statement established standards for how an issuer classifies and measures certain financial instruments with
characteristics of both liabilities and equity. This Statement is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after September 15,
2003. Adoption of this Statement did not have a material effect on the Companys consolidated financial statements.



In November 2003, the FASB ratified a consensus reached by the Emerging Issues Task Force (EITF) in EITF 03-1, The Meaning of
Other-Than-Temporary Impairment and Its Application to Certain Investments, which is effective for fiscal years ending after December 15, 2003. The consensus requires certain qualitative and quantitative disclosures for debt and marketable
equity securities classified as available-for sale or held-to-maturity under SFAS No. 115, Accounting for Certain Investments in Debt and Equity Securities that are impaired at the balance sheet date but for which an other-than-temporary
impairment has not been recognized. These disclosures are contained in Note 3 of the Notes to Consolidated Financial Statements.



In December 2003, the American Institute of Certified Public Accountants (AICPA) released Statement of Position 03-3, Accounting for
Certain Loans or Debt Securities Acquired in a transfer (SOP 03-3). SOP 03-3 addresses accounting for differences between contractual cash flows and cash flows expected to be collected from an investors initial investment in loans
or debt securities acquired in a transfer if those differences are attributable to credit quality. SOP 03-3 is effective for loans acquired in fiscal years beginning after December 15, 2004. Adoption of this statement is not expected to have a
material impact on the Companys consolidated financial statements.



72



---

##### Table of Contents

Item 7A. Quantitative and Qualitative Disclosures about Market Risk



Asset/Liability Management and GAP Analysis.As part of its normal operations, the Bank is subject to interest-rate risk on the
interest-sensitive assets it invests in and the interest-sensitive liabilities it borrows. The Banks exposure to interest rate risk is reviewed at least quarterly by the Banks asset/liability management committee (ALCO) and
the Board of Directors of the Company. The ALCO, which includes members of senior management, monitors the rate and sensitivity repricing characteristics of the individual asset and liability portfolios the Bank maintains and determines risk
management strategies.



The Bank utilizes an interest rate
sensitivity gap analysis to monitor the relationship of maturing or repricing interest-earning assets and interest-bearing liabilities, while maintaining an acceptable interest rate spread. Interest rate sensitivity gap is defined as the difference
between the amount of interest-earning assets maturing or repricing within a specific period of time and the amount of interest-bearing liabilities maturing or repricing within that same period of time, and is usually analyzed at a period of one
year. Generally, a positive gap, where more interest-earning assets are repricing or maturing than interest-bearing liabilities, would tend to result in a reduction in net interest income in a period of falling interest rates. Conversely, during a
period of rising interest rates, a positive gap would likely result in an improvement in net interest income. Managements goal is to maintain its cumulative one-year gap within the range of (15)% to 15%. The gap ratio fluctuates as a result of
market conditions and managements expectation of future interest rate trends, as well as the impact of the interest rate risk position of acquired institutions. The Banks asset/liability management strategy emphasizes the origination of
one- to four-family adjustable-rate loans and other loans which have shorter terms to maturity or reprice more frequently than fixed-rate mortgage loans, yet provide a positive margin over the Banks cost of funds, for its own portfolio.
Historically, the Bank has generally sold its conforming long-term fixed-rate loan originations in the secondary market in order to improve and maintain its interest rate sensitivity levels. In the last couple of years, the Bank has generally sold
most of its conforming and non-conforming, or jumbo long-term fixed-rate loan originations. In 2003, the Bank retained $258.9 million of its 15-year fixed rate originations in portfolio as the Bank believes it can currently absorb the interest rate
risk in this product with the change in its asset mix and increase in core deposit levels.



The Bank, except as noted below, has not used derivative financial instruments such as swaps, caps, floors, options or similar financial instruments to manage its interest rate risk. However, in conjunction with its
origination and sale strategy discussed above, management does hedge the Banks exposure to interest rate risk primarily by committing to sell fixed-rate mortgage loans for future delivery. Under these commitments, the Bank agrees to sell
fixed-rate loans at a specified price and at a specified future date. The sale of fixed-rate mortgage loans for future delivery has enabled the Bank to continue to originate new long term fixed-rate mortgage loans, and to generate gains on sale of
these loans as well as loan servicing fee income, while maintaining its gap ratio within the parameters discussed above. Most of these forward sale commitments are conducted with Fannie Mae, Freddie Mac and MPF with respect to loans that conform to
the requirements of these government agencies. The forward commitment of mortgage loans presents a risk to the Bank if the Bank is not able to deliver the mortgage loans by the commitment expiration date. If this should occur, the Bank would be
required to pay a fee to the buyer. The Bank attempts to mitigate this risk by charging potential retail borrowers a 1% fee to lock in the interest rate. The Bank also estimates a percentage of fallout when determining the amount of forward
commitments to enter into. In addition, the Bank uses U.S. Treasury bond futures contracts to hedge some of the mortgage pipeline exposure. These futures contracts are used to hedge mortgage loan production in those circumstances where loans are not
sold forward as described above.



The tables on the next pages
set forth the scheduled repricing or maturity of the Banks assets and liabilities at December 31, 2003 and 2002. The tables use managements assumptions regarding prepayment percentages on loans and mortgage-backed securities,



73



---

##### Table of Contents

based on its current experience in these portfolios. The Bank uses the withdrawal assumptions used by the Office of
Thrift Supervision with respect to NOW, checking and passbook accounts, which are annual rates of 17.0%, 17.0%, 17.0%, 16.0%, and 33.0%, respectively, although they are considered conservative by the ALCO. At December 31, 2003 and 2002, the Bank had
$239.3 million and $91.7 million, respectively, of investment securities that contain call provisions at the option of the issuer. At December 31, 2003, $43.8 million of investments with final maturities beyond one year have been shown in the less
than one-year categories due to their expected calls in the current interest rate environment, while the remainder are shown at their final maturities. At December 31, 2002, these investments are shown in the category relating to their final
maturities. At December 31, 2003, and 2002, the Bank has $710.0 million and $480.0 million, respectively, of FHLB advances that contain various put provisions exercisable at the option of the FHLB of Chicago. At December 31, 2003, $30.0 million are
shown in the less than one year category, $125.0 million are shown in the one to three year category relating to their put option date based on the expected exercise of the put option by the FHLB of Chicago and the remaining $555.0 million are shown
in the category relating to their final maturities. At December 31, 2002, all putable advances were shown in the category relating to their final maturity.



The effect of these assumptions is to quantify the dollar amount of items that are interest-sensitive and may be repriced within each of the periods
specified. Certain shortcomings are inherent in using gap analysis to quantify exposure to interest rate risk. For example, although certain assets and liabilities may have similar maturities or repricings in the table, they may react differently to
actual changes in market interest rates. The interest rates on certain types of assets and liabilities may fluctuate in advance of changes in market interest rates, while interest rates on other types may lag behind changes in market rates. This is
especially true in circumstances where management has a certain amount of control over interest rates, such as the pricing of deposits. Additionally, certain assets such as hybrid adjustable-rate mortgage loans have features that restrict changes in
interest rates on a short-term basis and over the life of the asset. Finally, as interest rates change, loan prepayment rates will differ from those rates assumed by management in the table.



Although management believes that its asset/liability management
strategies help to mitigate the potential negative effects of changes in interest rates on the Banks operations, a decrease in long term interest rates in the near term may adversely affect the Banks operations because prepayments on
higher mortgage yielding related assets would likely accelerate and would be reinvested at lower rates. Conversely, increases in long term interest rates could benefit the Banks operation primarily due to a slowing of prepayments on high
yielding loans receivable and mortgage-backed securities.



74



---

##### Table of Contents

|                                                                                       |  |                        |           |   |             |           |   |            |           |            |           |         |           |   |       |          
|-------------------------------------------------------------------------------------- |  | ---------------------- | --------- | - | ----------- | --------- | - | ---------- | --------- | ---------- | --------- | ------- | --------- | - | ----- | ---------
|                                                                                       |  | December 31, 2003     
|                                                                                       |  | < 1/2 Yr.              |           |   | 1/2  1 Yr. |           |   | 1  3 Yrs. |           | 3  5 Yrs. |           | 5+ Yrs. |           |   | Total
|                                                                                       |  | (Dollars in thousands)
|Interest-earning assets:                                                               |  |                        |           |   |             |           |   |            |           |            |           |         |           |   |       |          
|Real estate loans                                                                      |  | $                      | 794,800   |   |             | 602,533   |   |            | 2,071,090 |            | 1,033,464 |         | 766,596   |   |       | 5,268,483
|Consumer loans                                                                         |  |                        | 900,841   |   |             | 21,200    |   |            | 26,513    |            | 42,458    |         | 17,724    |   |       | 1,008,736
|Commercial business loans                                                              |  |                        | 47,829    |   |             | 24,551    |   |            | 24,001    |            | 27,960    |         | 2,102     |   |       | 126,443  
|Mortgage-backed securities                                                             |  |                        | 131,036   |   |             | 110,756   |   |            | 300,385   |            | 180,359   |         | 249,433   |   |       | 971,969  
|Investment securities(1)                                                               |  |                        | 567,908   |   |             | 1,736     |   |            | 87,546    |            | 74,894    |         | 17,893    |   |       | 749,977  
|Interest-bearing deposits                                                              |  |                        | 57,988    |   |             |          |   |            |          |            |          |         |          |   |       | 57,988   
|Federal funds sold                                                                     |  |                        | 19,684    |   |             |          |   |            |          |            |          |         |          |   |       | 19,684   
|                                                                                       |  |                        |           |   |             |           |   |            |           |            |           |         |           |   |       |          
|Total interest-earning assets                                                          |  |                        | 2,520,086 |   |             | 760,776   |   |            | 2,509,535 |            | 1,359,135 |         | 1,053,748 |   |       | 8,203,280
|Impact of hedging activities(2)                                                        |  |                        | 44,511    |   |             |          |   |            |          |            |          |         | (44,511   | ) |       |         
|                                                                                       |  |                        |           |   |             |           |   |            |           |            |           |         |           |   |       |          
|Total net interest-earning assets, adjusted for impact of hedging activities           |  |                        | 2,564,597 |   |             | 760,776   |   |            | 2,509,535 |            | 1,359,135 |         | 1,009,237 |   |       | 8,203,280
|Interest-bearing liabilities:                                                          |  |                        |           |   |             |           |   |            |           |            |           |         |           |   |       |          
|NOW and checking accounts                                                              |  |                        | 47,394    |   |             | 43,341    |   |            | 158,628   |            | 98,536    |         | 209,389   |   |       | 557,288  
|Money market accounts                                                                  |  |                        | 891,135   |   |             |          |   |            |          |            |          |         |          |   |       | 891,135  
|Passbook accounts                                                                      |  |                        | 116,246   |   |             | 106,365   |   |            | 389,295   |            | 241,821   |         | 513,869   |   |       | 1,367,596
|Certificate accounts                                                                   |  |                        | 975,279   |   |             | 543,786   |   |            | 670,933   |            | 127,111   |         | 14,108    |   |       | 2,331,217
|FHLB advances                                                                          |  |                        | 334,615   |   |             | 284,351   |   |            | 924,484   |            | 500,000   |         | 80,000    |   |       | 2,123,450
|Other borrowings                                                                       |  |                        | 95,239    |   |             | 30,000    |   |            | 50,112    |            | 236       |         | 390       |   |       | 175,977  
|                                                                                       |  |                        |           |   |             |           |   |            |           |            |           |         |           |   |       |          
|Total interest-bearing liabilities                                                     |  |                        | 2,459,908 |   |             | 1,007,843 |   |            | 2,193,452 |            | 967,704   |         | 817,756   |   |       | 7,446,663
|                                                                                       |  |                        |           |   |             |           |   |            |           |            |           |         |           |   |       |          
|Interest sensitivity gap                                                               |  | $                      | 104,689   |   |             | (247,067  | ) |            | 316,083   |            | 391,431   |         | 191,481   |   |       | 756,617  
|                                                                                       |  |                        |           |   |             |           |   |            |           |            |           |         |           |   |       |          
|Cumulative gap                                                                         |  | $                      | 104,689   |   |             | (142,378  | ) |            | 173,705   |            | 565,136   |         | 756,617   |   |       |          
|                                                                                       |  |                        |           |   |             |           |   |            |           |            |           |         |           |   |       |          
|Cumulative gap as a percentage of total assets                                         |  |                        | 1.17      | % |             | (1.59     | ) |            | 1.94      |            | 6.33      |         | 8.47      |   |       |          
|Cumulative net interest-earning assets as a percentage of interest-bearing liabilities |  |                        | 104.26    | % |             | 95.89     |   |            | 103.07    |            | 108.53    |         | 110.16    |   |       |          

---

|(1) | Includes $384.6 million of stock in FHLB of Chicago in 6 months or less.
|--- | ------------------------------------------------------------------------

|(2) | Represents forward commitments to sell long-term fixed-rate mortgage loans.
|--- | ---------------------------------------------------------------------------



75



---

##### Table of Contents

|                                                                                       |  |                        |           |   |            |         |            |           |            |         |         |          |   |       |          
|-------------------------------------------------------------------------------------- |  | ---------------------- | --------- | - | ---------- | ------- | ---------- | --------- | ---------- | ------- | ------- | -------- | - | ----- | ---------
|                                                                                       |  | December 31, 2002     
|                                                                                       |  | < 1/2 Yr.              |           |   | 1/2 1 Yr. |         | 1  3 Yrs. |           | 3  5 Yrs. |         | 5+ Yrs. |          |   | Total
|                                                                                       |  | (Dollars in thousands)
|Interest-earning assets:                                                               |  |                        |           |   |            |         |            |           |            |         |         |          |   |       |          
|Loans receivable                                                                       |  | $                      | 1,241,631 |   |            | 641,954 |            | 1,266,564 |            | 732,049 |         | 668,217  |   |       | 4,550,415
|Mortgage-backed securities                                                             |  |                        | 69,531    |   |            | 38,727  |            | 89,231    |            | 64,145  |         | 104,004  |   |       | 365,638  
|Investment securities(1)                                                               |  |                        | 349,578   |   |            | 22,571  |            | 71,420    |            | 17,482  |         | 16,892   |   |       | 477,943  
|Interest-bearing deposits                                                              |  |                        | 100,205   |   |            |        |            |          |            |        |         |         |   |       | 100,205  
|Federal funds sold                                                                     |  |                        | 28,210    |   |            |        |            |          |            |        |         |         |   |       | 28,210   
|                                                                                       |  |                        |           |   |            |         |            |           |            |         |         |          |   |       |          
|Total interest-earning assets                                                          |  |                        | 1,789,155 |   |            | 703,252 |            | 1,427,215 |            | 813,676 |         | 789,113  |   |       | 5,522,411
|Impact of hedging activities(2)                                                        |  |                        | 167,780   |   |            |        |            |          |            |        |         | (167,780 | ) |       |         
|                                                                                       |  |                        |           |   |            |         |            |           |            |         |         |          |   |       |          
|Total net interest-earning assets, adjusted for impact of hedging activities           |  |                        | 1,956,935 |   |            | 703,252 |            | 1,427,215 |            | 813,676 |         | 621,333  |   |       | 5,522,411
|Interest-bearing liabilities:                                                          |  |                        |           |   |            |         |            |           |            |         |         |          |   |       |          
|NOW and checking accounts                                                              |  |                        | 30,846    |   |            | 28,223  |            | 103,299   |            | 64,167  |         | 136,355  |   |       | 362,890  
|Money market accounts                                                                  |  |                        | 458,144   |   |            |        |            |          |            |        |         |         |   |       | 458,144  
|Passbook accounts                                                                      |  |                        | 85,560    |   |            | 78,288  |            | 286,532   |            | 177,987 |         | 378,223  |   |       | 1,006,590
|Certificate accounts                                                                   |  |                        | 869,202   |   |            | 286,017 |            | 403,058   |            | 67,922  |         | 8,291    |   |       | 1,634,490
|FHLB advances                                                                          |  |                        | 115,500   |   |            | 50,000  |            | 605,000   |            | 305,000 |         | 430,000  |   |       | 1,505,500
|Other borrowings                                                                       |  |                        | 51,000    |   |            |        |            |          |            |        |         |         |   |       | 51,000   
|                                                                                       |  |                        |           |   |            |         |            |           |            |         |         |          |   |       |          
|Total interest-bearing liabilities                                                     |  |                        | 1,610,252 |   |            | 442,528 |            | 1,397,889 |            | 615,076 |         | 952,869  |   |       | 5,018,614
|                                                                                       |  |                        |           |   |            |         |            |           |            |         |         |          |   |       |          
|Interest sensitivity gap                                                               |  | $                      | 346,683   |   |            | 260,724 |            | 29,326    |            | 198,600 |         | (331,536 | ) |       | 503,797  
|                                                                                       |  |                        |           |   |            |         |            |           |            |         |         |          |   |       |          
|Cumulative gap                                                                         |  | $                      | 346,683   |   |            | 607,407 |            | 636,733   |            | 835,333 |         | 503,797  |   |       |          
|                                                                                       |  |                        |           |   |            |         |            |           |            |         |         |          |   |       |          
|Cumulative gap as a percentage of total assets                                         |  |                        | 5.84      | % |            | 10.23   |            | 10.72     |            | 14.07   |         | 8.49     |   |       |          
|Cumulative net interest-earning assets as a percentage of interest-bearing liabilities |  |                        | 121.53    | % |            | 129.59  |            | 118.45    |            | 120.55  |         | 110.04   |   |       |          

---

|(1) | Includes $169.7 million of stock in FHLB of Chicago in 6 months or less.
|--- | ------------------------------------------------------------------------

|(2) | Represents forward commitments to sell long-term fixed-rate mortgage loans.
|--- | ---------------------------------------------------------------------------



The Companys cumulative one-year gap moved
to a slightly negative position of (1.59)% at December 31, 2003 compared to a positive 10.23% at December 31, 2002. Through internal growth and acquisitions, the Bank increased its level of core deposits in 2003, as well as borrowed shorter-term
wholesale funding to match against the shorter duration assets generated and acquired in 2003, most notably equity lines of credit. Also adding to the slightly negative gap is the of one- to four-family mortgage cash flows due to slower prepayment
speeds at December 31, 2003 compared to 2002, due to rising long-term interest rates in the second half of 2003. The Banks current slightly negative gap position indicates that if rates fell, the Banks net interest margin would hold or
slightly improve over the next year, while if rates rose, the margin would remain steady or decrease slightly.



Net Portfolio Value Analysis.Under OTS Thrift Bulletin 13a, the Bank is required to measure its interest rate risk assuming various increases and
decreases in general interest rates, and the effect on net interest income and market value of portfolio equity. The Board of Directors has established limits to changes in Net Portfolio Value (NPV) and net interest income across a range
of hypothetical interest rate changes. If estimated changes to NPV and net interest income are not within these limits, the Board may direct management to adjust its asset/liability mix to bring its interest rate risk within Board limits. At
December 31, 2003, the Bank was within the Board approved limits.



Interest rate sensitivity analysis is used to measure the Banks interest rate risk by calculating the estimated change in the NPV of its cash flows from interest sensitive assets and liabilities, as well as certain off-balance sheet
items, in the event of a series of sudden and sustained changes in interest rates ranging from 100 to 300 basis points. Management assumes that a 200 basis point movement up or down is considered reasonable and plausible for purposes of reviewing
its overall interest-rate risk. For its analysis at December 31, 2003 and 2002, the down 200 basis point analysis was excluded given the current low interest rate environment. NPV is the market value of portfolio equity and is computed as the
difference between the market value of assets and the market value of



76



---

##### Table of Contents

liabilities, adjusted for the value of off-balance sheet items, including a core deposit intangible on the Banks
core deposit balances. The table below shows the change in NPV applying various instantaneous rate shocks to the Banks interest-earning assets and interest-bearing liabilities as of December 31, 2003 and 2002.



|                        |  |                        |         |                                      |         |      |                                      |   |      |         |   |      |     |    |      |    |   
|----------------------- |  | ---------------------- | ------- | ------------------------------------ | ------- | ---- | ------------------------------------ | - | ---- | ------- | - | ---- | --- | -- | ---- | -- | --
|                        |  | Estimated NPV          |         | Estimated Increase (Decrease) in NPV |         |      | Percentage Increase (Decrease)in NPV |  
|Change in Interest rate |  | 2003                   |         | 2002                                 |         | 2003 |                                      |   | 2002 |         |   | 2003 |     |    | 2002 |   
|                        |  | (Dollars in thousands) |        
|200 basis point rise    |  | $                      | 830,554 |                                      | 527,334 |      | (121,351                             | ) |      | (31,119 | ) |      | (13 | )% |      | (6 | )%
|100 basis point rise    |  |                        | 916,929 |                                      | 559,241 |      | (34,976                              | ) |      | 788     |   |      | (4  | )  |      |   |   
|Base scenario           |  |                        | 951,905 |                                      | 558,453 |      |                                     |   |      |        |   |      |    |    |      |   |   
|100 basis point decline |  |                        | 925,378 |                                      | 539,058 |      | (26,527                              | ) |      | (19,395 | ) |      | (3  | )  |      | (3 | ) 



The Banks base
scenario net portfolio value (NPV) at December 31, 2003 increased $393.5 million from December 31, 2002 to $951.9 million. Although the Banks stated stockholders equity increased $393.1 million in 2003, the base scenario NPV
increased primarily due to acquisitions by the Bank during 2003, as well as an increase in the balances and estimated value of core deposits. The decline in NPV in the up 200 basis point scenario is (13)% at December 31, 2003 compared to (6)% at
December 31, 2002. The increase in the decline in NPV at in the up 200 basis point scenario is due to higher 10-year Treasury rates at December 31, 2003 compared to December 31, 2002. Mortgage-related assets increase in duration as interest rates
rise, which makes them more price sensitive in a further rising rate environment. The asset side of the Banks balance sheet experiences this more rapidly than the improvement in value on the liability side when rates rise. As such, the Bank
would expect its NPV to decline more as rates rise, although it can control the rates of decline by limiting the amount of longer duration assets on its balance sheet as it does by originating hybrid ARM loans, floating rate equity lines of credit
and commercial real estate and business loans for its portfolio.



77



---

##### Table of Contents

Item 8. Financial Statements and Supplementary Data



MAF Bancorp, Inc. and Subsidiaries

Consolidated Statements of Financial Condition



|                                                                                                                                                  |  |                        |           |      |           |  
|------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------- | --------- | ---- | --------- | -
|                                                                                                                                                  |  | December 31,           |          
|                                                                                                                                                  |  | 2003                   |           | 2002 |          
|                                                                                                                                                  |  | (Dollars in thousands) |          
|Assets                                                                                                                                            |  |                        |           |      |           |  
|                                                                                                                                                  |  |                       
|Cash and due from banks                                                                                                                           |  | $                      | 144,290   |      | 134,265   |  
|Interest-bearing deposits                                                                                                                         |  |                        | 57,988    |      | 28,210    |  
|Federal funds sold                                                                                                                                |  |                        | 19,684    |      | 100,205   |  
|                                                                                                                                                  |  |                        |           |      |           |  
|Total cash and cash equivalents                                                                                                                   |  |                        | 221,962   |      | 262,680   |  
|                                                                                                                                                  |  |                       
|Investment securities available for sale, at fair value                                                                                           |  |                        | 365,334   |      | 308,235   |  
|Stock in Federal Home Loan Bank of Chicago, at cost                                                                                               |  |                        | 384,643   |      | 169,708   |  
|Mortgage-backed securities available for sale, at fair value                                                                                      |  |                        | 971,969   |      | 365,638   |  
|Loans receivable held for sale                                                                                                                    |  |                        | 44,511    |      | 167,780   |  
|Loans receivable, net of allowance for loan losses of $34,555 and $19,483                                                                         |  |                        | 6,324,596 |      | 4,363,152 |  
|Accrued interest receivable                                                                                                                       |  |                        | 31,168    |      | 27,513    |  
|Foreclosed real estate                                                                                                                            |  |                        | 3,200     |      | 2,366     |  
|Real estate held for development or sale                                                                                                          |  |                        | 32,093    |      | 14,938    |  
|Premises and equipment, net                                                                                                                       |  |                        | 122,817   |      | 72,492    |  
|Other assets                                                                                                                                      |  |                        | 130,615   |      | 67,753    |  
|Goodwill                                                                                                                                          |  |                        | 262,488   |      | 94,796    |  
|Intangibles                                                                                                                                       |  |                        | 38,189    |      | 20,130    |  
|                                                                                                                                                  |  |                        |           |      |           |  
|                                                                                                                                                  |  | $                      | 8,933,585 |      | 5,937,181 |  
|                                                                                                                                                  |  |                        |           |      |           |  
|Liabilities and Stockholders Equity                                                                                                              |  |                        |           |      |           |  
|                                                                                                                                                  |  |                       
|Liabilities                                                                                                                                       |  |                        |           |      |           |  
|Deposits                                                                                                                                          |  | $                      | 5,580,455 |      | 3,751,237 |  
|Borrowed funds                                                                                                                                    |  |                        | 2,299,427 |      | 1,556,500 |  
|Advances by borrowers for taxes and insurance                                                                                                     |  |                        | 41,149    |      | 37,700    |  
|Accrued expenses and other liabilities                                                                                                            |  |                        | 110,950   |      | 90,286    |  
|                                                                                                                                                  |  |                        |           |      |           |  
|Total liabilities                                                                                                                                 |  |                        | 8,031,981 |      | 5,435,723 |  
|                                                                                                                                                  |  |                       
|Stockholders equity                                                                                                                              |  |                        |           |      |           |  
|Preferred stock, $.01 par value; authorized 5,000,000 shares; none issued or outstanding                                                          |  |                        |          |      |          |  
|Common stock, $.01 par value; 80,000,000 shares authorized; 33,063,853 and 25,420,650 shares issued; 33,063,853 and 23,252,815 shares
outstanding |  |                        | 331       |      | 254       |  
|Additional paid-in capital                                                                                                                        |  |                        | 495,747   |      | 204,710   |  
|Retained earnings, substantially restricted                                                                                                       |  |                        | 402,402   |      | 342,790   |  
|Stock in Gain Deferral Plan; 240,879 and 236,401 shares                                                                                           |  |                        | 1,015     |      | 851       |  
|Accumulated other comprehensive income, net of tax                                                                                                |  |                        | 2,109     |      | 4,819     |  
|Treasury stock, at cost; 2,167,835 shares in 2002                                                                                                 |  |                        |          |      | (51,966   | )
|                                                                                                                                                  |  |                        |           |      |           |  
|Total stockholders equity                                                                                                                        |  |                        | 901,604   |      | 501,458   |  
|                                                                                                                                                  |  |                        |           |      |           |  
|                                                                                                                                                  |  | $                      | 8,933,585 |      | 5,937,181 |  
|                                                                                                                                                  |  |                        |           |      |           |  



See
accompanying Notes to Consolidated Financial Statements.



78



---

##### Table of Contents

MAF Bancorp, Inc. and Subsidiaries

Consolidated Statements of Operations



|                                                            |  |                                              |         |   |      |         |   |      |         |  
|----------------------------------------------------------- |  | -------------------------------------------- | ------- | - | ---- | ------- | - | ---- | ------- | -
|                                                            |  | Year Ended December 31,                      |        
|                                                            |  | 2003                                         |         |   | 2002 |         |   | 2001 |        
|                                                            |  | (Dollars in thousands, except pershare data) |        
|Interest income:                                            |  |                                              |         |   |      |         |   |      |         |  
|Loans receivable                                            |  | $                                            | 272,687 |   |      | 288,790 |   |      | 307,780 |  
|Mortgage-backed securities available for sale               |  |                                              | 14,651  |   |      | 11,295  |   |      | 7,229   |  
|Investment securities available for sale                    |  |                                              | 24,266  |   |      | 24,368  |   |      | 22,680  |  
|Interest-bearing deposits and federal funds sold            |  |                                              | 4,826   |   |      | 5,037   |   |      | 8,047   |  
|                                                            |  |                                              |         |   |      |         |   |      |         |  
|Total interest income                                       |  |                                              | 316,430 |   |      | 329,490 |   |      | 345,736 |  
|Interest expense:                                           |  |                                              |         |   |      |         |   |      |         |  
|Deposits                                                    |  |                                              | 61,011  |   |      | 90,963  |   |      | 120,664 |  
|Borrowed funds                                              |  |                                              | 75,941  |   |      | 80,502  |   |      | 93,825  |  
|                                                            |  |                                              |         |   |      |         |   |      |         |  
|Total interest expense                                      |  |                                              | 136,952 |   |      | 171,465 |   |      | 214,489 |  
|                                                            |  |                                              |         |   |      |         |   |      |         |  
|Net interest income                                         |  |                                              | 179,478 |   |      | 158,025 |   |      | 131,247 |  
|Provision for loan losses                                   |  |                                              |        |   |      | 300     |   |      |        |  
|                                                            |  |                                              |         |   |      |         |   |      |         |  
|Net interest income after provision for loan losses         |  |                                              | 179,478 |   |      | 157,725 |   |      | 131,247 |  
|Non-interest income:                                        |  |                                              |         |   |      |         |   |      |         |  
|Gain (loss) on sale and writedown of:                       |  |                                              |         |   |      |         |   |      |         |  
|Loans receivable held for sale                              |  |                                              | 25,948  |   |      | 16,330  |   |      | 8,689   |  
|Mortgage-backed securities                                  |  |                                              | 6,006   |   |      | 39      |   |      |        |  
|Investment securities                                       |  |                                              | (6,943  | ) |      | 80      |   |      | 879     |  
|Foreclosed real estate                                      |  |                                              | 365     |   |      | 179     |   |      | 347     |  
|Income from real estate operations                          |  |                                              | 11,325  |   |      | 9,717   |   |      | 11,484  |  
|Deposit account service charges                             |  |                                              | 24,552  |   |      | 22,239  |   |      | 16,535  |  
|Loan servicing fee expense                                  |  |                                              | (5,939  | ) |      | (2,472  | ) |      | (371    | )
|Valuation recovery (allowance) on mortgage servicing rights |  |                                              | 1,130   |   |      | (2,300  | ) |      | (904    | )
|Brokerage commissions                                       |  |                                              | 3,587   |   |      | 2,702   |   |      | 2,371   |  
|Other                                                       |  |                                              | 11,602  |   |      | 9,849   |   |      | 8,088   |  
|                                                            |  |                                              |         |   |      |         |   |      |         |  
|Total non-interest income                                   |  |                                              | 71,633  |   |      | 56,363  |   |      | 47,118  |  
|Non-interest expense:                                       |  |                                              |         |   |      |         |   |      |         |  
|Compensation and benefits                                   |  |                                              | 70,573  |   |      | 59,098  |   |      | 48,221  |  
|Office occupancy and equipment                              |  |                                              | 15,410  |   |      | 11,670  |   |      | 9,011   |  
|Advertising and promotion                                   |  |                                              | 6,466   |   |      | 4,844   |   |      | 4,355   |  
|Data processing                                             |  |                                              | 4,255   |   |      | 3,655   |   |      | 3,103   |  
|Amortization of goodwill                                    |  |                                              |        |   |      |        |   |      | 3,245   |  
|Amortization of core deposit intangibles                    |  |                                              | 1,732   |   |      | 1,649   |   |      | 1,333   |  
|Other                                                       |  |                                              | 21,761  |   |      | 18,426  |   |      | 14,156  |  
|                                                            |  |                                              |         |   |      |         |   |      |         |  
|Total non-interest expense                                  |  |                                              | 120,197 |   |      | 99,342  |   |      | 83,424  |  
|                                                            |  |                                              |         |   |      |         |   |      |         |  
|Income before income taxes                                  |  |                                              | 130,914 |   |      | 114,746 |   |      | 94,941  |  
|Income taxes                                                |  |                                              | 47,481  |   |      | 40,775  |   |      | 35,466  |  
|                                                            |  |                                              |         |   |      |         |   |      |         |  
|Net income                                                  |  | $                                            | 83,433  |   |      | 73,971  |   |      | 59,475  |  
|                                                            |  |                                              |         |   |      |         |   |      |         |  
|Basic earnings per share                                    |  | $                                            | 3.35    |   |      | 3.19    |   |      | 2.62    |  
|                                                            |  |                                              |         |   |      |         |   |      |         |  
|Diluted earnings per share                                  |  | $                                            | 3.26    |   |      | 3.11    |   |      | 2.56    |  
|                                                            |  |                                              |         |   |      |         |   |      |         |  



See
accompanying Notes to Consolidated Financial Statements.



79



---

##### Table of Contents

MAF Bancorp, Inc. and Subsidiaries

Consolidated Statements of Changes in Stockholders Equity



|                                                                                                                                                                        |  |                        |     |                          |         |                  |         |   |                  |       |                                     |        |   |               |         |   |       |         |  
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------- | --- | ------------------------ | ------- | ---------------- | ------- | - | ---------------- | ----- | ----------------------------------- | ------ | - | ------------- | ------- | - | ----- | ------- | -
|                                                                                                                                                                        |  | Commonstock            |     | Additionalpaidincapital |         | Retainedearnings |         |   | GainDeferralPlan |       | Accumulatedothercomprehensiveincome |        |   | Treasurystock |         |   | Total |        
|                                                                                                                                                                        |  | (Dollars in thousands) |    
|Balance at December 31, 2000                                                                                                                                            |  | $                      | 254 |                          | 198,068 |                  | 237,761 |   |                  | 617   |                                     | 1,435  |   |               | (50,406 | ) |       | 387,729 |  
|                                                                                                                                                                        |  |                        |     |                          |         |                  |         |   |                  |       |                                     |        |   |               |         |   |       |         |  
|Comprehensive income:                                                                                                                                                   |  |                        |     |                          |         |                  |         |   |                  |       |                                     |        |   |               |         |   |       |         |  
|Net income                                                                                                                                                              |  |                        |    |                          |        |                  | 59,475  |   |                  |      |                                     |       |   |               |        |   |       | 59,475  |  
|Other comprehensive income, net of tax:                                                                                                                                 |  |                        |     |                          |         |                  |         |   |                  |       |                                     |        |   |               |         |   |       |         |  
|Unrealized holding gain during the year                                                                                                                                 |  |                        |    |                          |        |                  |        |   |                  |      |                                     | 2,786  |   |               |        |   |       | 2,786   |  
|Reclassification adjustment of gains included in net income                                                                                                             |  |                        |    |                          |        |                  |        |   |                  |      |                                     | (549   | ) |               |        |   |       | (549    | )
|                                                                                                                                                                        |  |                        |     |                          |         |                  |         |   |                  |       |                                     |        |   |               |         |   |       |         |  
|Total comprehensive income                                                                                                                                              |  |                        |    |                          |        |                  | 59,475  |   |                  |      |                                     | 2,237  |   |               |        |   |       | 61,712  |  
|                                                                                                                                                                        |  |                        |     |                          |         |                  |         |   |                  |       |                                     |        |   |               |         |   |       |         |  
|Issuance of 494,867 shares for acquisition of Mid Town Bancorp, Inc.                                                                                                    |  |                        |    |                          | 3,257   |                  |        |   |                  |      |                                     |       |   |               | 10,543  |   |       | 13,800  |  
|Exercise of 54,242 stock options, and reissuance of treasury stock                                                                                                      |  |                        |    |                          |        |                  | (251    | ) |                  |      |                                     |       |   |               | 1,043   |   |       | 792     |  
|Tax benefits from stock-related compensation                                                                                                                            |  |                        |    |                          | 143     |                  |        |   |                  |      |                                     |       |   |               |        |   |       | 143     |  
|Purchase of 645,100 shares of treasury stock                                                                                                                            |  |                        |    |                          |        |                  |        |   |                  |      |                                     |       |   |               | (17,954 | ) |       | (17,954 | )
|Cash dividends declared, $0.46 per share                                                                                                                                |  |                        |    |                          |        |                  | (10,455 | ) |                  |      |                                     |       |   |               |        |   |       | (10,455 | )
|Dividends paid to Gain Deferral Plan                                                                                                                                    |  |                        |    |                          |        |                  | 5       |   |                  | 101   |                                     |       |   |               |        |   |       | 106     |  
|                                                                                                                                                                        |  |                        |     |                          |         |                  |         |   |                  |       |                                     |        |   |               |         |   |       |         |  
|Balance at December 31, 2001                                                                                                                                            |  |                        | 254 |                          | 201,468 |                  | 286,535 |   |                  | 718   |                                     | 3,672  |   |               | (56,774 | ) |       | 435,873 |  
|Comprehensive income:                                                                                                                                                   |  |                        |     |                          |         |                  |         |   |                  |       |                                     |        |   |               |         |   |       |         |  
|Net income                                                                                                                                                              |  |                        |    |                          |        |                  | 73,971  |   |                  |      |                                     |       |   |               |        |   |       | 73,971  |  
|Other comprehensive income, net of tax:                                                                                                                                 |  |                        |     |                          |         |                  |         |   |                  |       |                                     |        |   |               |         |   |       |         |  
|Unrealized holding gain during the year                                                                                                                                 |  |                        |    |                          |        |                  |        |   |                  |      |                                     | 1,224  |   |               |        |   |       | 1,224   |  
|Reclassification adjustment of gains included in net income                                                                                                             |  |                        |    |                          |        |                  |        |   |                  |      |                                     | (77    | ) |               |        |   |       | (77     | )
|                                                                                                                                                                        |  |                        |     |                          |         |                  |         |   |                  |       |                                     |        |   |               |         |   |       |         |  
|Total comprehensive income                                                                                                                                              |  |                        |    |                          |        |                  | 73,971  |   |                  |      |                                     | 1,147  |   |               |        |   |       | 75,118  |  
|                                                                                                                                                                        |  |                        |     |                          |         |                  |         |   |                  |       |                                     |        |   |               |         |   |       |         |  
|Exercise of 331,611 stock options, and reissuance of treasury stock                                                                                                     |  |                        |    |                          |        |                  | (3,785  | ) |                  |      |                                     |       |   |               | 4,976   |   |       | 1,191   |  
|Tax benefits from stock-related compensation                                                                                                                            |  |                        |    |                          | 1,829   |                  |        |   |                  |      |                                     |       |   |               |        |   |       | 1,829   |  
|Impact of exercise of acquisition carry-over options                                                                                                                    |  |                        |    |                          | 1,413   |                  |        |   |                  |      |                                     |       |   |               |        |   |       | 1,413   |  
|Purchase of treasury stock                                                                                                                                              |  |                        |    |                          |        |                  |        |   |                  |      |                                     |       |   |               | (168    | ) |       | (168    | )
|Cash dividends declared, $0.60 per share                                                                                                                                |  |                        |    |                          |        |                  | (13,939 | ) |                  |      |                                     |       |   |               |        |   |       | (13,939 | )
|Dividends paid to Gain Deferral Plan                                                                                                                                    |  |                        |    |                          |        |                  | 8       |   |                  | 133   |                                     |       |   |               |        |   |       | 141     |  
|                                                                                                                                                                        |  |                        |     |                          |         |                  |         |   |                  |       |                                     |        |   |               |         |   |       |         |  
|Balance at December 31, 2002                                                                                                                                            |  |                        | 254 |                          | 204,710 |                  | 342,790 |   |                  | 851   |                                     | 4,819  |   |               | (51,966 | ) |       | 501,458 |  
|                                                                                                                                                                        |  |                        |     |                          |         |                  |         |   |                  |       |                                     |        |   |               |         |   |       |         |  
|Comprehensive income:                                                                                                                                                   |  |                        |     |                          |         |                  |         |   |                  |       |                                     |        |   |               |         |   |       |         |  
|Net income                                                                                                                                                              |  |                        |    |                          |        |                  | 83,433  |   |                  |      |                                     |       |   |               |        |   |       | 83,433  |  
|Other comprehensive income, net of tax:                                                                                                                                 |  |                        |     |                          |         |                  |         |   |                  |       |                                     |        |   |               |         |   |       |         |  
|Unrealized holding loss during the year                                                                                                                                 |  |                        |    |                          |        |                  |        |   |                  |      |                                     | (3,307 | ) |               |        |   |       | (3,307  | )
|Reclassification adjustment of losses included in net income                                                                                                            |  |                        |    |                          |        |                  |        |   |                  |      |                                     | 597    |   |               |        |   |       | 597     |  
|                                                                                                                                                                        |  |                        |     |                          |         |                  |         |   |                  |       |                                     |        |   |               |         |   |       |         |  
|Total comprehensive income                                                                                                                                              |  |                        |    |                          |        |                  | 83,433  |   |                  |      |                                     | (2,710 | ) |               |        |   |       | 80,723  |  
|                                                                                                                                                                        |  |                        |     |                          |         |                  |         |   |                  |       |                                     |        |   |               |         |   |       |         |  
|Exercise of 313,344 stock options and reissuance of treasury stock                                                                                                      |  |                        |    |                          |        |                  | (4,903  | ) |                  |      |                                     |       |   |               | 9,017   |   |       | 4,114   |  
|Allocation of 33,896 treasury shares to deferred compensation plan                                                                                                      |  |                        |    |                          |        |                  |        |   |                  |      |                                     |       |   |               | 820     |   |       | 820     |  
|Issuance of 2,826,109 and 7,489,043 shares for acquisition of Fidelity Bancorp and St. Francis Bancorp, respectively, and conversion of
acquired entities stock options |  |                        | 77  |                          | 289,577 |                  |        |   |                  |      |                                     |       |   |               | 73,074  |   |       | 362,728 |  
|Purchase of treasury stock                                                                                                                                              |  |                        |    |                          |        |                  |        |   |                  |      |                                     |       |   |               | (30,945 | ) |       | (30,945 | )
|Tax benefits from stock-related compensation                                                                                                                            |  |                        |    |                          | 1,460   |                  |        |   |                  |      |                                     |       |   |               |        |   |       | 1,460   |  
|Cash dividends declared, $0.72 per share                                                                                                                                |  |                        |    |                          |        |                  | (18,926 | ) |                  |      |                                     |       |   |               |        |   |       | (18,926 | )
|Dividends paid to Gain Deferral Plan                                                                                                                                    |  |                        |    |                          |        |                  | 8       |   |                  | 164   |                                     |       |   |               |        |   |       | 172     |  
|                                                                                                                                                                        |  |                        |     |                          |         |                  |         |   |                  |       |                                     |        |   |               |         |   |       |         |  
|Balance at December 31, 2003                                                                                                                                            |  | $                      | 331 |                          | 495,747 |                  | 402,402 |   |                  | 1,015 |                                     | 2,109  |   |               |        |   |       | 901,604 |  
|                                                                                                                                                                        |  |                        |     |                          |         |                  |         |   |                  |       |                                     |        |   |               |         |   |       |         |  



See
accompanying Notes to Consolidated Financial Statements.



80



---

##### Table of Contents

MAF Bancorp, Inc. and Subsidiaries

Consolidated Statements of Cash Flows



|                                                                                            |  |                         |            |   |      |            |   |      |            |  
|------------------------------------------------------------------------------------------- |  | ----------------------- | ---------- | - | ---- | ---------- | - | ---- | ---------- | -
|                                                                                            |  | Year Ended December 31, |           
|                                                                                            |  | 2003                    |            |   | 2002 |            |   | 2001 |           
|                                                                                            |  | (Dollars in thousands)  |           
|Operating activities:                                                                       |  |                         |            |   |      |            |   |      |            |  
|Net income                                                                                  |  | $                       | 83,433     |   |      | 73,971     |   |      | 59,475     |  
|Adjustments to reconcile net income to net cash provided by (used in) operating activities: |  |                         |            |   |      |            |   |      |            |  
|Amortization of premiums, discounts and deferred loan fees                                  |  |                         | (13,841    | ) |      | 5,013      |   |      | 3,713      |  
|Provision for loan losses                                                                   |  |                         |           |   |      | 300        |   |      |           |  
|FHLB of Chicago stock dividends                                                             |  |                         | (16,431    | ) |      | (7,627     | ) |      | (6,597     | )
|Net gain on sale of loans receivable                                                        |  |                         | (25,948    | ) |      | (16,330    | ) |      | (8,691     | )
|Net gain on sale of investment and mortgage-backed securities                               |  |                         | (9,125     | ) |      | (3,105     | ) |      | (877       | )
|Other than temporary impairment write-down on investment securities                         |  |                         | 10,062     |   |      | 2,986      |   |      |           |  
|Net gain on real estate held for development or sale                                        |  |                         | (11,325    | ) |      | (9,717     | ) |      | (11,484    | )
|Amortization and impairment (recovery) of mortgage servicing rights, net                    |  |                         | 11,792     |   |      | 9,514      |   |      | 4,348      |  
|Depreciation and amortization                                                               |  |                         | 8,163      |   |      | 6,523      |   |      | 5,021      |  
|Amortization of goodwill and core deposit intangibles                                       |  |                         | 1,732      |   |      | 1,649      |   |      | 4,578      |  
|Deferred income tax expense                                                                 |  |                         | 6,432      |   |      | 8,900      |   |      | 12,050     |  
|Increase (decrease) in accrued interest receivable                                          |  |                         | 5,949      |   |      | 1,248      |   |      | (873       | )
|Net increase (decrease) in other assets and liabilities, net of effects from acquisitions   |  |                         | 8,365      |   |      | (24,193    | ) |      | (25,955    | )
|Loans purchased for sale                                                                    |  |                         | (11,388    | ) |      |           |   |      |           |  
|Loans originated for sale                                                                   |  |                         | (1,628,667 | ) |      | (1,313,296 | ) |      | (1,140,195 | )
|Sale of loans originated and purchased for sale                                             |  |                         | 1,783,732  |   |      | 1,314,617  |   |      | 1,021,927  |  
|                                                                                            |  |                         |            |   |      |            |   |      |            |  
|Net cash provided by (used in) operating activities                                         |  |                         | 202,935    |   |      | 50,453     |   |      | (83,560    | )
|                                                                                            |  |                         |            |   |      |            |   |      |            |  
|Investing activities:                                                                       |  |                         |            |   |      |            |   |      |            |  
|Loans originated for investment                                                             |  |                         | (3,372,494 | ) |      | (2,361,305 | ) |      | (1,672,688 | )
|Principal repayments on loans receivable                                                    |  |                         | 2,908,791  |   |      | 2,218,226  |   |      | 1,884,663  |  
|Principal repayments on mortgage-backed securities                                          |  |                         | 242,594    |   |      | 69,355     |   |      | 29,539     |  
|Proceeds from maturities of investment securities available for sale                        |  |                         | 106,157    |   |      | 88,025     |   |      | 158,241    |  
|Proceeds from sale of:                                                                      |  |                         |            |   |      |            |   |      |            |  
|Investment securities available for sale                                                    |  |                         | 53,218     |   |      | 67,891     |   |      | 6,515      |  
|Mortgage backed securities available for sale                                               |  |                         | 258,956    |   |      | 14,822     |   |      |           |  
|Real estate held for development or sale                                                    |  |                         | 34,392     |   |      | 30,420     |   |      | 37,316     |  
|Purchases of:                                                                               |  |                         |            |   |      |            |   |      |            |  
|Investment securities available for sale                                                    |  |                         | (142,845   | ) |      | (117,261   | ) |      | (274,902   | )
|Mortgage-backed securities available for sale                                               |  |                         | (224,296   | ) |      | (232,049   | ) |      | (62,127    | )
|Stock in Federal Home Loan Bank of Chicago                                                  |  |                         | (30,000    | ) |      | (30,000    | ) |      | (30,000    | )
|Real estate held for development or sale                                                    |  |                         | (30,833    | ) |      | (14,118    | ) |      | (16,490    | )
|Premises and equipment                                                                      |  |                         | (21,905    | ) |      | (14,429    | ) |      | (10,340    | )
|Proceeds (payment) for acquisitions, net of cash acquired                                   |  |                         | 10,167     |   |      |           |   |      | (40,037    | )
|                                                                                            |  |                         |            |   |      |            |   |      |            |  
|Net cash provided by (used in) investing activities                                         |  |                         | (208,098   | ) |      | (280,423   | ) |      | 9,690      |  
|                                                                                            |  |                         |            |   |      |            |   |      |            |  
|Financing Activities:                                                                       |  |                         |            |   |      |            |   |      |            |  
|Proceeds from:                                                                              |  |                         |            |   |      |            |   |      |            |  
|FHLB of Chicago advances                                                                    |  |                         | 430,000    |   |      | 460,000    |   |      | 145,000    |  
|Unsecured bank term loan                                                                    |  |                         |           |   |      |           |   |      | 55,000     |  
|Unsecured line of credit                                                                    |  |                         | 20,000     |   |      |           |   |      | 16,000     |  
|Repayments of:                                                                              |  |                         |            |   |      |            |   |      |            |  
|FHLB of Chicago advances                                                                    |  |                         | (390,500   | ) |      | (360,000   | ) |      | (435,000   | )
|Unsecured bank term loan                                                                    |  |                         | (6,000     | ) |      | (4,000     | ) |      | (29,400    | )
|Unsecured line of credit                                                                    |  |                         | (10,000    | ) |      | (10,000    | ) |      | (10,000    | )
|Net decrease in other borrowings                                                            |  |                         | (43,718    | ) |      |           |   |      |           |  
|Net increase in deposits                                                                    |  |                         | 17,724     |   |      | 193,630    |   |      | 313,139    |  
|Increase in advances by borrowers for taxes and insurance                                   |  |                         | (10,539    | ) |      | (784       | ) |      | (348       | )
|Proceeds from exercise of stock options                                                     |  |                         | 4,718      |   |      | 2,366      |   |      | 832        |  
|Purchase of treasury stock                                                                  |  |                         | (30,945    | ) |      | (168       | ) |      | (17,301    | )
|Cash dividends paid                                                                         |  |                         | (16,295    | ) |      | (13,066    | ) |      | (9,900     | )
|                                                                                            |  |                         |            |   |      |            |   |      |            |  
|Net cash provided by (used in) financing activities                                         |  |                         | (35,555    | ) |      | 267,978    |   |      | 28,022     |  
|                                                                                            |  |                         |            |   |      |            |   |      |            |  
|Increase (decrease) in cash and cash equivalents                                            |  |                         | (40,718    | ) |      | 38,008     |   |      | (45,848    | )
|Cash and cash equivalents at beginning of year                                              |  |                         | 262,680    |   |      | 224,672    |   |      | 270,520    |  
|                                                                                            |  |                         |            |   |      |            |   |      |            |  
|Cash and cash equivalents at end of year                                                    |  | $                       | 221,962    |   |      | 262,680    |   |      | 224,672    |  
|                                                                                            |  |                         |            |   |      |            |   |      |            |  



(Continued)



81



---

##### Table of Contents

MAF Bancorp, Inc. and Subsidiaries

Consolidated Statements of Cash Flows  (Continued)



|                                                                                                                           |  |   |           |  |         |  |         |  
|-------------------------------------------------------------------------------------------------------------------------- |  | - | --------- |  | ------- |  | ------- | -
|Supplemental disclosure of cash flow information:                                                                          |  |   |           |  |         |  |         |  
|Cash paid during the year for:                                                                                             |  |   |           |  |         |  |         |  
|Interest on deposits and borrowed funds                                                                                    |  | $ | 131,497   |  | 171,432 |  | 215,492 |  
|Income taxes                                                                                                               |  |   | 49,431    |  | 30,774  |  | 22,008  |  
|Summary of non-cash transactions:                                                                                          |  |   |           |  |         |  |         |  
|Transfer of loans receivable to foreclosed real estate                                                                     |  |   | 6,106     |  | 3,998   |  | 2,697   |  
|Loans receivable swapped into mortgage-backed securities                                                                   |  |   | 162,164   |  | 126,433 |  | 76,670  |  
|Investment securities transferred to available for sale                                                                    |  |   |          |  |        |  | 12,633  |  
|Mortgage-backed securities transferred to available for sale                                                               |  |   |          |  |        |  | 80,301  |  
|Treasury stock received for withholding tax liability related to stock option exercises (15,893, 30,033, and 1,267 shares) |  |   | 605       |  | 1,175   |  | 40      |  
|Treasury stock received for stock option exercises (30,466, 26,292, and 1,339 shares)                                      |  |   | 1,216     |  | 959     |  | 36      |  
|                                                                                                                           |  |   |           |  |         |  |         |  
|                                                                                                                           |  |   |          
|Acquisitions:                                                                                                              |  |   |           |  |         |  |         |  
|Assets acquired                                                                                                            |  |   | 2,856,688 |  |        |  | 307,469 |  
|Common stock issued for acquisition                                                                                        |  |   | 362,728   |  |        |  | 13,800  |  
|                                                                                                                           |  |   |          
|Cash paid for purchase of stock                                                                                            |  |   |          |  |        |  | (58,161 | )
|Cash acquired                                                                                                              |  |   | 15,370    |  |        |  | 18,124  |  
|                                                                                                                           |  |   |           |  |         |  |         |  
|Net cash (used) received from acquisitions                                                                                 |  | $ | 15,370    |  |        |  | (40,037 | )
|                                                                                                                           |  |   |           |  |         |  |         |  



See
accompanying Notes to Consolidated Financial Statements.



82



---

##### Table of Contents

MAF Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements



1. Summary of Significant Accounting Policies



Principles of Consolidation. The consolidated financial statements include the accounts of MAF Bancorp, Inc. (Company) and its wholly-owned subsidiaries. All significant intercompany balances and
transactions have been eliminated in consolidation. Certain reclassifications of prior year amounts have been made to conform to the current year presentation.



Use of Estimates.The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the
United States of America requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Estimates most susceptible to change are in the determination of the
Banks allowance for loan losses, the valuation of mortgage servicing rights, and the accounting for real estate development. Actual results could differ from those estimates.



Statement of Cash Flows.For purposes of reporting cash flows, cash and cash equivalents include cash
and due from banks, interest-bearing deposits and federal funds sold. Generally, federal funds are sold for one-day periods and interest-bearing deposits mature within one day to three months.



Restrictions on Cash.Based on the types and amounts of
deposits received, the Bank maintains vault cash and non-interest bearing cash balances in accordance with Federal Reserve Bank reserve requirements. At December 31, 2003 and 2002, the Banks reserve requirements were met with funds on deposit
in a pass-through account at the Federal Home Loan Bank of Chicago as well as vault cash.



Investment and Mortgage-Backed Securities. All investment and mortgage-backed securities are classified as available for sale. These investments are carried at fair value, with unrealized gains and losses
reflected in stockholders equity, net of tax. Losses on securities that are deemed other than temporary are recognized in the statement of operations, with a new cost basis established in the statement of financial condition.



Investments and mortgage-backed securities are adjusted for amortization of
premiums, accretion of discounts, and the amortization of purchase accounting adjustments to the earlier of call or maturity, or in the case of mortgage-related securities, over the estimated life of the security using the level yield method. Gains
and losses on sales of investment securities, mortgage-backed securities, and equity securities are determined using the specific identification method.



The Bank arranges for swap transactions with the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan
Mortgage Corporation (Freddie Mac) which involve the exchange of whole mortgage loans originated by the Bank for mortgage-backed securities.



83



---

##### Table of Contents

MAF Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements  (Continued)



Loans receivable held for sale.The Bank sells, generally without recourse, whole loans and
participation interests in mortgage loans that it originates mainly to GSEs such as Fannie Mae and Freddie Mac. The Bank sells various loans, with recourse to the Federal Home Loan Bank Mortgage Partnership Program (MPF) in which
it retains a limited and specified level of credit risk. Loans originated are identified as either held for investment or sale upon origination. Loans which the Bank intends to sell before maturity are classified as held for sale, and are carried at
the lower of cost, adjusted for applicable deferred loan fees or expenses, or estimated market value in the aggregate.



The Bank enters into forward commitments to sell mortgage loans primarily with Fannie Mae to deliver mortgage loans originated by the Bank at a specific
time and specific price in the future. Loans subject to forward sales are classified as held for sale. Unrealized losses, if any, on forward commitments are included in gain on sale of mortgage loans in the period the loans are committed.



Loans Receivable. Loans receivable are stated at unpaid
principal balances less unearned discounts, deferred loan origination fees and costs, loans in process and the allowance for loan losses.



Loan fees and certain direct loan origination costs are deferred at origination, and the net deferred fee or cost is recognized as an adjustment to yield
using the level-yield method over the contractual life of the loans. Discounts on loans receivable are amortized to interest income using the level-yield method over the remaining period to contractual maturity, adjusted for anticipated prepayments.
Amortization of purchase accounting discounts are being amortized over the contractual term of loans receivable acquired, adjusted for anticipated prepayments, using the level-yield method.



The accrual of interest income for all loans is discontinued when there is
clear indication that the borrowers cash flow may not be sufficient to meet payments as they become due or management becomes aware of facts or circumstances that may adversely impact the collectibility of principal or interest on loans. A
loan (whether considered impaired or not) is classified as non-accrual when the borrower becomes 91 days past due. When a loan is placed on non-accrual status, or is in the process of bankruptcy or foreclosure, previously accrued but unpaid interest
is reversed against interest income. Income is subsequently recorded to the extent cash payments are received, if the entire principal balance is considered collectible, or at a time when the loan is brought current in accordance with its original
terms.



The Bank considers a loan impaired when, based on
current information and events, it is probable that a creditor will be unable to collect all amounts due according to the contractual terms of the loan. For loans which are not individually significant (i.e. loans under $1.0 million) and represent a
homogeneous population, the Bank evaluates impairment collectively based on management reports on the volume and extent of delinquencies, as well as historical loss experience for these types of loans. The Bank uses this criteria on one- to
four-family residential loans, consumer loans, multi-family residential loans, and land loans. Impairment for loans considered individually significant, as well as commercial real estate and commercial business loans, are measured based on the
present value of expected future cash flows discounted at the loans effective interest rate, or the fair value of the collateral if the loan is collateral dependent. Charge-offs of principal occur when a loss has deemed to have occurred as a
result of the book value exceeding the fair value or net realizable value.



Allowance for Loan Losses. The allowance for loan losses is increased by charges to operations and decreased by charge-offs, net of recoveries. In evaluating the adequacy of the allowance for loan losses and
determining, if any, the related provision for loan losses, management considers: (1) subjective factors, including local and general economic business factors and trends, portfolio concentrations and changes in the size and/or general terms of



84



---

##### Table of Contents

MAF Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements  (Continued)



the loan portfolio, (2) historical loss experience and the change in the mix of the overall portfolio composition
over the last five years, (3) specific allocations based upon probable losses identified during the review of the portfolio, and (4) delinquency in the portfolio and the composition of non-performing loans including the percent of non-performing
loans with supplemental mortgage insurance. Larger loans, typically secured by commercial real estate that exhibit probable or observed credit weaknesses are subject to individual review. In addition, various regulatory agencies, as an integral part
of their examination process, periodically review the Banks allowance for loan losses. Such agencies may require the Bank to recognize additions to the allowance based on their judgments about information available to them at the time of their
examination. In the opinion of management, the allowance, when taken as a whole, is adequate to absorb probable losses in the loan portfolio.



Foreclosed Real Estate. Real estate properties acquired through, or in lieu of, foreclosure are initially recorded at the lower of carrying value
or fair value less the estimated cost to dispose at the date of foreclosure, establishing a new cost basis. Management periodically performs valuations and an allowance for loss is established by a charge to operations if the carrying value of a
property exceeds its estimated fair value less cost to dispose. At December 31, 2003 and 2002 all foreclosed real estate properties are one- to-four family residences.



Real Estate Held for Development or Sale.Real estate properties held for development or sale, are
carried at the lower of cost, including capitalized holding costs, or net realizable value. Gains and losses on individual lot sales in a particular development are based on cash received less the estimated cost of sales per lot. Cost of sales per
lot is calculated as the current investment in the particular development plus anticipated costs to complete the development, which includes capitalized interest, divided by the total number of lots to be sold. Periodic reviews are made as to a
developments estimated cost to complete. Changes in estimated costs are recognized in the period of change as either a charge or an addition to income from real estate operations. Included in earnings is a calculation of interest income, which
is recognized as a contra expense, representing the interest cost for funds that would normally be invested in interest earning assets, but is instead consumed as capital in developing a land development project. This interest cost is included in
the total cost of the project.



Premises and Equipment.
Land is carried at cost. Buildings, leasehold improvements, furniture, fixtures, and equipment are carried at cost, less accumulated depreciation and amortization. Buildings, furniture, fixtures, and equipment are depreciated using the straight-line
method over the estimated useful lives of the assets. The cost of leasehold improvements is being amortized using the straight-line method over the lesser of the life of the leasehold improvement or the term of the related lease.



Affordable Housing Investments. Affordable housing investments
included in other assets, represents multi-family rental property (affordable housing projects) that SFEP owns, operates and develops as a limited partner. The properties are recorded at cost less accumulated depreciation. The Company evaluates the
recoverability of the carrying value on a regular basis. If the recoverability was determined to be in doubt, a valuation allowance would be established by way of a charge to expense. Depreciation expense is provided on a straight-line basis over
the estimated useful life of the assets. Expenditures for normal repairs and maintenance are charged to expense as incurred. The financial condition, results of operations and cash flows of each LLP or LLC is consolidated in the Companys
financial statements. The operations of the properties are not expected to contribute significantly to the Companys income before income taxes. However, the



85



---

##### Table of Contents

MAF Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements  (Continued)



properties do contribute in the form of income tax credits, which lowers the Companys effective tax rate. Once
established, the credits on each property last for ten years and are passed through from the LLP or LLC to SFEP and reduce the consolidated federal tax liability of the Company. The Company is obligated to keep the projects low-rent structure
in place for a period of time after the ten-year tax credit period.



Premiums on deposits and borrowings.Amortization of purchase accounting adjustments on deposits and borrowings are amortized using the level yield method over the estimated term to maturity.



Goodwill and Intangibles. Goodwill represents the excess of the
purchase price over the fair value of the net identifiable assets acquired in business combinations or branch acquisitions. Core deposit intangibles represent the value assigned to the core deposit base acquired. Each is recognized as a result of
the purchase method of accounting for business combinations. Core deposit intangibles have finite lives and are amortized on an accelerated basis to expense over the estimated life of the core deposit which approximates ten years.



The Company reviews long-lived assets and certain identifiable intangibles
for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. The impairment is measured based on the expected future cash flows from the use of the asset and its eventual disposition. If
expected future cash flows are less than the carrying amount of the asset, an impairment loss is recognized based on current fair values.



The Company adopted Statement of Financial Accounting Standards (SFAS) No. 142, Goodwill and Other Intangible Assets, and SFAS No.
147 Acquisitions of Certain Financial Institutions effective January 1, 2002. Under SFAS No. 142, goodwill and indefinite life intangibles are no longer amortized but are subject to impairment tests on at least an annual basis. Any
impairment of goodwill or intangibles will be recognized as an expense in the period of impairment. The Company is required to complete a goodwill impairment test annually. An evaluation was completed as of May 31, 2003. No impairment was deemed
necessary as a result of the Companys analysis.



SFAS No.
147 amends SFAS No. 72, Accounting for Certain Acquisitions of Banking or Thrift Institutions, to remove the acquisition of financial institutions from the scope of that statement and provides guidance on the accounting for the
impairment or disposal of acquired long term customer relationship intangible assets. SFAS No. 147 requires acquisitions of financial institutions that meet the definition of a business combination to be accounted for in accordance with SFAS Nos.
141 and 142. The provisions were effective on October 1, 2002. Adoption of Statement No. 147 required restatement of earnings for each quarter since adoption of SFAS No. 142. The Company adopted SFAS No. 147 on October 1, 2002 and earnings for each
of the first three quarters were restated by approximately $163,000 pre-tax to eliminate goodwill amortization on branch acquisitions.



Mortgage Servicing Rights. Mortgage servicing rights are initially capitalized upon acquisition, and are subsequently amortized over the estimated
life of the loan servicing income stream, using the level-yield method. The balance of mortgage servicing rights is included in the consolidated statements of financial condition in intangible assets. The Bank conducts periodic impairment analysis
by evaluating the present value of the future economic benefit to be derived from the servicing rights using current information regarding interest rates, prepayment assumptions, ancillary income, and the cost to service such loans. For purposes of
measuring impairment, the mortgage servicing rights are stratified based on the predominant risk characteristics of the underlying loans. The Bank stratifies loans by interest rate, maturity, and whether the loans are fixed or adjustable rate. A



86



---

##### Table of Contents

MAF Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements  (Continued)



valuation allowance is recognized in the amount by which the capitalized servicing rights for a specific stratum exceeds its estimated fair value.



Income Taxes. The Company and its
subsidiaries file a consolidated federal income tax return except for MAF Realty Co., L.L.C.- IV, a REIT, which is required to file a separate federal income tax return. Deferred income taxes are provided for all significant items of income and
expense that are recognized in different periods for financial reporting purposes and income tax reporting purposes. The asset and liability approach is used for the financial accounting and reporting of income taxes. This approach requires
companies to take into account changes in the tax rates when valuing the deferred income tax accounts recorded on the consolidated statement of financial condition. In addition, it provides that a deferred tax liability or asset shall be recognized
for the estimated future tax effects attributable to temporary differences and loss and tax credit carryforwards. Temporary differences include differences between financial statement income and tax return income which are expected to
reverse in future periods as well as differences between tax bases of assets and liabilities and their amounts for financial reporting purposes which are also expected to be settled in future periods. To the extent a deferred tax asset is
established which is not likely to be realized, a valuation allowance shall be established against such asset.



Derivative Financial Instruments.The Company primarily utilizes forward commitments to sell mortgage loans and to a lesser extent, interest rate
futures contracts, primarily U.S. Treasury bond futures, as part of its mortgage loan origination hedging strategy. Loan commitments and forward sales are accounted for as derivative instruments with adjustments included in earnings as a component
of gain on sale of loans at each period end. Gains and losses on open and closed futures positions are deferred and recognized as an adjustment to gain (loss) on the sale of loans receivable when the underlying loan being hedged is sold into the
secondary market. All derivatives are recognized on the consolidated statement of financial condition at their fair value.



Comprehensive Income.Comprehensive income includes net income plus other comprehensive income. Other comprehensive income includes revenues,
expenses, gains and losses that under accounting principles generally accepted in the United States of America are included in comprehensive income but excluded from net income. The Company reports comprehensive income in its consolidated statement
of changes in stockholders equity.



Segments.The
Company uses the management approach for determining segment reporting. Based on the management approach, the Company operates two separate lines of business, retail banking and land development operations.



Stock Option and Equity-based Plans.The Company has various
stock-based compensation plans that authorize the granting of stock option and other equity-based awards to eligible employees. In December 2002, the Company adopted SFAS No. 148, Accounting for Stock-Based Compensation-Transition and
Disclosure.



87



---

##### Table of Contents

MAF Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements  (Continued)



The Company applies APB Opinion 25, Accounting for Stock Issued to Employees, and related
Interpretations in accounting for its stock option plans. Accordingly, no compensation cost has been recognized for stock options granted under its plans. Had compensation cost for the Companys stock option grants been determined based on the
fair value at the grant dates for stock option awards under those plans consistent with the method of SFAS No. 148, the Companys net income and earnings per share would have been reduced to the pro forma amounts indicated in the table below:



|                                                                                                                                             |  |                                              |        |      |        |      |       
|-------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------------------------------------- | ------ | ---- | ------ | ---- | ------
|                                                                                                                                             |  | Year Ended December 31,                     
|                                                                                                                                             |  | 2003                                         |        | 2002 |        | 2001
|                                                                                                                                             |  | (Dollars in thousands, except pershare data)
|Net income                                                                                                                                   |  |                                              |        |      |        |      |       
|As reported                                                                                                                                  |  | $                                            | 83,433 |      | 73,971 |      | 59,475
|Deduct: total stock option employee compensation expense determined under fair value based method for all awards, net of related tax
effects |  |                                              | 4,075  |      | 2,845  |      | 2,867 
|                                                                                                                                             |  |                                              |        |      |        |      |       
|Pro-forma                                                                                                                                    |  | $                                            | 79,358 |      | 71,126 |      | 56,608
|                                                                                                                                             |  |                                              |        |      |        |      |       
|Basic earnings per share                                                                                                                     |  |                                              |        |      |        |      |       
|As reported                                                                                                                                  |  | $                                            | 3.35   |      | 3.19   |      | 2.62  
|Pro-forma                                                                                                                                    |  |                                              | 3.18   |      | 3.07   |      | 2.50  
|                                                                                                                                             |  |                                              |       
|Diluted earnings per share                                                                                                                   |  |                                              |        |      |        |      |       
|As reported                                                                                                                                  |  |                                              | 3.26   |      | 3.11   |      | 2.56  
|Pro-forma                                                                                                                                    |  |                                              | 3.18   |      | 3.07   |      | 2.50  
|                                                                                                                                             |  |                                              |        |      |        |      |       



The fair value of each
option grant is estimated using the Black-Scholes option-pricing model with the following weighted-average assumptions used for grants during the years ended December 31, 2003, 2002, and 2001, respectively: dividend yield of 1.73%, 1.75%, and 1.63%;
expected volatility of 26.57%, 26.56%, and 26.11%; risk-free interest rates of 3.86%, 3.44%, and 4.77%; expected life of 7.5 years for each period.



Earnings Per Share. Earnings per share is determined by dividing net income for the period by the weighted average number of shares outstanding.
Stock options are considered in the earnings per share calculations only if dilutive, and are the only adjustments made to average shares outstanding in computing diluted earnings per share. Anti-dilutive stock options not included in the
computation of diluted earnings per share were 317,700, 577,021 and 155,867, at December 31, 2003, 2002, and 2001, respectively.



|                                                                 |  |                                               |        |                              |            |                  |   |                    |  |                      |        |                  |            |  |   |     
|---------------------------------------------------------------- |  | --------------------------------------------- | ------ | ---------------------------- | ---------- | ---------------- | - | ------------------ |  | -------------------- | ------ | ---------------- | ---------- |  | - | ----
|                                                                 |  | Year Ended December 31, 2003                  |        | Year Ended December 31, 2002
|                                                                 |  | Income (Numerator)                            |        | Shares (Denominator)         |            | Per Share Amount |   | Income (Numerator) |  | Shares (Denominator) |        | Per Share Amount
|                                                                 |  |                                               |        |                              |            |                 
|                                                                 |  | (Dollars in thousands, except per share data)
|Basic earnings per share:                                        |  |                                               |        |                              |            |                  |   |                    |  |                      |        |                  |            |  |   |     
|Income available to common shareholders                          |  | $                                             | 83,433 |                              | 24,920,150 |                  | $ | 3.35               |  | $                    | 73,971 |                  | 23,162,422 |  | $ | 3.19
|                                                                 |  |                                               |        |                              |            |                  |   |                    |  |                      |        |                  |            |  |   |     
|Effect of dilutive securities-Stock options                      |  |                                               |        |                              | 672,595    |                  |   |                    |  |                      |        |                  | 585,989    |  |   |     
|                                                                 |  |                                               |        |                              |            |                  |   |                    |  |                      |        |                  |            |  |   |     
|Diluted earnings per share:                                      |  |                                               |        |                              |            |                  |   |                    |  |                      |        |                  |            |  |   |     
|Income available to common shareholders plus assumed conversions |  | $                                             | 83,433 |                              | 25,592,745 |                  | $ | 3.26               |  | $                    | 73,971 |                  | 23,748,411 |  | $ | 3.11
|                                                                 |  |                                               |        |                              |            |                  |   |                    |  |                      |        |                  |            |  |   |     



88



---

##### Table of Contents

MAF Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements  (Continued)



|                                                                 |  |                                               |        |                     |            |                 |   |     
|---------------------------------------------------------------- |  | --------------------------------------------- | ------ | ------------------- | ---------- | --------------- | - | ----
|                                                                 |  | Year Ended December 31, 2001                 
|                                                                 |  | Income(Numerator)                             |        | Shares(Denominator) |            | Per ShareAmount
|                                                                 |  | (Dollars in thousands, except per share data)
|Basic earnings per share:                                        |  |                                               |        |                     |            |                 |   |     
|Income available to common shareholders                          |  | $                                             | 59,475 |                     | 22,691,053 |                 | $ | 2.62
|                                                                 |  |                                               |        |                     |            |                 |   |     
|Effect of dilutive securities-Stock options                      |  |                                               |        |                     | 504,270    |                 |   |     
|                                                                 |  |                                               |        |                     |            |                 |   |     
|Diluted earnings per share:                                      |  |                                               |        |                     |            |                 |   |     
|Income available to common shareholders plus assumed conversions |  | $                                             | 59,475 |                     | 23,195,323 |                 | $ | 2.56
|                                                                 |  |                                               |        |                     |            |                 |   |     



2. Business Combinations



On November 30, 2001, the Company purchased privately
held Mid Town Bancorp, Inc. (Mid Town) based in Chicago, Illinois for $69.0 million in the form of 80% cash and 20% stock. A total of 494,867 shares of common stock, at a value of $13.8 million, and cash of $55.2 million was paid to
shareholders of Mid Town. The transaction was accounted for as a purchase. The transaction generated goodwill of $36.1 million and core deposit intangibles of $3.3 million. At acquisition date, Mid Town had $307.5 million in total assets, $270.3
million in deposits and $33.3 million in stockholders equity.



On March 28, 2003, the Company purchased a branch of UmbrellaBank, fsb in Chicago, IL. The transaction involved the purchase of approximately $8.5 million in deposits.



On July 21, 2003, the Company acquired Fidelity Bancorp, Inc. in an all-stock transaction, valued at $115 million. A total
of 2,826,109 shares of common stock were issued, $3.2 million was paid out for stock option cancellations, and $44.8 million of goodwill and core deposit intangibles were generated in the transaction. In connection with the merger, Fidelitys
bank subsidiary, Fidelity Federal Savings Bank, was merged into the Bank. The merger provided five additional branch locations in the Chicago area. At acquisition date, Fidelity had assets of $612.9 million, deposits of $434.6 million and
stockholders equity of $59.6 million.



On December 1,
2003 the Company acquired St. Francis Capital Corporation in an all-stock transaction, valued at $358 million. A total of 7,489,043 shares of common stock were issued, $16.2 million was paid out for stock option cancellations, and $131.2 million of
goodwill and core deposit intangibles were generated in the transaction. The merger gave the Company 23 new branch offices in the Milwaukee, Wisconsin area. In connection with the merger, St. Franciss bank subsidiary St. Francis Bank, was
merged into the Bank. At acquisition date, St. Francis had assets of $2.19 billion, deposits of $1.36 billion, and stockholders equity of $191.1 million.



89



---

##### Table of Contents

MAF Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements  (Continued)



The following table summarizes the estimated fair value of the assets acquired and liabilities
assumed at the date of acquisition of St. Francis and Fidelity:



|                           |  |                        |           |   |          |         |   |       |           |  
|-------------------------- |  | ---------------------- | --------- | - | -------- | ------- | - | ----- | --------- | -
|                           |  | St. Francis            |           |   | Fidelity |         |   | Total |          
|                           |  | (Dollars in thousands) |          
|Cash                       |  | $                      | 59,348    |   |          | 1,563   |   |       | 60,911    |  
|Investment Securities      |  |                        | 73,278    |   |          | 7,606   |   |       | 80,884    |  
|FHLB of Chicago stock      |  |                        | 114,701   |   |          | 53,803  |   |       | 168,504   |  
|Mortgage-backed securities |  |                        | 603,577   |   |          | 201,286 |   |       | 804,863   |  
|Loans                      |  |                        | 1,252,290 |   |          | 344,560 |   |       | 1,596,850 |  
|Allowance for loan losses  |  |                        | (13,360   | ) |          | (2,011  | ) |       | (15,371   | )
|Other assets               |  |                        | 81,863    |   |          | 4,435   |   |       | 86,298    |  
|Goodwill                   |  |                        | 124,312   |   |          | 43,265  |   |       | 167,577   |  
|Core deposit intangibles   |  |                        | 6,907     |   |          | 1,575   |   |       | 8,482     |  
|                           |  |                        |           |   |          |         |   |       |           |  
|Total assets acquired      |  | $                      | 2,302,916 |   |          | 656,082 |   |       | 2,958,998 |  
|                           |  |                        |           |   |          |         |   |       |           |  
|Deposits                   |  | $                      | 1,368,576 |   |          | 436,835 |   |       | 1,805,411 |  
|Borrowings                 |  |                        | 647,903   |   |          | 113,115 |   |       | 761,018   |  
|Other liabilities          |  |                        | 4,376     |   |          | 5,186   |   |       | 9,562     |  
|                           |  |                        |           |   |          |         |   |       |           |  
|Total liabilities assumed  |  |                        | 2,020,855 |   |          | 555,136 |   |       | 2,575,991 |  
|                           |  |                        |           |   |          |         |   |       |           |  
|Net assets acquired        |  | $                      | 282,061   |   |          | 100,946 |   |       | 383,007   |  
|                           |  |                        |           |   |          |         |   |       |           |  



The $167.6 million of
goodwill was assigned to the banking segment. The core deposit intangible has an estimated life of ten years.



The following represents supplemental pro forma disclosure required by SFAS No. 141, Business Combinations, of total revenue, net income, and
earnings per share as though the business combinations had been completed at the beginning of the earliest comparable period.



|                           |  |                                              |         |      |        
|-------------------------- |  | -------------------------------------------- | ------- | ---- | -------
|                           |  | Year Ended December 31,                     
|                           |  | 2003                                         |         | 2002
|                           |  | (Dollars in thousands,except per share data)
|Total revenue              |  | $                                            | 355,566 |      | 334,119
|Net income                 |  |                                              | 111,955 |      | 109,482
|Basic earnings per share   |  |                                              | 3.36    |      | 3.27   
|Diluted earnings per share |  |                                              | 3.28    |      | 3.18   
|                           |  |                                              |         |      |        



3. Investment Securities Available
for Sale



Investment securities available for sale are
summarized below:



|                                                |  |                        |         |                   |       |                  |        |   |           |         |               |   |            |  |                  |  |        |           |  |        
|----------------------------------------------- |  | ---------------------- | ------- | ----------------- | ----- | ---------------- | ------ | - | --------- | ------- | ------------- | - | ---------- |  | ---------------- |  | ------ | --------- |  | -------
|                                                |  | December 31, 2003      |         | December 31, 2002
|                                                |  | AmortizedCost          |         | GrossGains        |       | UnrealizedLosses |        |   | FairValue |         | AmortizedCost |   | GrossGains |  | UnrealizedLosses |  |        | FairValue
|                                                |  | (Dollars in thousands)
|United States government and agency obligations |  | $                      | 227,834 |                   | 1,558 |                  | (466   | ) |           | 228,926 |               | $ | 96,631     |  | 2,712            |  | (203   | )         |  | 99,140 
|Asset-backed securities                         |  |                        | 47,067  |                   | 1,939 |                  | (1,268 | ) |           | 47,738  |               |   | 66,736     |  | 413              |  | (4,619 | )         |  | 62,530 
|Corporate debt securities                       |  |                        | 7,683   |                   | 126   |                  |       |   |           | 7,809   |               |   | 63,615     |  | 1,807            |  |       |           |  | 65,422 
|Bank trust preferred securities                 |  |                        | 62,330  |                   | 381   |                  | (43    | ) |           | 62,668  |               |   | 57,914     |  | 353              |  | (37    | )         |  | 58,230 
|Marketable equity securities                    |  |                        | 19,242  |                   | 438   |                  | (1,487 | ) |           | 18,193  |               |   | 22,704     |  | 1,297            |  | (1,088 | )         |  | 22,913 
|                                                |  |                        |         |                   |       |                  |        |   |           |         |               |   |            |  |                  |  |        |           |  |        
|                                                |  | $                      | 364,156 |                   | 4,442 |                  | (3,264 | ) |           | 365,334 |               |   | 307,600    |  | 6,582            |  | (5,947 | )         |  | 308,235
|                                                |  |                        |         |                   |       |                  |        |   |           |         |               |   |            |  |                  |  |        |           |  |        



90



---

##### Table of Contents

MAF Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements  (Continued)



The Company did not have any investment securities classified as held to maturity or trading at
December 31, 2003 or December 31, 2002.



The amortized cost and
fair value of securities at December 31, 2003, by contractual maturity, are shown in the table below. Expected maturities may differ from contractual maturities because certain borrowers have the right to call obligations without penalty. At
December 31, 2003, the Company had $239.3 million of investment securities with call options, of which $157.1 million were callable within one year.



|                             |  |                        |         |           |        
|---------------------------- |  | ---------------------- | ------- | --------- | -------
|                             |  | AmortizedCost          |         | FairValue
|                             |  | (Dollars in thousands)
|Debt securities:             |  |                        |         |           |        
|Under one year               |  | $                      | 19,083  |           | 19,195 
|Over 1 to 5 years            |  |                        | 210,434 |           | 211,650
|Over 5 to 10 years           |  |                        |        |           |       
|Over 10 years                |  |                        | 68,330  |           | 68,558 
|                             |  |                        |         |           |        
|Total debt securities        |  |                        | 297,847 |           | 299,403
|                             |  |                        |         |           |        
|Asset-backed securities      |  |                        | 47,067  |           | 47,738 
|Marketable equity securities |  |                        | 19,242  |           | 18,193 
|                             |  |                        |         |           |        
|Total investment securities  |  | $                      | 364,156 |           | 365,334
|                             |  |                        |         |           |        



Activity in the sales
of investment securities available for sale is as follows:



|                                   |  |                         |         |   |      |        |   |      |      
|---------------------------------- |  | ----------------------- | ------- | - | ---- | ------ | - | ---- | -----
|                                   |  | Year Ended December 31,
|                                   |  | 2003                    |         |   | 2002 |        |   | 2001
|                                   |  | (Dollars in thousands) 
|Total proceeds on sale             |  | $                       | 53,218  |   |      | 67,891 |   |      | 6,515
|                                   |  |                         |         |   |      |        |   |      |      
|Gross realized gains               |  | $                       | 3,451   |   |      | 3,176  |   |      | 879  
|Gross realized losses              |  |                         | (332    | ) |      | (110   | ) |      |     
|                                   |  |                         |         |   |      |        |   |      |      
|Net gain on sale                   |  |                         | 3,119   |   |      | 3,066  |   |      | 879  
|Losses deemed other than temporary |  |                         | (10,062 | ) |      | (2,986 | ) |      |     
|                                   |  |                         |         |   |      |        |   |      |      
|Net gain (loss)                    |  | $                       | (6,943  | ) |      | 80     |   |      | 879  
|                                   |  |                         |         |   |      |        |   |      |      



During 2003, the
Company wrote down a $9.3 million floating-rate debt security by $6.9 million due to insufficient cash flow underlying the repayment of the security. This security was collateralized by various aircraft assets and leases. Another $7.4 million
floating-rate security collateralized debt obligation which was secured by various high yield debt securities was written down by $3.1 million during 2003. The charge taken in 2002 related to a third $8.5 million floating-rate security that was in
default following its maturity in December 2002. This security is collateralized by various aircraft leased to a major carrier that filed bankruptcy in the fourth quarter of 2002. The two aircraft-related securities are on non-accrual status and
classified as non-performing assets at December 31, 2003.



91



---

##### Table of Contents

MAF Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements  (Continued)



The following table discloses the securities in the Companys investment portfolio that have
unrealized losses aggregated by each category of investment as of December 31, 2003:



|                                     |  |                                                      |        |                  |                     |        |           |       |                  |        |  |           |        |                  |  |   |        |  |   |        |  
|------------------------------------ |  | ---------------------------------------------------- | ------ | ---------------- | ------------------- | ------ | --------- | ----- | ---------------- | ------ |  | --------- | ------ | ---------------- |  | - | ------ |  | - | ------ | -
|                                     |  | Aggregate Unrealized Losses on Investment Securities |       
|                                     |  | Less than 12 months                                  |        |                  | 12 months or longer |        |           | Total |                 
|Description of Securities            |  | Fair Value                                           |        | UnrealizedLosses |                     |        | FairValue |       | UnrealizedLosses |        |  | FairValue |        | UnrealizedLosses | 
|US Treasury obligations and agencies |  | $                                                    | 32,494 |                  | $                   | (392   | )         |       | $                | 5,858  |  | $         | (74    | )                |  | $ | 38,352 |  | $ | (466   | )
|                                     |  |                                                      |        |                  |                     |       
|Asset backed securities              |  |                                                      | 12,249 |                  |                     | (1,068 | )         |       |                  | 9,800  |  |           | (200   | )                |  |   | 22,049 |  |   | (1,268 | )
|Bank trust preferred securities      |  |                                                      | 3,468  |                  |                     | (43    | )         |       |                  |       |  |           |       |                  |  |   | 3,468  |  |   | (43    | )
|Preferred marketable securities      |  |                                                      |       |                  |                     |       |           |       |                  | 7,263  |  |           | (1,487 | )                |  |   | 7,263  |  |   | (1,487 | )
|                                     |  |                                                      |        |                  |                     |        |           |       |                  |        |  |           |        |                  |  |   |        |  |   |        |  
|Total unrealized losses              |  | $                                                    | 48,211 |                  |                     | (1,503 | )         |       |                  | 22,921 |  |           | (1,761 | )                |  |   | 71,132 |  |   | (3,264 | )
|                                     |  |                                                      |        |                  |                     |        |           |       |                  |        |  |           |        |                  |  |   |        |  |   |        |  



Because the securities
identified in the table above are classified as available for sale, and carried at fair value with unrealized losses net of related tax effect recorded in stockholders equity, any charge to earnings in the future if the securities would be
deemed by management to be other than temporarily impaired would not be expected to have a significant impact on stockholders equity. None of the unrealized losses are related to credit deterioration. The Bank has the ability and intent to
hold these securities until market values recover. The $1.5 million of unrealized losses on marketable equity securities are on Fannie Mae and Freddie Mac floating rate preferred stock. These unrealized losses are considered temporary impairments
due to the interest rate on these securities having repriced lower in the lower interest rate environment in 2003. It is expected that market values will recover in the future as the interest rate on the securities reprice higher as market interest
rates increase.



4. Mortgage-Backed Securities Available for Sale



Mortgage-backed securities available for sale are
summarized below:



|                                    |  |                        |         |                   |        |  |            |   |                |         |                  |         |  |            |  |      |   |  |        
|----------------------------------- |  | ---------------------- | ------- | ----------------- | ------ |  | ---------- | - | -------------- | ------- | ---------------- | ------- |  | ---------- |  | ---- | - |  | -------
|                                    |  | December 31, 2003      |         | December 31, 2002
|                                    |  | Amortized Cost         |         | Gross Unrealized  |        |  | Fair Value |   | Amortized Cost |         | Gross Unrealized |         |  | Fair Value
|                                    |  |                        | Gains   |                   | Losses |  |            |   |                | Gains   |                  | Losses  |  |           
|                                    |  | (Dollars in thousands)
|Pass-through certificates:          |  |                        |         |                   |        |  |            |   |                |         |                  |         |  |            |  |      |   |  |        
|Ginnie Mae                          |  | $                      | 24,965  |                   | 147    |  | (121       | ) |                | 24,991  |                  | 11,902  |  | 205        |  | (1   | ) |  | 12,106 
|Freddie Mac                         |  |                        | 50,471  |                   | 848    |  | (7         | ) |                | 51,312  |                  | 85,379  |  | 2,053      |  | (1   | ) |  | 87,431 
|Fannie Mae                          |  |                        | 287,884 |                   | 1,793  |  | (479       | ) |                | 289,198 |                  | 28,930  |  | 972        |  | (127 | ) |  | 29,775 
|Collateralized Mortgage Obligations |  |                        | 606,391 |                   | 1,550  |  | (1,473     | ) |                | 606,468 |                  | 232,095 |  | 4,280      |  | (49  | ) |  | 236,326
|                                    |  |                        |         |                   |        |  |            |   |                |         |                  |         |  |            |  |      |   |  |        
|                                    |  | $                      | 969,711 |                   | 4,338  |  | (2,080     | ) |                | 971,969 |                  | 358,306 |  | 7,510      |  | (178 | ) |  | 365,638
|                                    |  |                        |         |                   |        |  |            |   |                |         |                  |         |  |            |  |      |   |  |        



At December 31, 2003
and 2002 the Company did not have any mortgage-backed securities classified as held to maturity or trading. Collateralized Mortgage Obligations includes securities at December 31, 2003, with a cost of $151.4 million and a fair value of $154.7
million that are privately issued and collateralized by whole loans.



During the years ended December 31, 2003, and 2002, the Bank swapped $76.9 million, and $58.8 million, respectively, of loans it originated into mortgage-backed securities which were sold in the same period. Additionally, in 2003 and 2002
the Bank swapped $85.3 million and $67.6 million, respectively, of loans into mortgage-backed securities. These securities were held by the Bank at December 31, 2002. Included in mortgage-backed



92



---

##### Table of Contents

MAF Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements  (Continued)



securities at December 31, 2003 and 2002 are $430,000 and $68.2 million of loans originated by the Bank and swapped
into mortgage-backed securities.



Activity in the sales of
mortgage-backed securities available for sale is as follows:



|                       |  |                         |         |      |        |      |  
|---------------------- |  | ----------------------- | ------- | ---- | ------ | ---- | -
|                       |  | Year Ended December 31,
|                       |  | 2003                    |         | 2002 |        | 2001
|                       |  | (Dollars in thousands) 
|Total proceeds on sale |  | $                       | 258,956 |      | 14,283 |      | 
|                       |  |                         |         |      |        |      |  
|Gross realized gains   |  | $                       | 6,006   |      | 39     |      | 
|Gross realized losses  |  |                         |        |      |       |      | 
|                       |  |                         |         |      |        |      |  
|Net gain               |  | $                       | 6,006   |      | 39     |      | 
|                       |  |                         |         |      |        |      |  



The following table
discloses the securities in the Companys portfolio that have unrealized losses aggregated by each category of investment as of December 31, 2003:



|                                    |  |                                                            |         |                  |                     |   |           |       |                  |      |   |           |         |                  |        |  
|----------------------------------- |  | ---------------------------------------------------------- | ------- | ---------------- | ------------------- | - | --------- | ----- | ---------------- | ---- | - | --------- | ------- | ---------------- | ------ | -
|                                    |  | Aggregate Unrealized Losses on Mortgage-Related Securities |        
|                                    |  | Less than 12 months                                        |         |                  | 12 months or longer |   |           | Total |                 
|Description of Securities           |  | Fair Value                                                 |         | UnrealizedLosses |                     |   | FairValue |       | UnrealizedLosses |      |   | FairValue |         | UnrealizedLosses |       
|Pass-through certificates           |  | $                                                          | 78,053  |                  | (471                | ) |           | 2,002 |                  | (136 | ) |           | 80,055  |                  | (607   | )
|Collateralized Mortgage Obligations |  |                                                            | 214,833 |                  | (1,473              | ) |           |      |                  |     |   |           | 214,833 |                  | (1,473 | )
|                                    |  |                                                            |         |                  |                     |   |           |       |                  |      |   |           |         |                  |        |  
|Total unrealized losses             |  | $                                                          | 292,886 |                  | (1,944              | ) |           | 2,002 |                  | (136 | ) |           | 294,888 |                  | (2,080 | )
|                                    |  |                                                            |         |                  |                     |   |           |       |                  |      |   |           |         |                  |        |  



Because the securities
identified in the table above are classified as available for sale, and carried at fair value with unrealized losses net of related tax effect recorded in stockholders equity, any charge to earnings in the future if the securities would be
deemed by management to be other than temporarily impaired would not be expected to have a significant impact on stockholders equity. None of the unrealized losses are related to credit deterioration. The Bank has the ability and intent to
hold these securities until market values recover.



5. Loans Receivable Held
For Sale



The Bank classifies loan originations that it
intends to sell in the secondary market as held for sale at the time of origination. At December 31, 2003 the Bank had $44.5 million of fixed-rate loans with a weighted average rate of 6.00% classified as held for sale. At December 31, 2002 the Bank
had $127.6 million of fixed-rate loans with a weighted average rate of 6.09% and $40.2 million of adjustable-rate loans with a weighted average rate of 4.80% classified as held for sale.



93



---

##### Table of Contents

MAF Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements  (Continued)



6. Loans Receivable



Loans receivable are summarized as follows:



|                                                              |  |                        |           |   |      |           |  
|------------------------------------------------------------- |  | ---------------------- | --------- | - | ---- | --------- | -
|                                                              |  | December 31,           |          
|                                                              |  | 2003                   |           |   | 2002 |          
|                                                              |  | (Dollars in thousands) |          
|Real estate loans:                                            |  |                        |           |   |      |           |  
|One-to-four family residential                                |  | $                      | 3,924,965 |   |      | 3,470,937 |  
|Multi-family                                                  |  |                        | 621,255   |   |      | 260,318   |  
|Commercial                                                    |  |                        | 535,709   |   |      | 142,493   |  
|Construction                                                  |  |                        | 135,704   |   |      | 48,179    |  
|Land                                                          |  |                        | 75,012    |   |      | 42,530    |  
|                                                              |  |                        |           |   |      |           |  
|Total real estate loans                                       |  |                        | 5,292,645 |   |      | 3,964,457 |  
|Consumer loans:                                               |  |                        |           |   |      |           |  
|Equity lines of credit                                        |  |                        | 898,452   |   |      | 387,025   |  
|Home equity loans                                             |  |                        | 67,119    |   |      | 32,120    |  
|Other                                                         |  |                        | 38,238    |   |      | 6,255     |  
|                                                              |  |                        |           |   |      |           |  
|Total consumer loans                                          |  |                        | 1,003,809 |   |      | 425,400   |  
|Commercial business loans                                     |  |                        | 128,266   |   |      | 20,592    |  
|                                                              |  |                        |           |   |      |           |  
|Total loans receivable                                        |  |                        | 6,424,720 |   |      | 4,410,449 |  
|Unearned discounts, premiums, and deferred loan expenses, net |  |                        | 16,614    |   |      | 2,875     |  
|Loans in process                                              |  |                        | (82,183   | ) |      | (30,689   | )
|Allowance for loan losses                                     |  |                        | (34,555   | ) |      | (19,483   | )
|                                                              |  |                        |           |   |      |           |  
|                                                              |  | $                      | 6,324,596 |   |      | 4,363,152 |  
|                                                              |  |                        |           |   |      |           |  



Adjustable-rate loans
included in loans receivable totaled $4.64 billion and $2.73 billion at December 31, 2003 and 2002, respectively.



Included in loans receivable are loans to directors and Regulation O officers of $6.8 million and $3.8 million at December 31, 2003 and 2002,
respectively. New loans originated or acquired through acquisition during the current year totaled $3.3 million, offset by repayments of $309,000.



Allowance for loan losses.Activity in the allowance for loan losses is summarized as follows for the years indicated:



|                                 |  |                         |        |   |      |        |   |      |        |  
|-------------------------------- |  | ----------------------- | ------ | - | ---- | ------ | - | ---- | ------ | -
|                                 |  | Year Ended December 31, |       
|                                 |  | 2003                    |        |   | 2002 |        |   | 2001 |       
|                                 |  | (Dollars in thousands)  |       
|Balance at beginning of year     |  | $                       | 19,483 |   |      | 19,607 |   |      | 18,258 |  
|Provision for loan losses        |  |                         |       |   |      | 300    |   |      |       |  
|Balance acquired in acquisitions |  |                         | 15,371 |   |      |       |   |      | 1,408  |  
|Charge-offs                      |  |                         | (369   | ) |      | (617   | ) |      | (104   | )
|Recoveries                       |  |                         | 70     |   |      | 193    |   |      | 45     |  
|                                 |  |                         |        |   |      |        |   |      |        |  
|Balance at end of year           |  | $                       | 34,555 |   |      | 19,483 |   |      | 19,607 |  
|                                 |  |                         |        |   |      |        |   |      |        |  



At December 31, 2003
and 2002, the Bank had $32.8 million and $25.4 million, respectively in loans that were on non-accrual status. Interest income that would have been recorded on non-accrual loans amounted to $1.4 million, $1.4 million and $1.1 million, for the years
ended December 31, 2003, 2002 and 2001, respectively, had these loans been accruing under their contractual terms. Interest income recognized on non-accrual loans and included in interest income was $718,000, $562,000 and $351,000, for the years
ended December 31, 2003, 2002 and 2001, respectively.



At
December 2003 and 2002, there were no commitments to lend additional funds to borrowers whose loans were determined to be non-performing. At December 31, 2003 and 2002, the Company had $2.6 million and $1.8 million of impaired loans respectively.
The average balance of impaired loans for 2003 and 2002 was $1.8 million and $4.8 million, respectively. There were no specific allowances established for these loans.



94



---

##### Table of Contents

MAF Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements  (Continued)



7. Accrued Interest Receivable



Accrued interest receivable is summarized as follows:



|                                 |  |                        |        |   |      |        |  
|-------------------------------- |  | ---------------------- | ------ | - | ---- | ------ | -
|                                 |  | December 31,           |       
|                                 |  | 2003                   |        |   | 2002 |       
|                                 |  | (Dollars in thousands) |       
|Investment securities            |  | $                      | 3,319  |   |      | 5,846  |  
|Mortgage-backed securities       |  |                        | 3,544  |   |      | 1,775  |  
|Loans receivable                 |  |                        | 26,780 |   |      | 21,829 |  
|Reserve for uncollected interest |  |                        | (2,475 | ) |      | (1,937 | )
|                                 |  |                        |        |   |      |        |  
|                                 |  | $                      | 31,168 |   |      | 27,513 |  
|                                 |  |                        |        |   |      |        |  



8. Real Estate Held for Development
or Sale



Real estate held for development or sale is
summarized by project as follows:



|                         |  |                        |        |      |       
|------------------------ |  | ---------------------- | ------ | ---- | ------
|                         |  | December 31,          
|                         |  | 2003                   |        | 2002
|                         |  | (Dollars in thousands)
|Tallgrass of Naperville  |  | $                      | 2,231  |      | 3,095 
|Shenandoah               |  |                        | 3,451  |      | 7,794 
|Springbank of Plainfield |  |                        | 26,411 |      | 4,049 
|                         |  |                        |        |      |       
|                         |  | $                      | 32,093 |      | 14,938
|                         |  |                        |        |      |       



Income from real
estate operations is summarized by project for the years indicated:



|                        |  |                         |        |      |       |      |       
|----------------------- |  | ----------------------- | ------ | ---- | ----- | ---- | ------
|                        |  | Year Ended December 31,
|                        |  | 2003                    |        | 2002 |       | 2001
|                        |  | (Dollars in thousands) 
|Tallgrass of Naperville |  | $                       | 5,143  |      | 9,570 |      | 10,712
|Shenandoah              |  |                         | 6,182  |      | 147   |      |      
|Woodbridge              |  |                         |       |      |      |      | 501   
|Hannaford Farm          |  |                         |       |      |      |      | 271   
|                        |  |                         |        |      |       |      |       
|                        |  | $                       | 11,325 |      | 9,717 |      | 11,484
|                        |  |                         |        |      |       |      |       



Interest capitalized
to real estate held for development or sale amounted to $-0-, $96,000 and $168,000 for the years ended December 31, 2003, 2002 and 2001, respectively.



9. Premises and Equipment



Premises and equipment are summarized as follows:



|                                                |  |                        |      |              |         |      |  |         |  
|----------------------------------------------- |  | ---------------------- | ---- | ------------ | ------- | ---- |  | ------- | -
|                                                |  | Estimated Useful Life  |      | December 31, |        
|                                                |  |                        | 2003 |              |         | 2002 | 
|                                                |  | (Dollars in thousands) |     
|Land                                            |  |                        |      | $            | 23,249  |      |  | 14,108  |  
|Office buildings                                |  | 10 - 50 years          |      |              | 64,081  |      |  | 41,124  |  
|Furniture, fixtures and equipment               |  | 1 - 10 years           |      |              | 47,565  |      |  | 32,150  |  
|Computer equipment                              |  | 3 - 7 years            |      |              | 9,917   |      |  | 6,425   |  
|Leasehold improvements                          |  | 1 - 27 years           |      |              | 12,751  |      |  | 8,021   |  
|                                                |  |                        |      |              |         |      |  |         |  
|Total premises and equipment, at cost           |  |                        |      |              | 157,563 |      |  | 101,828 |  
|Less: accumulated depreciation and amortization |  |                        |      |              | (34,746 | )    |  | (29,336 | )
|                                                |  |                        |      |              |         |      |  |         |  
|                                                |  |                        |      | $            | 122,817 |      |  | 72,492  |  
|                                                |  |                        |      |              |         |      |  |         |  



Depreciation and
amortization of premises and equipment, included in data processing expense and office occupancy and equipment expense was $8.2 million, $6.5 million and $5.0 million for the years ended December 31, 2003, 2002 and 2001, respectively. Occupancy
expense is reduced by rental income from leased premises totaling $1.0 million, $1.1 million and $609,000 for the years ended December 31, 2003, 2002 and 2001, respectively.



95



---

##### Table of Contents

MAF Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements  (Continued)



The Bank is obligated under non-cancelable leases primarily for office space. Rent expense under
these leases for the years ended December 31, 2003, 2002 and 2001, was $3.6 million, $2.6 million, and $1.4 million, respectively. The projected minimum rentals under existing leases as of December 31, 2003 is as follows (in thousands):



|                        |  |   |       
|----------------------- |  | - | ------
|Year Ended December 31, |  |  
|2004                    |  | $ | 7,300 
|2005                    |  |   | 6,300 
|2006                    |  |   | 6,100 
|2007                    |  |   | 5,800 
|2008                    |  |   | 5,800 
|2009 and thereafter     |  |   | 52,800
|                        |  |   |       



10. Goodwill and Intangibles



The following is a summary of net income and
earnings per share for the years ended December 31, 2003, 2002 and 2001 as adjusted to eliminate the amortization of goodwill for those periods under SFAS 142 and 147:



|                                            |  |                                              |        |      |        |      |       
|------------------------------------------- |  | -------------------------------------------- | ------ | ---- | ------ | ---- | ------
|                                            |  | For the year ended December 31,             
|                                            |  | 2003                                         |        | 2002 |        | 2001
|                                            |  | (Dollars in thousands, except pershare data)
|Net income as reported                      |  | $                                            | 83,433 |      | 73,971 |      | 59,475
|Add back: goodwill amortization, net of tax |  |                                              |       |      |       |      | 3,001 
|                                            |  |                                              |        |      |        |      |       
|Net income-adjusted                         |  |                                              | 83,433 |      | 73,971 |      | 62,476
|                                            |  |                                              |        |      |        |      |       
|Basic earnings per share of common stock:   |  |                                              |        |      |        |      |       
|Net income-as reported                      |  |                                              | 3.35   |      | 3.19   |      | 2.62  
|Goodwill amortization, net of tax           |  |                                              |       |      |       |      | .13   
|                                            |  |                                              |        |      |        |      |       
|Net income-adjusted                         |  |                                              | 3.35   |      | 3.19   |      | 2.75  
|                                            |  |                                              |        |      |        |      |       
|Diluted earnings per share of common stock: |  |                                              |        |      |        |      |       
|Net income-as reported                      |  |                                              | 3.26   |      | 3.11   |      | 2.56  
|Goodwill amortization, net of tax           |  |                                              |       |      |       |      | .13   
|                                            |  |                                              |        |      |        |      |       
|Net income-adjusted                         |  | $                                            | 3.26   |      | 3.11   |      | 2.69  
|                                            |  |                                              |        |      |        |      |       



The changes in the
carrying amount of goodwill, by segment, for the years ended December 31, 2003, 2002 and 2001 are as follows:



|                                            |  |                        |         |   |                 |   |       |         |  
|------------------------------------------- |  | ---------------------- | ------- | - | --------------- | - | ----- | ------- | -
|                                            |  | Banking                |         |   | LandDevelopment |   | Total |        
|                                            |  | (Dollars in thousands) |        
|Balance as of December 31, 2000             |  |                        | 61,962  |   |                 |  |       | 61,962  |  
|Addition related to Mid Town acquisition    |  |                        | 38,134  |   |                 |  |       | 38,134  |  
|Amortization expense                        |  |                        | (3,245  | ) |                 |  |       | (3,245  | )
|                                            |  |                        |         |   |                 |   |       |         |  
|Balance as of December 31, 2001             |  |                        | 96,851  |   |                 |  |       | 96,851  |  
|Adjustments related to Mid Town acquisition |  |                        | (2,055  | ) |                 |  |       | (2,055  | )
|                                            |  |                        |         |   |                 |   |       |         |  
|Balance at December 31, 2002                |  |                        | 94,796  |   |                 |  |       | 94,796  |  
|                                            |  |                        |         |   |                 |   |       |         |  
|Addition related to Umbrella acquisition    |  |                        | 587     |   |                 |  |       | 587     |  
|Addition related to Fidelity acquisition    |  |                        | 43,265  |   |                 |  |       | 43,265  |  
|Addition related to St. Francis acquisition |  |                        | 124,312 |   |                 |  |       | 124,312 |  
|Adjustments related to prior acquisitions   |  |                        | (472    | ) |                 |  |       | (472    | )
|                                            |  |                        |         |   |                 |   |       |         |  
|Balance at December 31, 2003                |  | $                      | 262,488 |   |                 |  |       | 262,488 |  
|                                            |  |                        |         |   |                 |   |       |         |  



96



---

##### Table of Contents

MAF Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements  (Continued)



The changes in the carrying amount of intangibles for the years ended December 31, 2003, 2002 and
2001 are as follows:



|                                  |  |                        |        |   |                         |         |   |       |         |  
|--------------------------------- |  | ---------------------- | ------ | - | ----------------------- | ------- | - | ----- | ------- | -
|                                  |  | CoreDepositIntangibles |        |   | MortgageServicingRights |         |   | Total |        
|                                  |  | (Dollars in thousands) |       
|Balance at December 31, 2000      |  |                        | 6,902  |   |                         | 5,107   |   |       | 12,009  |  
|Additions                         |  |                        | 3,250  |   |                         | 9,782   |   |       | 13,032  |  
|Amortization expense              |  |                        | (1,333 | ) |                         | (3,454  | ) |       | (4,787  | )
|Valuation allowance               |  |                        |       |   |                         | (904    | ) |       | (904    | )
|                                  |  |                        |        |   |                         |         |   |       |         |  
|Balance at December 31, 2001      |  |                        | 8,819  |   |                         | 10,531  |   |       | 19,350  |  
|                                  |  |                        |        |   |                         |         |   |       |         |  
|Additions                         |  |                        |       |   |                         | 11,943  |   |       | 11,943  |  
|Amortization expense              |  |                        | (1,649 | ) |                         | (7,214  | ) |       | (8,863  | )
|Valuation allowance               |  |                        |       |   |                         | (2,300  | ) |       | (2,300  | )
|                                  |  |                        |        |   |                         |         |   |       |         |  
|Balance at December 31, 2002      |  |                        | 7,170  |   |                         | 12,960  |   |       | 20,130  |  
|                                  |  |                        |        |   |                         |         |   |       |         |  
|Additions                         |  |                        | 8,623  |   |                         | 22,960  |   |       | 31,583  |  
|Amortization expense              |  |                        | (1,732 | ) |                         | (12,922 | ) |       | (14,654 | )
|Valuation allowance recovery, net |  |                        |       |   |                         | 1,130   |   |       | 1,130   |  
|                                  |  |                        |        |   |                         |         |   |       |         |  
|Balance at December 31, 2003      |  | $                      | 14,061 |   |                         | 24,128  |   |       | 38,189  |  
|                                  |  |                        |        |   |                         |         |   |       |         |  



The following is a
summary of intangible assets subject to amortization:



|                             |  |                         |        |                         |                         |   |                     |        |                         |         |  
|---------------------------- |  | ----------------------- | ------ | ----------------------- | ----------------------- | - | ------------------- | ------ | ----------------------- | ------- | -
|                             |  | As of December 31, 2003 |        |                         | As of December 31, 2002 |  
|                             |  | GrossCarryingAmount     |        | AccumulatedAmortization |                         |   | GrossCarryingAmount |        | AccumulatedAmortization |        
|                             |  | (Dollars in thousands)  |       
|Core deposit intangibles     |  | $                       | 24,570 |                         | (10,509                 | ) |                     | 15,947 |                         | (8,777  | )
|Mortgage servicing rights(1) |  |                         | 26,988 |                         | (2,860                  | ) |                     | 15,207 |                         | (2,247  | )
|                             |  |                         |        |                         |                         |   |                     |        |                         |         |  
|Total                        |  | $                       | 51,558 |                         | (13,369                 | ) |                     | 31,154 |                         | (11,024 | )
|                             |  |                         |        |                         |                         |   |                     |        |                         |         |  

---

|(1) | The gross carrying amounts for December 31, 2003 and 2002 do not include impairment reserves of $2.2 million and $3.4 million respectively.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------



Amortization expense for core deposit intangibles and mortgage servicing
rights for the year ended December 31, 2003 and estimates for the five years thereafter are as follows. These estimates relate to the carrying value of the Banks core deposit intangibles and mortgage servicing rights as of December 31, 2003.



|                                     |  |                        |       |                         |       
|------------------------------------ |  | ---------------------- | ----- | ----------------------- | ------
|                                     |  | CoreDepositIntangibles |       | MortgageServicingRights
|                                     |  | (Dollars in thousands)
|Aggregate Amortization Expense:      |  |                        |       |                         |       
|For the Year ended December 31, 2003 |  | $                      | 1,732 |                         | 12,922
|Estimated Amortization Expense:      |  |                        |       |                         |       
|For the Year Ended December 31, 2004 |  |                        | 2,920 |                         | 7,200 
|For the Year Ended December 31, 2005 |  |                        | 2,500 |                         | 5,100 
|For the Year Ended December 31, 2006 |  |                        | 1,900 |                         | 3,800 
|For the Year Ended December 31, 2007 |  |                        | 1,300 |                         | 2,900 
|For the Year Ended December 31, 2008 |  |                        | 1,200 |                         | 2,200 
|                                     |  |                        |       |                         |       



Loan servicing and mortgage
servicing rights.The Bank services loans for the benefit of others pursuant to loan servicing agreements. Under these agreements, the Bank typically collects from the borrower monthly payments of principal and interest, as well as funds for the
payment of real estate taxes and insurance. The Bank retains its loan servicing fee from these payments and remits the balance of the principal and interest payments to the various investors. Mortgage loans serviced for others are not included in
the accompanying consolidated statements of financial condition. The unpaid principal balances of these loans were $3.33 billion, $2.02 billion and $1.40 billion, at December 31, 2003, 2002, and 2001, respectively. Non-interest bearing custodial
balances maintained in connection with mortgage loans serviced for others (included in deposits) were $40.0 million and $54.1 million at December 31, 2003 and 2002, respectively.



97



---

##### Table of Contents

MAF Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements  (Continued)



11. Deposits



Deposit account balances by interest rate are summarized as follows:



|                              |  |                        |           |           |                   |   |                     |      |   |        |   |           |  |       |                     |  |      |  
|----------------------------- |  | ---------------------- | --------- | --------- | ----------------- | - | ------------------- | ---- | - | ------ | - | --------- |  | ----- | ------------------- |  | ---- | -
|                              |  | December 31, 2003      |           |           | December 31, 2002 |  
|                              |  | Amount                 |           | % ofTotal |                   |   | WeightedAverageRate |      |   | Amount |   | % ofTotal |  |       | WeightedAverageRate | 
|                              |  | (Dollars in thousands) |          
|Commercial checking           |  | $                      | 216,489   |           | 3.9               | % |                     |     |   |        | $ | 150,005   |  | 4.0   | %                   |  |     | %
|Non-interest bearing checking |  |                        | 218,446   |           | 3.9               |   |                     |     |   |        |   | 139,119   |  | 3.7   |                     |  |     |  
|Interest bearing NOW accounts |  |                        | 555,675   |           | 10.0              |   |                     | .42  |   |        |   | 362,889   |  | 9.7   |                     |  | .74  |  
|Money market accounts         |  |                        | 904,728   |           | 16.2              |   |                     | .78  |   |        |   | 458,144   |  | 12.2  |                     |  | 1.43 |  
|Passbook accounts             |  |                        | 1,353,881 |           | 24.2              |   |                     | .66  |   |        |   | 1,006,590 |  | 26.8  |                     |  | 1.24 |  
|                              |  |                        |           |           |                   |   |                     |      |   |        |   |           |  |       |                     |  |      |  
|                              |  |                        | 3,249,219 |           | 58.2              |   |                     | .56  |   |        |   | 2,116,747 |  | 56.4  |                     |  | 1.03 |  
|                              |  |                        |           |           |                   |   |                     |      |   |        |   |           |  |       |                     |  |      |  
|Certificate accounts:         |  |                        |           |           |                   |   |                     |      |   |        |   |           |  |       |                     |  |      |  
|.75% to 1.99%                 |  |                        | 1,056,024 |           | 19.0              |   |                     | 1.44 |   |        |   | 330,189   |  | 8.8   |                     |  | 1.66 |  
|2.00% to 2.99%                |  |                        | 479,922   |           | 8.6               |   |                     | 2.54 |   |        |   | 543,576   |  | 14.5  |                     |  | 2.49 |  
|3.00% to 3.99%                |  |                        | 433,245   |           | 7.8               |   |                     | 3.48 |   |        |   | 338,585   |  | 9.0   |                     |  | 3.40 |  
|4.00% and greater             |  |                        | 354,534   |           | 6.3               |   |                     | 4.76 |   |        |   | 421,927   |  | 11.3  |                     |  | 5.11 |  
|                              |  |                        |           |           |                   |   |                     |      |   |        |   |           |  |       |                     |  |      |  
|                              |  |                        | 2,323,725 |           | 41.7              |   |                     | 2.55 |   |        |   | 1,634,277 |  | 43.6  |                     |  | 3.19 |  
|                              |  |                        |           |           |                   |   |                     |      |   |        |   |           |  |       |                     |  |      |  
|Unamortized premium           |  |                        | 7,511     |           | .1                |   |                     |      |   |        |   | 213       |  |      |                     |  |      |  
|                              |  |                        |           |           |                   |   |                     |      |   |        |   |           |  |       |                     |  |      |  
|Total deposits                |  | $                      | 5,580,455 |           | 100.0             | % |                     | 1.39 | % |        | $ | 3,751,237 |  | 100.0 | %                   |  | 1.97 | %
|                              |  |                        |           |           |                   |   |                     |      |   |        |   |           |  |       |                     |  |      |  



The aggregate amount
of certificates of deposit with a minimum denomination of $100,000 (jumbo certificates) was $536.4 million and $316.3 million at December 31, 2003 and 2002, respectively.



Scheduled maturities of certificate accounts at December 31, 2003 are as follows (in thousands):



|                  |  |   |          
|----------------- |  | - | ---------
|12 months or less |  | $ | 1,513,701
|13 to 24 months   |  |   | 529,677  
|25 to 36 months   |  |   | 139,421  
|Over 36 months    |  |   | 140,926  
|                  |  |   |          
|                  |  | $ | 2,323,725
|                  |  |   |          



The certificate
categories above include approximately $70.0 million of brokered deposits at December 31, 2003 acquired with the St. Francis acquisition. At December 31, 2003, the original maturities of the brokered certificates ranged from two to fifteen months
and the weighted average interest rate on these certificates was 3.40%.



Interest expense on deposit accounts is summarized as follows for the periods indicated:



|                                           |  |                         |        |      |        |      |        
|------------------------------------------ |  | ----------------------- | ------ | ---- | ------ | ---- | -------
|                                           |  | Year Ended December 31,
|                                           |  | 2003                    |        | 2002 |        | 2001
|                                           |  | (Dollars in thousands) 
|Interest-bearing checking and NOW accounts |  | $                       | 2,441  |      | 2,732  |      | 2,535  
|Money market accounts                      |  |                         | 5,505  |      | 9,006  |      | 9,737  
|Passbook accounts                          |  |                         | 9,276  |      | 15,733 |      | 18,022 
|Certificate accounts                       |  |                         | 43,789 |      | 63,492 |      | 90,370 
|                                           |  |                         |        |      |        |      |        
|                                           |  | $                       | 61,011 |      | 90,963 |      | 120,664
|                                           |  |                         |        |      |        |      |        



At December 31, 2003,
U.S. Treasury Notes, Freddie Mac and Fannie Mae mortgage-backed securities, as well as mortgage loans with an aggregate carrying value of $55.0 and fair value of $55.2 million, were pledged as collateral for certain jumbo certificates.



98



---

##### Table of Contents

MAF Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements  (Continued)



12. Borrowed Funds



The following table is a summary of the Companys borrowed funds at December 31, 2003 and 2002. The weighted average rates are contractual rates
and are not adjusted for the effect of purchase accounting adjustments. The unamortized premium was created as part of the purchase accounting adjustments in the acquisitions of Fidelity and St. Francis to mark the borrowings to fair value.



|                                        |  |                        |  |                     |   |  |        |           |                     |      |   |        |   |          
|--------------------------------------- |  | ---------------------- |  | ------------------- | - |  | ------ | --------- | ------------------- | ---- | - | ------ | - | ---------
|                                        |  | December 31, 2003      |  | December 31, 2002  
|                                        |  | Interest Rate Range    |  | WeightedAverageRate |   |  | Amount |           | WeightedAverageRate |      |   | Amount
|                                        |  | (Dollars in thousands)
|Fixed-rate advances from FHLB due:      |  |                        |  |                     |   |  |        |           |                     |      |   |        |   |          
|Within 1 year                           |  | 1.27%   -     7.22%    |  | 5.32                | % |  | $      | 390,000   |                     | 6.08 | % |        | $ | 135,500  
|1 to 2 years                            |  | 2.24       -     7.20  |  | 5.34                |   |  |        | 619,375   |                     | 5.87 |   |        |   | 310,000  
|2 to 3 years                            |  | 1.75       -     6.82  |  | 4.30                |   |  |        | 210,000   |                     | 5.33 |   |        |   | 295,000  
|3 to 4 years                            |  | 3.23       -     4.34  |  | 3.82                |   |  |        | 150,000   |                     | 4.66 |   |        |   | 155,000  
|4 to 5 years                            |  | 2.49       -     5.86  |  | 4.90                |   |  |        | 375,000   |                     | 3.82 |   |        |   | 150,000  
|5 to 6 years                            |  | 2.54       -     5.86  |  | 4.67                |   |  |        | 75,000    |                     | 5.07 |   |        |   | 350,000  
|6 to 7 years                            |  | 2.77       -     5.42  |  | 3.65                |   |  |        | 105,000   |                     | 5.73 |   |        |   | 50,000   
|7 to 8 years                            |  |           -          |  |                    |   |  |        |          |                     | 5.42 |   |        |   | 30,000   
|                                        |  |                        |  |                     |   |  |        |           |                     |      |   |        |   |          
|Total fixed rate advances               |  | 1.27       -     7.22  |  | 4.90                |   |  |        | 1,924,375 |                     | 5.24 |   |        |   | 1,475,500
|Adjustable-rate advances from FHLB due: |  |                        |  |                     |   |  |        |           |                     |      |   |        |   |          
|Within 1 year                           |  | 1.16       -     1.16  |  | 1.16                |   |  |        | 30,000    |                     |     |   |        |   |         
|1 to 2 years                            |  | 1.18       -     1.20  |  | 1.19                |   |  |        | 100,000   |                     | 1.39 |   |        |   | 30,000   
|2 to 3 years                            |  | 1.21       -     1.21  |  | 1.21                |   |  |        | 50,000    |                     |     |   |        |   |         
|                                        |  |                        |  |                     |   |  |        |           |                     |      |   |        |   |          
|Total adjustable rate advances          |  | 1.16       -     1.21  |  | 1.19                |   |  |        | 180,000   |                     | 1.39 |   |        |   | 30,000   
|                                        |  |                        |  |                     |   |  |        |           |                     |      |   |        |   |          
|Total advances from FHLB                |  | 1.16%    -     7.22%   |  | 4.58                |   |  |        | 2,104,375 |                     | 5.17 |   |        |   | 1,505,500
|                                        |  |                        |  |                     |   |  |        |           |                     |      |   |        |   |          
|Unsecured term bank loan                |  |                        |  | 2.26                |   |  |        | 45,000    |                     | 2.53 |   |        |   | 51,000   
|Unsecured line of credit                |  |                        |  | 2.17                |   |  |        | 10,000    |                     |     |   |        |   |         
|Other borrowings                        |  |                        |  | 1.55                |   |  |        | 120,977   |                     |     |   |        |   |         
|Unamortized premium                     |  |                        |  |                    |   |  |        | 19,075    |                     |     |   |        |   |         
|                                        |  |                        |  |                     |   |  |        |           |                     |      |   |        |   |          
|Total borrowed funds                    |  |                        |  | 4.36                | % |  | $      | 2,299,427 |                     | 5.08 | % |        | $ | 1,556,500
|                                        |  |                        |  |                     |   |  |        |           |                     |      |   |        |   |          



Federal Home Loan
Bank of Chicago Advances.The Bank has adopted a collateral pledge agreement whereby the Bank has agreed to at all times keep on hand, free of all other pledges, liens, and encumbrances, first mortgages with unpaid principal balances aggregating
no less than 167% of the outstanding secured advances from the Federal Home Loan Bank (FHLB) of Chicago. All stock in the FHLB of Chicago is pledged as additional collateral for these advances. The Bank also pledged $418.0 million of
mortgage-backed securities with a fair value of $418.5 million as collateral for these borrowings.



Included in FHLB of Chicago advances at December 31, 2003 are $710.0 million of fixed-rate advances with original scheduled maturities of 5 to 10 years,
which are putable at the discretion of the FHLB of Chicago as follows: $505.0 million at 5.66% in 2004, $130.0 million at 3.51% in 2005, $75.0 million at 2.94% in 2006. The Bank receives a lower cost of borrowing on such advances than on similar
non-putable long-term advances in return for granting the FHLB of Chicago the option to put the advances back to the Bank prior to their final maturity. At December 31, 2003, the Bank had $180.0 million of adjustable-rate advances that are indexed
to rates ranging from the three-month London interbank offering rate (LIBOR) minus three basis points to plus four basis points. The table above shows all advances at their final maturity.



99



---

##### Table of Contents

MAF Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements  (Continued)



Unsecured Term Bank Loan.In 2001, the Company obtained a $55.0 million unsecured term bank
loan in conjunction with its acquisition of Mid Town Bancorp with a final maturity of December 31, 2008. The loan agreement provides for an interest rate of one, two, three, six or twelve-month LIBOR at the option of the borrower plus 110 basis
points. At December 31, 2003, the interest rate is currently one-month LIBOR plus 110 basis points, or 2.26%. At December 31, 2003, the balance of the unsecured term loan is $45.0 million after the Company made its scheduled principal payment of
$6.0 million on December 31, 2003. Prepayments of principal are allowed without penalty at the end of any repricing period.



Scheduled principal repayments on the unsecured term bank loan are as follows as of December 31, 2003 (in thousands):



|             |  |   |       
|------------ |  | - | ------
|December 31, |  |  
|2004         |  | $ | 7,000 
|2005         |  |   | 8,000 
|2006         |  |   | 8,000 
|2007         |  |   | 11,000
|2008         |  |   | 11,000
|             |  |   |       
|             |  | $ | 45,000
|             |  |   |       



Unsecured Line of
Credit.In conjunction with the term bank loan, the Company also maintains a $55.0 million one year unsecured revolving line of credit, renewable annually on November 30. The balance outstanding on the line of credit was $10.0 million and $-0-
at December 31, 2003 and 2002 respectively. This line of credit is subject to interest rates at one, two, three, six or twelve-month LIBOR plus 100 basis points. At December 31, 2003, the interest rate is currently one-month LIBOR plus 100 basis
points or 2.17%. The financing agreements contain covenants that, among other things, require the Company to maintain a minimum stockholders equity balance and to obtain certain minimum operating results, as well as requiring the Bank to
maintain well capitalized regulatory capital levels and certain non-performing asset ratios. In addition, the Company has agreed to certain restrictions on additional indebtedness and agreed not to pledge any stock of the Bank or MAF
Developments for any purpose. At December 31, 2003, the Company was in compliance with these covenants.



Other borrowings:



Reverse Repurchase Agreements.The Bank enters into sales of securities under agreements to repurchase the identical securities (reverse repurchase agreements) with nationally recognized primary securities dealers and are
treated as financings. The securities underlying the agreements are delivered to the dealers who arrange the transaction and are reflected as assets. The usual terms of agreements require the seller, generally after a short period of time, to
repurchase the same securities as a predetermined price or yield. In conjunction with the St. Francis acquisition, the Bank assumed $105.0 million of reverse repurchase agreements. The following table presents certain information regarding reverse
repurchase agreements as of and for the periods indicated:



|                                         |  |                         |         |   |      |     |      |    
|---------------------------------------- |  | ----------------------- | ------- | - | ---- | --- | ---- | ---
|                                         |  | Year Ended December 31,
|                                         |  | 2003                    |         |   | 2002 |     | 2001
|                                         |  | (In thousands)         
|Balance at end of period                 |  | $                       | 105,000 |   |      |    |      |   
|Maximum month-end balance                |  |                         | 105,000 |   |      |    |      |   
|Average balance                          |  |                         | 105,000 |   |      |    |      |   
|Weighted average rate at end of period   |  |                         | 1.64    | % |      | N/A |      | N/A
|Weighted average rate on average balance |  |                         | 1.64    |   |      | N/A |      | N/A



100



---

##### Table of Contents

MAF Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements  (Continued)



At December 31, 2003, reverse repurchase agreements were collateralized by investment and
mortgage-backed securities with a carrying value of $113.3 million and a market value of $112.8 million. At December 31, 2003, the reverse repurchase agreements have maturities ranging from two to twenty-seven months. Securities sold under
agreements to repurchase were delivered for escrow to the broker-dealer who arranged the transactions.



Retail repurchase agreements.The Bank also has implemented a sweep program for its large commercial deposit customers. The Bank in return must
provide adequate collateral for the deposit accounts in the form of U.S. government or agency securities. The retail repurchases, which totaled $13.5 million at December 31, 2003, are collateralized by two mortgage backed securities with a carrying
value of $14.2 and market value of $14.4 million.



Other. The remaining balance in other borrowings is comprised mainly of treasury tax and loan advances totaling $1.7 million at December 31, 2003, which are collateralized by $2.0 million of an investment security with a market value
of $2.0 million.



Interest expense on borrowed funds is
summarized as follows for the periods indicated:



|                         |  |                         |        |      |        |      |       
|------------------------ |  | ----------------------- | ------ | ---- | ------ | ---- | ------
|                         |  | Year Ended December 31,
|                         |  | 2003                    |        | 2002 |        | 2001
|                         |  | (Dollars in thousands) 
|FHLB of Chicago advances |  | $                       | 74,554 |      | 78,765 |      | 91,851
|Unsecured term bank loan |  |                         | 1,210  |      | 1,634  |      | 1,650 
|Unsecured line of credit |  |                         | 33     |      | 103    |      | 324   
|Other borrowings(1)      |  |                         | 144    |      |       |      |      
|                         |  |                         |        |      |        |      |       
|                         |  | $                       | 75,941 |      | 80,502 |      | 93,825
|                         |  |                         |        |      |        |      |       

---

|(1) | Other borrowings expense includes interest expense on retail repurchase agreements, reverse
repurchase agreements, federal funds purchased and Treasury Tax & Loan advances.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------



13. Derivative Financial Instruments



The Bank enters into forward commitments to sell mortgage loans for future delivery as a means of limiting exposure to changing interest rates between the date a loan customer commits to a given rate, or closes the
loan, whichever is sooner, and the sale date, which is generally 10 to 60 days after the closing date. These commitments to sell require the Bank to deliver mortgage loans at stated coupon rates within the specified forward sale period, and subject
the Bank to risk to the extent the loans do not close. The Bank attempts to mitigate this risk by collecting a non-refundable commitment fee, when possible, and by estimating a percentage of fallout when determining the amount of forward commitments
to sell. The following is a summary of the Banks forward sales commitment activity for the periods indicated:



|                                               |  |                         |            |   |      |            |   |      |            |  
|---------------------------------------------- |  | ----------------------- | ---------- | - | ---- | ---------- | - | ---- | ---------- | -
|                                               |  | Year Ended December 31, |           
|                                               |  | 2003                    |            |   | 2002 |            |   | 2001 |           
|                                               |  | (Dollars in thousands)  |           
|Balance at beginning of year                   |  | $                       | 317,263    |   |      | 195,888    |   |      | 47,943     |  
|New forward commitments to deliver loans       |  |                         | 1,516,124  |   |      | 1,428,901  |   |      | 1,167,118  |  
|Loans delivered to satisfy forward commitments |  |                         | (1,766,954 | ) |      | (1,307,526 | ) |      | (1,019,173 | )
|                                               |  |                         |            |   |      |            |   |      |            |  
|Balance at end of year                         |  | $                       | 66,433     |   |      | 317,263    |   |      | 195,888    |  
|                                               |  |                         |            |   |      |            |   |      |            |  



101



---

##### Table of Contents

MAF Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements  (Continued)



The Company adopted SFAS No. 133 Accounting for Derivative Instruments and Hedging
Activities, on January 1, 2002. Loan commitments and forward sales are accounted for as derivative instruments with adjustments included in gain on sale of loans at each period end. At December 31, 2003 the net fair value adjustment of locked
commitments and forward sales was $(84,000).



The Bank also
enters into interest rate futures contracts to hedge its exposure to price fluctuations on firm commitments to originate loans intended for sale, that have not been covered by forward commitments to sell loans for future delivery. Included in gain
on sale of mortgage loans for the year ended December 31, 2003, 2002 and 2001 are $77,000, $(66,000), and $(182,000), of net futures gains, (losses), respectively, from hedging activities. At December 31, 2003 and 2002, the Bank had no deferred
gains or losses on futures contracts. The following is a summary of the notional amount of interest rate futures contract activity for the periods indicated:



|                                       |  |                         |         |   |      |         |   |      |         |  
|-------------------------------------- |  | ----------------------- | ------- | - | ---- | ------- | - | ---- | ------- | -
|                                       |  | Year Ended December 31, |        
|                                       |  | 2003                    |         |   | 2002 |         |   | 2001 |        
|                                       |  | (In thousands)          |        
|Balance at beginning of year           |  | $                       | 1,000   |   |      |        |   |      |        |  
|Interest rate futures contracts sold   |  |                         | 9,500   |   |      | 49,700  |   |      | 73,500  |  
|Interest rate futures contracts closed |  |                         | (10,500 | ) |      | (48,700 | ) |      | (73,500 | )
|                                       |  |                         |         |   |      |         |   |      |         |  
|Balance at end of year                 |  | $                       |        |   |      | 1,000   |   |      |        |  
|                                       |  |                         |         |   |      |         |   |      |         |  



14. Income Taxes



Income tax expense is summarized below:



|                         |  |                         |        |      |        |      |       
|------------------------ |  | ----------------------- | ------ | ---- | ------ | ---- | ------
|                         |  | Year Ended December 31,
|                         |  | 2003                    |        | 2002 |        | 2001
|                         |  | (In thousands)         
|Current:                 |  |                         |        |      |        |      |       
|Federal                  |  | $                       | 38,052 |      | 28,088 |      | 20,739
|State                    |  |                         | 2,997  |      | 3,787  |      | 2,677 
|                         |  |                         |        |      |        |      |       
|                         |  |                         | 41,049 |      | 31,875 |      | 23,416
|                         |  |                         |        |      |        |      |       
|Deferred:                |  |                         |        |      |        |      |       
|Federal                  |  |                         | 4,544  |      | 8,445  |      | 11,627
|State                    |  |                         | 1,888  |      | 455    |      | 423   
|                         |  |                         |        |      |        |      |       
|                         |  |                         | 6,432  |      | 8,900  |      | 12,050
|                         |  |                         |        |      |        |      |       
|Total income tax expense |  | $                       | 47,481 |      | 40,775 |      | 35,466
|                         |  |                         |        |      |        |      |       



Retained earnings at
December 31, 2003 include $85.9 million of tax bad debt reserves for which no provision for income taxes has been made. If in the future this amount or a portion thereof, is used for certain purposes other than to absorb losses on bad debts, an
income tax liability will be imposed on the amount so used at the then current corporate income tax rate. If deferred taxes were required to be provided on this item, the amount of this deferred tax liability would be approximately $33.8 million.



The reasons for the differences between the effective income
tax rate and the corporate federal income tax rate are summarized in the following table:



|                                           |  |                                                                |   |  |      |   |  |     
|------------------------------------------ |  | -------------------------------------------------------------- | - |  | ---- | - |  | ----
|                                           |  | Percentage of IncomeBefore Income TaxesYear Ended December 31,
|                                           |  | 2003                                                           |   |  | 2002 |   |  | 2001
|Federal income tax rate                    |  | 35.0                                                           | % |  | 35.0 |   |  | 35.0
|Items affecting effective income tax rate: |  |                                                                |   |  |      |   |  |     
|State income taxes, net of federal benefit |  | 2.4                                                            |   |  | 2.4  |   |  | 2.1 
|Other items, net                           |  | (1.1                                                           | ) |  | (1.9 | ) |  | .3  
|                                           |  |                                                                |   |  |      |   |  |     
|Effective income tax rate                  |  | 36.3                                                           | % |  | 35.5 |   |  | 37.4
|                                           |  |                                                                |   |  |      |   |  |     



102



---

##### Table of Contents

MAF Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements  (Continued)



The tax effects of temporary differences that give rise to significant portions of the deferred tax
assets and deferred tax liabilities at December 31, 2003 and 2002 are presented below:



|                                                     |  |                        |         |   |      |         |  
|---------------------------------------------------- |  | ---------------------- | ------- | - | ---- | ------- | -
|                                                     |  | December 31,           |        
|                                                     |  | 2003                   |         |   | 2002 |        
|                                                     |  | (Dollars in thousands) |        
|Deferred tax assets:                                 |  |                        |         |   |      |         |  
|Deferred compensation                                |  | $                      | 10,002  |   |      | 6,806   |  
|Allowance for loan losses                            |  |                        | 13,742  |   |      | 8,016   |  
|Book versus tax basis of loans receivable            |  |                        |        |   |      | 1,419   |  
|Book versus tax basis of securities                  |  |                        | 7,244   |   |      | 951     |  
|Book versus tax basis on borrowings                  |  |                        | 7,351   |   |      |        |  
|Book versus tax basis on deposits                    |  |                        | 2,984   |   |      |        |  
|State net operating losses                           |  |                        | 1,695   |   |      |        |  
|Other                                                |  |                        | 586     |   |      | 1,597   |  
|                                                     |  |                        |         |   |      |         |  
|Total deferred tax assets                            |  |                        | 43,604  |   |      | 18,789  |  
|Valuation allowance                                  |  |                        | (1,660  | ) |      |        |  
|                                                     |  |                        |         |   |      |         |  
|Total deferred tax assets net of valuation allowance |  |                        | 41,944  |   |      | 18,789  |  
|Deferred tax liabilities:                            |  |                        |         |   |      |         |  
|REIT dividends                                       |  |                        | (11,467 | ) |      | (16,616 | )
|Loan origination fees and expenses                   |  |                        | (1,614  | ) |      | (567    | )
|Book versus tax basis of land and fixed assets       |  |                        | (10,480 | ) |      | (6,194  | )
|Book versus tax basis of capitalized servicing       |  |                        | (5,671  | ) |      | (5,424  | )
|Book versus tax basis of intangible assets           |  |                        | (5,999  | ) |      | (2,773  | )
|Book versus tax basis in FHLB stock                  |  |                        | (22,650 | ) |      | (10,020 | )
|Book versus tax basis of loans receivable            |  |                        | (3,255  | ) |      |        |  
|Unrealized gain on securities available for sale     |  |                        | (1,329  | ) |      | (3,148  | )
|Other                                                |  |                        | (1,604  | ) |      | (1,638  | )
|                                                     |  |                        |         |   |      |         |  
|Total deferred tax liabilities                       |  |                        | (64,069 | ) |      | (46,380 | )
|                                                     |  |                        |         |   |      |         |  
|Net deferred tax liability                           |  | $                      | (22,125 | ) |      | (27,591 | )
|                                                     |  |                        |         |   |      |         |  



At December 31,2003, deferred tax
assets include approximately $33.0 million of various acquired state net operating loss carry forwards, which begin to expire in 2007 through 2018 and are reduced by a valuation allowance to the extent full realization is in doubt. If these acquired
net operating losses with an attached valuation allowance are subsequently utilized, the related recognized tax benefits will be allocated to reduce goodwill. Based upon historical taxable income as well as projections of future taxable income,
management believes that it is more likely than not that the deferred tax assets, net of the valuation allowance, will be fully realized.



15. Regulatory Capital



The Bank is subject to regulatory capital requirements by the Office of Thrift Supervision (OTS). Failure to meet minimum capital requirements
can initiate certain mandatory, and possibly additional discretionary actions by regulators, which could have a material impact 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.



Quantitative measures established by the OTS to ensure capital adequacy
require the Bank to maintain minimum amounts and ratios (as set forth in the table below) of three capital requirements: a tangible capital (as defined in the regulations) to adjusted total assets ratio, a core capital (as defined) to adjusted total
assets ratio, and a risk-based capital (as defined) to total risk-weighted assets ratio. The Bank met all capital adequacy requirements to which it is subject as of December 31, 2003.



103



---

##### Table of Contents

MAF Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements  (Continued)



The Banks actual capital amounts and ratios, as well as minimum amounts and ratios required for
capital adequacy and prompt corrective action provisions are presented below:



|                                        |  |                        |         |       |                               |   |        |                                                                |           |  |   |        |   |       |   |          |  |   |       |  
|--------------------------------------- |  | ---------------------- | ------- | ----- | ----------------------------- | - | ------ | -------------------------------------------------------------- | --------- |  | - | ------ | - | ----- | - | -------- |  | - | ----- | -
|                                        |  | Actual                 |         |       | For Capital Adequacy Purposes |   |        | To Be Well Capitalized UnderPrompt CorrectiveAction Provisions |          
|                                        |  | Amount                 |         | Ratio |                               |   | Amount |                                                                | Ratio     |  |   | Amount |   | Ratio |  
|                                        |  | (Dollars in thousands) |        
|As of December 31, 2003:                |  |                        |         |       |                               |   |        |                                                                |           |  |   |        |   |       |   |          |  |   |       |  
|Tangible capital (to total assets)      |  | $                      | 615,582 |       | 7.16                          | % |        | 3                                                              | $129,000  |  | 3 | 1.50   | % |       |   | N/A      |  |   |       |  
|Core capital (to total assets)          |  | $                      | 615,582 |       | 7.16                          | % |        | 3                                                              | $343,999  |  | 3 | 4.00   | % |       | 3 | $429,998 |  | 3 | 5.00  | %
|Total capital (to risk-weighted assets) |  | $                      | 640,413 |       | 11.45                         | % |        | 3                                                              | $447,366  |  | 3 | 8.00   | % |       | 3 | $559,208 |  | 3 | 10.00 | %
|Core capital (to risk-weighted assets)  |  | $                      | 615,582 |       | 11.01                         | % |        |                                                                | N/A       |  |   |        |   |       | 3 | $335,525 |  | 3 | 6.00  | %
|                                        |  |                        |         |       |                               |  
|As of December 31, 2002:                |  |                        |         |       |                               |   |        |                                                                |           |  |   |        |   |       |   |          |  |   |       |  
|Tangible capital (to total assets)      |  | $                      | 392,995 |       | 6.78                          | % |        | 3                                                              | $  86,971 |  | 3 | 1.50   | % |       |   | N/A      |  |   |       |  
|Core capital (to total assets)          |  | $                      | 392,995 |       | 6.78                          | % |        | 3                                                              | $231,923  |  | 3 | 4.00   | % |       | 3 | $289,903 |  | 3 | 5.00  | %
|Total capital (to risk-weighted assets) |  | $                      | 405,959 |       | 11.85                         | % |        | 3                                                              | $274,114  |  | 3 | 8.00   | % |       | 3 | $342,642 |  | 3 | 10.00 | %
|Core capital (to risk-weighted assets)  |  | $                      | 392,995 |       | 11.47                         | % |        |                                                                | N/A       |  |   |        |   |       | 3 | $205,585 |  | 3 | 6.00  | %



OTS regulations
provide various standards under which the Bank may declare and pay dividends to the Company. If the total amount of all dividends, including the proposed dividend, declared by the Bank in any calendar year, does not exceed the Banks net income
of that year to date combined with the retained net income of the preceding two years, the Bank must file a notice of such proposed dividend with the OTS. At December 31, 2003, $58.2 million of the Banks retained earnings were available for
dividend declaration under this standard. Proposed capital distributions in excess of this retained net income standard are not prohibited but are merely subject to greater regulatory review through an application process.



As of December 31, 2003 and 2002, the most recent notification from the OTS
categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized, the Bank must maintain a minimum core capital to adjusted total assets, risk-based capital to adjusted
risk-weighted assets, and core capital to adjusted risk-weighted assets ratios as set forth in the table above. There are no conditions or events since that notification that management believes have changed the Banks category. The
acquisitions of Fidelity and St. Francis did not negatively impact capital adequacy levels.



16. Officer, Director and Employee Benefit Plans



Employee Stock Ownership Plan (ESOP).The Mid America Bank, fsb ESOP covers substantially all employees with more than one year of employment who have attained the age of 21. Contributions to the
ESOP by the Bank are currently made to purchase additional common shares of the Companys stock. For the years ended December 31, 2003, 2002 and 2001, total contributions to the ESOP were $580,000, $640,000, and $1.0 million,



104



---

##### Table of Contents

MAF Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements  (Continued)



respectively, which were expensed. The ESOP purchased 13,000, 16,211 and 37,190 of the Companys shares for the
years ended December 31, 2003, 2002 and 2001, respectively.



Profit Sharing Plan/401(k) Plan.The Mid America Bank, fsb Profit Sharing/401(k) Plan allows employees to make pre-tax or after-tax contributions to the plan, subject to certain limitations. The Bank matches the pre-tax contributions
of employees at a rate equal to 35%, up to a $1,200 maximum matching contribution per employee. The Bank, at its discretion, may make additional contributions. Employees contributions vest immediately while the Banks contributions vest
gradually based on an employees years of service. The Bank made discretionary and matching contributions of $2.3 million, $1.9 million, and $1.0 million for the years ended December 31, 2003, 2002, and 2001, respectively.



Fidelity and St. Francis qualified retirement plans. As a result of
the mergers with Fidelity Bancorp and St. Francis Capital Corporation during 2003, the Company, through Mid America Bank, became the plan sponsor of the Fidelity ESOP, the Fidelity 401(k) Plan, the Fidelity Retirement Plan, the St. Francis ESOP and
the St. Francis Savings and Retirement Plan. The Fidelity ESOP and 401(k) plans were merged into the Mid America ESOP and Mid America Profit Sharing Plan, respectively, in November 2003. The St. Francis ESOP and St. Francis Savings and Retirement
Plan are expected to be merged into the Mid America ESOP and Mid America Profit Sharing Plan during 2004. The Fidelity Retirement Plan is expected to be terminated during 2004. The Company recorded expenses for contributions made to these plans of
$162,000 for 2003.



Incentive Plan/Stock Option Plans.
Prior to 2003, the Company and its shareholders adopted various stock option plans for the benefit of employees and directors of the Bank. Vesting under such plans generally occurs over a period of approximately three years, except for option grants
to non-employee directors, which are immediately exercisable.



In July 2003, the Company adopted the MAF Bancorp Incentive Compensation Plan (the Incentive Plan), which was later approved by shareholders in December 2003. Under the Incentive Plan, a variety of different types of awards may
be granted to directors and employees, including stock options, stock appreciation rights, restricted shares, performance shares, restricted and performance share units, cash awards, awards under deferred compensation or similar plans and other
incentive awards.



The plan provides that the total number of
shares of common stock which may be issued pursuant to awards under the plan may not exceed 800,000 shares, plus such number of shares of common stock that have already been authorized and previously approved by MAFs shareholders and are
available for issuance under MAFs 2000 Stock Option Plan. All further stock option and equity awards will be made under the Incentive Plan.



Of the shares authorized for issuance under the Incentive Plan, up to 25% may be issued with respect to awards of restricted stock and restricted stock
units. In the case of stock option awards, the option exercise price must be at least 100% of the fair market value of the common stock on the date of grant, and the option term cannot exceed 10 years. Vesting periods are determined at the
discretion of the Companys Compensation Committee. For the initial stock options awards granted under the Incentive Plan in 2003, the vesting period was established as two years.



In conjunction with the Companys acquisitions, certain outstanding stock options of the acquired institutions were
converted into stock options of the Company based on the transactions exchange ratios and other terms of the merger agreements. The value of these stock options were included in the purchase price of the transactions.



105



---

##### Table of Contents

MAF Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements  (Continued)



A summary of shares subject to stock options and stock option activity in the Incentive Plan and all
other stock option plans of the Company, (including plans of acquired entities assumed by the Company as a result of the conversion of stock options) follows:



|                                          |  |                         |   |      |                      |       |        |           |   |                      |   |        |  |           |                      |  |   |      
|----------------------------------------- |  | ----------------------- | - | ---- | -------------------- | ----- | ------ | --------- | - | -------------------- | - | ------ |  | --------- | -------------------- |  | - | -----
|                                          |  | Year Ended December 31,
|                                          |  | 2003                    |   | 2002 |                      | 2001 
|                                          |  | Shares                  |   |      | AverageExercisePrice |       | Shares |           |   | AverageExercisePrice |   | Shares |  |           | AverageExercisePrice
|Beginning of year                         |  | 2,894,035               |   |      | $                    | 25.66 |        | 2,700,611 |   |                      | $ | 22.05  |  | 1,818,383 |                      |  | $ | 19.20
|Options granted                           |  | 350,700                 |   |      |                      | 41.79 |        | 532,500   |   |                      |   | 34.25  |  | 948,250   |                      |  |   | 27.20
|Acquiree options converted                |  | 367,286                 |   |      |                      | 20.80 |        |          |   |                      |   |       |  |          |                      |  |   |     
|Options exercised                         |  | (226,990                | ) |      |                      | 18.98 |        | (249,542  | ) |                      |   | 11.75  |  | (54,242   | )                    |  |   | 16.01
|Converted options exercised               |  | (86,354                 | ) |      |                      | 18.84 |        | (82,069   | ) |                      |   | 4.78   |  |          |                      |  |   |     
|Options cancelled                         |  | (25,332                 | ) |      |                      | 30.77 |        | (7,465    | ) |                      |   | 27.06  |  | (11,780   | )                    |  |   | 24.91
|                                          |  |                         |   |      |                      |       |        |           |   |                      |   |        |  |           |                      |  |   |      
|End of year                               |  | 3,273,345               |   |      | $                    | 27.44 |        | 2,894,035 |   |                      | $ | 25.66  |  | 2,700,611 |                      |  | $ | 22.05
|                                          |  |                         |   |      |                      |       |        |           |   |                      |   |        |  |           |                      |  |   |      
|Options exercisable                       |  | 2,495,117               |   |      |                      | 25.29 |        | 1,822,685 |   |                      |   | 22.89  |  | 1,714,911 |                      |  |   | 19.49
|                                          |  |                         |   |      |                      |       |        |           |   |                      |   |        |  |           |                      |  |   |      
|Fair value of options granted during year |  |                         |   |      | $                    | 12.58 |        |           |   |                      | $ | 9.91   |  |           |                      |  | $ | 8.81 
|                                          |  |                         |   |      |                      |       |        |           |   |                      |   |        |  |           |                      |  |   |      



In addition to the
outstanding stock options shown in the table above, there were 983,831 shares available for grant under the Incentive Plan as of December 31, 2003. Cancelled stock options increase the number of shares available for grant under the Incentive Plan.



In December 2003, there were also 26,458 restricted stock
units granted to certain non-executive employees under the Incentive Plan, 26,258 of which remain outstanding at December 31, 2003. These grants vest in equal annual installments over a five-year period.



At December 31, 2003 the following stock options are outstanding:



|                         |  |                     |  |                                      |  |                                |       |                    |           |                                |   |      
|------------------------ |  | ------------------- |  | ------------------------------------ |  | ------------------------------ | ----- | ------------------ | --------- | ------------------------------ | - | -----
|                         |  | Options Outstanding |  | Options Exercisable                 
|Range of Exercise Prices |  | OptionsOutstanding  |  | Weighted-AverageRemainingLife (yrs.) |  | Weighted-AverageExercise Price |       | OptionsExercisable |           | Weighted-AverageExercise Price
|$10.78 to $18.36         |  | 454,442             |  | 2.75                                 |  | $                              | 14.64 |                    | 454,442   |                                | $ | 14.64
|19.68 to   24.53         |  | 618,956             |  | 5.04                                 |  |                                | 22.55 |                    | 606,534   |                                |   | 22.53
|25.22 to   27.85         |  | 698,341             |  | 6.20                                 |  |                                | 26.37 |                    | 652,081   |                                |   | 26.40
|28.16 to   42.22         |  | 1,501,606           |  | 8.47                                 |  |                                | 33.83 |                    | 782,060   |                                |   | 32.68
|                         |  |                     |  |                                      |  |                                |       |                    |           |                                |   |      
|                         |  | 3,273,345           |  | 6.54                                 |  | $                              | 27.44 |                    | 2,495,117 |                                | $ | 25.29
|                         |  |                     |  |                                      |  |                                |       |                    |           |                                |   |      



Stock Option Gain
Deferral Plan. The MAF Bancorp, Inc. Stock Option Gain Deferral Plan (Gain Deferral Plan) was adopted during 1999. The Gain Deferral Plan combines traditional deferred compensation arrangements with stock option exercise transactions
by allowing designated executive officer participants (currently two) to defer to a future date, the receipt of shares representing the value of underlying MAF Bancorp stock options. Dividends paid on MAF Bancorp shares deferred through the Gain
Deferral Plan are recorded as compensation expense and reinvested in MAF Bancorp shares. The Companys obligation to issue the deferred MAF Bancorp shares in the future is recorded in stockholders equity as the sum of (a) the number of
shares purchased with reinvested dividends multiplied by the purchase price of such shares, and (b) the number of shares deferred in option exercise transactions multiplied by the exercise price of the related stock options.



Post Retirement Benefits.The Bank sponsors a supplemental executive
retirement plan (SERP) for the purpose of providing certain retirement benefits to executive officers and other corporate officers approved by the Board of Directors. The annual retirement plan benefit under the SERP is calculated equal
to 2% of final average salary times the years of



106



---

##### Table of Contents

MAF Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements  (Continued)



service after 1994, or such later date that a participant enters the plan. In most cases, ten additional years of
service are credited to participants in the event of a change in control transaction although in no event may total years of service exceed 20 years. The maximum annual retirement benefit payable is equal to 40% of final average salary. Benefits are
payable in various forms in the event of retirement, death, disability and separation from service, subject to certain conditions defined in the plan. The SERP also provides for certain death benefits to the extent such amounts exceed a
participants accrued benefit at the time of death. The plan is unfunded, however, the Company funds life insurance policies that may be used to satisfy obligations of the SERP.



The Bank also provides a long term medical plan for the purpose of providing employees post retirement medical benefits. If
retirement occurs prior to age 65, but at least age 55 with 10 years of service, the retiree pays 100% of the premium cost of the plan for lifetime. If retirement occurs at 65 or later, the retiree pays the following percentage of premium costs
based on service at retirement:



|                 |  |                         |  
|---------------- |  | ----------------------- | -
|Years of service |  | Contribution percentage |  
|10-19            |  | 100                     | %
|20-24            |  | 90                      | %
|25-29            |  | 75                      | %
|30+              |  | 60                      | %



Members of the board of directors pay
a majority of the cost for both pre-65 and post-65 coverage. The benefits under the retiree benefit plan are not pre-funded. There are no plan assets. Benefits are funded on a pay-as-you-go basis.



107



---

##### Table of Contents

MAF Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements  (Continued)



The following table sets forth the change in benefit obligations and the related assumptions for the
SERP and long term medical plan for the periods indicated:



|                                                 |  |                         |        |   |                   |        |   |      |        |   |      |      |  
|------------------------------------------------ |  | ----------------------- | ------ | - | ----------------- | ------ | - | ---- | ------ | - | ---- | ---- | -
|                                                 |  | Year Ended December 31, |       
|                                                 |  | SERP                    |        |   | Long Term Medical |       
|                                                 |  | 2002                    |        |   | 2003              |        |   | 2002 |        |   | 2003 |     
|                                                 |  | (Dollars in thousands)  |       
|Projected benefit obligation - beginning of year |  | $                       | 3,797  |   |                   | 2,960  |   |      | 909    |   |      | 587  |  
|Service cost                                     |  |                         | 556    |   |                   | 483    |   |      | 62     |   |      | 48   |  
|Interest cost                                    |  |                         | 256    |   |                   | 217    |   |      | 67     |   |      | 55   |  
|Actuarial losses                                 |  |                         | 320    |   |                   | 142    |   |      | 206    |   |      | 224  |  
|Acquisitions                                     |  |                         |       |   |                   |       |   |      | 308    |   |      |     |  
|Benefits paid                                    |  |                         | (5     | ) |                   | (5     | ) |      | (14    | ) |      | (5   | )
|                                                 |  |                         |        |   |                   |        |   |      |        |   |      |      |  
|Projected benefit obligation - end of year       |  | $                       | 4,924  |   |                   | 3,797  |   |      | 1,538  |   |      | 909  |  
|                                                 |  |                         |        |   |                   |        |   |      |        |   |      |      |  
|Funded status                                    |  |                         | (4,924 | ) |                   | (3,797 | ) |      | (1,538 | ) |      | (909 | )
|Unrecognized transition obligation               |  |                         |       |   |                   |       |   |      | 54     |   |      | 60   |  
|Unrecognized loss                                |  |                         | 578    |   |                   | 258    |   |      | 649    |   |      | 463  |  
|                                                 |  |                         |        |   |                   |        |   |      |        |   |      |      |  
|Accrued benefit cost                             |  | $                       | (4,346 | ) |                   | (3,539 | ) |      | (835   | ) |      | (386 | )
|                                                 |  |                         |        |   |                   |        |   |      |        |   |      |      |  
|                                                 |  |                         |        |  
|Weighted average assumptions:                    |  |                         |        |   |                   |        |   |      |        |   |      |      |  
|Discount rate                                    |  |                         | 6.75   | % |                   | 7.25   |   |      | 6.75   |   |      | 7.25 |  
|Rate of compensation increase                    |  |                         | 4.50   |   |                   | 5.00   |   |      | N/A    |   |      | N/A  |  
|                                                 |  |                         |        |   |                   |        |   |      |        |   |      |      |  



The accumulated
post-retirement benefit did not take into consideration the effect on these programs of the Medicare Prescription Drug Improvement and Modernization Act of 2003 enacted by Congress and signed into law by the President in late 2003. The Company is
currently reviewing this legislation and its options to modify benefits provided by these plans.



The components of the net periodic benefit cost of post-retirement plans are as follows:



|                                                       |  |                         |     |                   |     |      |     |      |    
|------------------------------------------------------ |  | ----------------------- | --- | ----------------- | --- | ---- | --- | ---- | ---
|                                                       |  | Year Ended December 31,
|                                                       |  | SERP                    |     | Long Term Medical
|                                                       |  | 2003                    |     | 2002              |     | 2003 |     | 2002
|                                                       |  | (Dollars in thousands) 
|Service cost                                           |  | $                       | 556 |                   | 483 |      | 62  |      | 48 
|Interest cost                                          |  |                         | 256 |                   | 217 |      | 67  |      | 55 
|Amortization of unrecognized net transition obligation |  |                         |    |                   |    |      | 6   |      | 6  
|Unrecognized net loss                                  |  |                         |    |                   | 20  |      | 20  |      | 17 
|                                                       |  |                         |     |                   |     |      |     |      |    
|Net periodic benefit cost                              |  | $                       | 812 |                   | 720 |      | 155 |      | 126
|                                                       |  |                         |     |                   |     |      |     |      |    



The projected future
benefit payments related to the SERP and long term medical plan for the next five years and the total payment thereafter are as follows (in thousands):



|                                |  |      |       |                  |    
|------------------------------- |  | ---- | ----- | ---------------- | ---
|For the year ended December 31, |  | SERP |       | Long TermMedical
|2004                            |  | $    | 5     |                  | 28 
|2005                            |  |      | 60    |                  | 33 
|2006                            |  |      | 60    |                  | 37 
|2007                            |  |      | 150   |                  | 41 
|2008                            |  |      | 160   |                  | 46 
|2009 - 2013                     |  | $    | 2,400 |                  | 338
|                                |  |      |       |                  |    



17. Commitments and Contingencies



The Bank is a party to various financial instruments with
off-balance sheet risk in the normal course of its business. These instruments include commitments to extend credit, standby letters of credit, and forward commitments to sell loans. These financial instruments carry varying degrees of credit and
interest-rate risk in excess of amounts recorded in the financial statements.



108



---

##### Table of Contents

MAF Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements  (Continued)



Commitments to originate and purchase loans of $561.7 million at December 31, 2003, represent amounts
which the Bank plans to fund within the normal commitment period of 30 to 90 days of which $258.4 million were fixed-rate, with rates ranging from 4.00% to 7.375%, and $303.3 million were adjustable-rate loans with rates ranging from 3.375% to
7.125%. At December 31, 2003 prospective borrowers had locked the interest rate on $63.1 million of fixed-rate loans, with rates ranging from 4.00% to 7.00%, and $73.0 million of adjustable-rate loans, with rates ranging from 3.375% to 6.875%.
Because the credit worthiness of each customer is reviewed prior to extension of the commitment, the Bank adequately controls their credit risk on these commitments, as it does for loans recorded on the balance sheet. As part of its effort to
control interest-rate risk on these commitments, the Bank generally sells fixed-rate mortgage loan commitments, for future delivery, at a specified price and at a specified future date. Such commitments for future delivery present a risk to the
Bank, in the event it cannot deliver the loans during the delivery period. This could lead to the Bank being charged a fee for non-performance, or being forced to reprice the mortgage loans at a lower rate, causing a loss to the Bank. The Bank seeks
to mitigate this potential loss by charging potential borrowers, when possible, a fee to fix the interest rate. The Bank also estimates a percentage of fallout when determining the amount of forward commitments to enter into. At December 31, 2003,
forward commitments to sell mortgage loans for future delivery were $66.4 million, of which $44.5 million are related to loans held for sale, and $21.9 million are unfunded as of December 31, 2003.



The Bank has approved, but unused home equity lines of credit of $830.7
million at December 31, 2003. Approval of equity lines is based on underwriting standards that generally do not allow total borrowings, including the equity line of credit to exceed 85% of the current appraised value of the customers home,
which is similar to guidelines used when the Bank originates first mortgage loans, and are a means of controlling its credit risk on the loan. However, the Bank offers home equity lines of credit up to 100% of the homes current appraised
value, less existing liens, at a commensurately higher interest rate. In addition, the Bank has $135.0 million in approved, but unused commercial business lines.



At December 31, 2003, the Bank had standby letters of credit totaling $61.9 million. Two of these standby letters of credit
total $13.3 million, and enhance two industrial revenue bond financings of commercial real estate in the Banks market. At December 31, 2003, the Bank had pledged investment securities with an aggregate carrying value and fair value of $25.3
million and $25.3 million respectively, as collateral for these two standby letters of credit. Standby letters of credit are conditional commitments issued by the Bank to guarantee the performance of a customer to a third party. The credit risk
involved in these transactions is essentially the same as that involved in extending a loan to a customer in the normal course of business, as performance under the letters of credit creates a first position lien in favor of the Bank. Additionally,
at December 31, 2003, the Company had standby letters of credit totaling $5.0 million, which ensure the completion of land development improvements on behalf of MAF Developments, Inc.



The contractual amounts of credit-related financial instruments such as commitments to extend credit, and letters of credit,
represent the amounts of potential loss should the contract be fully drawn upon, the customer default, and the value of any existing collateral become worthless. At December 31, 2003, the Bank had $10.4 million of credit risk related to loans sold
to the MPF program. Additionally, the Bank had a $19.1 million of credit risk



109



---

##### Table of Contents

MAF Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements  (Continued)



related to loans with private mortgage insurance in force in its captive reinsurance subsidiary.



In addition to financial instruments with off-balance sheet risk, the Bank is
exposed to varying risks with concentrations of credit. Concentrations of credit include significant lending activities in specific geographical areas and large extensions of credit to individual borrowers. The Banks loan portfolio primarily
consists of loans within its market area. At December 31, 2003 and 2002, loans representing 82.8% and 94.5%, respectively, of the Banks total loans receivable were located in the State of Illinois and 12.4% and .7%, respectively, were located
in the State of Wisconsin.



18. Parent Company Only Financial Information



The information as of December 31, 2003, and 2002, and
for the years ended December 31, 2003, 2002, and 2001, presented below should be read in conjunction with the other Notes to Consolidated Financial Statements.



|                                            |  |                        |         |      |         |  
|------------------------------------------- |  | ---------------------- | ------- | ---- | ------- | -
|                                            |  | December 31,           |        
|                                            |  | 2003                   |         | 2002 |        
|                                            |  | (Dollars in thousands) |        
|Condensed Statements of Financial Condition |  |                        |         |      |         |  
|Assets:                                     |  |                        |         |      |         |  
|Cash and cash equivalents                   |  | $                      | 13,118  |      | 13,960  |  
|Investment securities                       |  |                        | 6,641   |      | 8,598   |  
|Equity in net assets of subsidiaries        |  |                        | 932,163 |      | 529,713 |  
|Other assets                                |  |                        | 13,039  |      | 5,704   |  
|                                            |  |                        |         |      |         |  
|                                            |  | $                      | 964,961 |      | 557,975 |  
|                                            |  |                        |         |      |         |  
|Liabilities and Stockholders Equity:       |  |                        |         |      |         |  
|Liabilities:                                |  |                        |         |      |         |  
|Borrowed funds                              |  | $                      | 55,000  |      | 51,000  |  
|Accrued expenses                            |  |                        | 8,357   |      | 5,517   |  
|                                            |  |                        |         |      |         |  
|Total liabilities                           |  |                        | 63,357  |      | 56,517  |  
|                                            |  |                        |         |      |         |  
|Stockholders equity:                       |  |                        |         |      |         |  
|Common stock                                |  |                        | 331     |      | 254     |  
|Additional paid-in capital                  |  |                        | 495,747 |      | 204,710 |  
|Retained earnings, substantially restricted |  |                        | 402,402 |      | 342,790 |  
|Stock in Gain Deferral Plan                 |  |                        | 1,015   |      | 851     |  
|Accumulated other comprehensive income      |  |                        | 2,109   |      | 4,819   |  
|Treasury stock                              |  |                        |        |      | (51,966 | )
|                                            |  |                        |         |      |         |  
|Total stockholders equity                  |  |                        | 901,604 |      | 501,458 |  
|                                            |  |                        |         |      |         |  
|                                            |  | $                      | 964,961 |      | 557,975 |  
|                                            |  |                        |         |      |         |  



|                                                                                          |  |                         |        |   |      |        |   |      |        |  
|----------------------------------------------------------------------------------------- |  | ----------------------- | ------ | - | ---- | ------ | - | ---- | ------ | -
|                                                                                          |  | Year Ended December 31, |       
|                                                                                          |  | 2003                    |        |   | 2002 |        |   | 2001 |       
|                                                                                          |  | (Dollars in thousands)  |       
|Condensed Statements of Operations                                                        |  |                         |        |  
|Dividend income from subsidiaries                                                         |  | $                       | 55,000 |   |      | 35,000 |   |      | 54,084 |  
|Interest income                                                                           |  |                         | 553    |   |      | 716    |   |      | 643    |  
|Interest expense                                                                          |  |                         | 1,243  |   |      | 1,739  |   |      | 1,978  |  
|                                                                                          |  |                         |        |   |      |        |   |      |        |  
|Net interest and dividend income                                                          |  |                         | 54,310 |   |      | 33,977 |   |      | 52,749 |  
|Gain on sale of investments, net                                                          |  |                         | 883    |   |      | 179    |   |      | 472    |  
|Non-interest expense                                                                      |  |                         | 2,562  |   |      | 2,403  |   |      | 2,017  |  
|                                                                                          |  |                         |        |   |      |        |   |      |        |  
|Net income before income tax benefit and equity in undistributed earnings of subsidiaries |  |                         | 52,631 |   |      | 31,753 |   |      | 51,204 |  
|Income tax benefit                                                                        |  |                         | (1,188 | ) |      | (1,333 | ) |      | (1,173 | )
|                                                                                          |  |                         |        |   |      |        |   |      |        |  
|Net income before equity in undistributed earnings of subsidiaries                        |  |                         | 53,819 |   |      | 33,086 |   |      | 52,377 |  
|Equity in undistributed earnings of subsidiaries                                          |  |                         | 29,614 |   |      | 40,885 |   |      | 7,098  |  
|                                                                                          |  |                         |        |   |      |        |   |      |        |  
|Net income                                                                                |  | $                       | 83,433 |   |      | 73,971 |   |      | 59,475 |  
|                                                                                          |  |                         |        |   |      |        |   |      |        |  



110



---

##### Table of Contents

MAF Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements  (Continued)



|                                                                                          |  |                         |         |   |      |         |   |      |         |  
|----------------------------------------------------------------------------------------- |  | ----------------------- | ------- | - | ---- | ------- | - | ---- | ------- | -
|                                                                                          |  | Year Ended December 31, |        
|                                                                                          |  | 2003                    |         |   | 2002 |         |   | 2001 |        
|                                                                                          |  | (Dollars in thousands)  |        
|Condensed Statements of Cash Flows                                                        |  |                         |         |  
|Operating activities:                                                                     |  |                         |         |   |      |         |   |      |         |  
|Net income                                                                                |  | $                       | 83,433  |   |      | 73,971  |   |      | 59,475  |  
|Equity in undistributed earnings of subsidiaries                                          |  |                         | (29,614 | ) |      | (40,885 | ) |      | (7,098  | )
|Gain on sale of investment securities                                                     |  |                         | (882    | ) |      | (179    | ) |      | (472    | )
|Net decrease (increase) in other assets and liabilities, net of effects from acquisitions |  |                         | (11,216 | ) |      | (1,476  | ) |      | 377     |  
|                                                                                          |  |                         |         |   |      |         |   |      |         |  
|Net cash provided by operating activities                                                 |  |                         | 41,721  |   |      | 31,431  |   |      | 52,282  |  
|Investing activities:                                                                     |  |                         |         |   |      |         |   |      |         |  
|Proceeds from sale of and maturities of investment securities                             |  |                         | 4,353   |   |      | 1,554   |   |      | 4,104   |  
|Loans to subsidiaries less repayments, net                                                |  |                         | 1,000   |   |      | (855    | ) |      | 109     |  
|Purchases of investment securities                                                        |  |                         |        |   |      | (1,329  | ) |      | (2,735  | )
|Payment for acquisitions, net of cash acquired                                            |  |                         | (9,394  | ) |      |        |   |      | (53,904 | )
|                                                                                          |  |                         |         |   |      |         |   |      |         |  
|Net cash used in investing activities                                                     |  |                         | (4,041  | ) |      | (630    | ) |      | (52,426 | )
|Financing activities:                                                                     |  |                         |         |   |      |         |   |      |         |  
|Proceeds from exercise of stock options                                                   |  |                         | 4,718   |   |      | 2,366   |   |      | 832     |  
|Proceeds from borrowings                                                                  |  |                         | 10,000  |   |      |        |   |      | 71,000  |  
|Repayment of borrowings                                                                   |  |                         | (6,000  | ) |      | (14,000 | ) |      | (39,400 | )
|Purchase of treasury stock                                                                |  |                         | (30,945 | ) |      | (168    | ) |      | (17,301 | )
|Cash dividends paid                                                                       |  |                         | (16,295 | ) |      | (13,066 | ) |      | (9,900  | )
|                                                                                          |  |                         |         |   |      |         |   |      |         |  
|Net cash provided by (used in) financing activities                                       |  |                         | (38,522 | ) |      | (24,868 | ) |      | 5,231   |  
|                                                                                          |  |                         |         |   |      |         |   |      |         |  
|Increase (decrease) in cash and cash equivalents                                          |  |                         | (842    | ) |      | 5,933   |   |      | 5,087   |  
|Cash and cash equivalents at beginning of year                                            |  |                         | 13,960  |   |      | 8,027   |   |      | 2,940   |  
|                                                                                          |  |                         |         |   |      |         |   |      |         |  
|Cash and cash equivalents at end of year                                                  |  | $                       | 13,118  |   |      | 13,960  |   |      | 8,027   |  
|                                                                                          |  |                         |         |   |      |         |   |      |         |  



19. Segment Information



The Company utilizes the management approach
for segment reporting. This approach is based on the way that a chief decision maker for the Company organizes segments for making operating decisions and assessing performance.



The Company operates two separate lines of business. The Bank operates primarily as a retail consumer bank, participating in
mortgage loan portfolio lending, deposit gathering and offering other financial services mainly to individuals. Land development consists primarily of acquiring, obtaining necessary zoning and regulatory approvals and improving raw land into
developed residential lots for resale to builders. All goodwill is assigned to the retail banking segment. Selected segment information is included in the table below:



|                           |  |                              |           |                 |        |              |   |                   |          
|-------------------------- |  | ---------------------------- | --------- | --------------- | ------ | ------------ | - | ----------------- | ---------
|                           |  | Year Ended December 31, 2003
|                           |  | RetailBanking                |           | LandDevelopment |        | Eliminations |   | ConsolidatedTotal
|                           |  | (Dollars in thousands)      
|Interest income            |  | $                            | 316,430   |                 |       |              |  |                   | 316,430  
|Interest expense           |  |                              | 136,952   |                 |       |              |  |                   | 136,952  
|                           |  |                              |           |                 |        |              |   |                   |          
|Net interest income        |  |                              | 179,478   |                 |       |              |  |                   | 179,478  
|Non-interest income        |  |                              | 60,308    |                 | 11,325 |              |  |                   | 71,633   
|Non-interest expense       |  |                              | 118,839   |                 | 1,358  |              |  |                   | 120,197  
|                           |  |                              |           |                 |        |              |   |                   |          
|Income before income taxes |  |                              | 120,947   |                 | 9,967  |              |  |                   | 130,914  
|Income tax expense         |  |                              | 43,528    |                 | 3,953  |              |  |                   | 47,481   
|                           |  |                              |           |                 |        |              |   |                   |          
|Net income                 |  | $                            | 77,419    |                 | 6,014  |              |  |                   | 83,433   
|                           |  |                              |           |                 |        |              |   |                   |          
|Average assets             |  | $                            | 6,447,358 |                 | 22,340 |              |  |                   | 6,469,698
|                           |  |                              |           |                 |        |              |   |                   |          



111



---

##### Table of Contents

MAF Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements  (Continued)



|                                    |  |                              |           |                 |        |   |              |   |                   |          
|----------------------------------- |  | ---------------------------- | --------- | --------------- | ------ | - | ------------ | - | ----------------- | ---------
|                                    |  | Year Ended December 31, 2002
|                                    |  | RetailBanking                |           | LandDevelopment |        |   | Eliminations |   | ConsolidatedTotal
|                                    |  | (Dollars in thousands)      
|Interest income                     |  | $                            | 329,490   |                 |       |   |              |  |                   | 329,490  
|Interest expense                    |  |                              | 171,369   |                 | 96     |   |              |  |                   | 171,465  
|                                    |  |                              |           |                 |        |   |              |   |                   |          
|Net interest income (expense)       |  |                              | 158,121   |                 | (96    | ) |              |  |                   | 158,025  
|Provision for loan losses           |  |                              | 300       |                 |       |   |              |  |                   | 300      
|                                    |  |                              |           |                 |        |   |              |   |                   |          
|Net interest income after provision |  |                              | 157,821   |                 | (96    | ) |              |  |                   | 157,725  
|Non-interest income                 |  |                              | 46,646    |                 | 9,717  |   |              |  |                   | 56,363   
|Non-interest expense                |  |                              | 98,177    |                 | 1,165  |   |              |  |                   | 99,342   
|                                    |  |                              |           |                 |        |   |              |   |                   |          
|Income before income taxes          |  |                              | 106,290   |                 | 8,456  |   |              |  |                   | 114,746  
|Income tax expense                  |  |                              | 37,421    |                 | 3,354  |   |              |  |                   | 40,775   
|                                    |  |                              |           |                 |        |   |              |   |                   |          
|Net income                          |  | $                            | 68,869    |                 | 5,102  |   |              |  |                   | 73,971   
|                                    |  |                              |           |                 |        |   |              |   |                   |          
|Average assets                      |  | $                            | 5,725,359 |                 | 14,040 |   |              |  |                   | 5,739,399
|                                    |  |                              |           |                 |        |   |              |   |                   |          



|                           |  |                              |           |                 |        |   |              |     |   |                   |          
|-------------------------- |  | ---------------------------- | --------- | --------------- | ------ | - | ------------ | --- | - | ----------------- | ---------
|                           |  | Year Ended December 31, 2001
|                           |  | RetailBanking                |           | LandDevelopment |        |   | Eliminations |     |   | ConsolidatedTotal
|                           |  | (Dollars in thousands)      
|Interest income            |  | $                            | 345,767   |                 |       |   |              | (31 | ) |                   | 345,736  
|Interest expense           |  |                              | 214,321   |                 | 199    |   |              | (31 | ) |                   | 214,489  
|                           |  |                              |           |                 |        |   |              |     |   |                   |          
|Net interest income        |  |                              | 131,446   |                 | (199   | ) |              |    |   |                   | 131,247  
|Non-interest income        |  |                              | 35,634    |                 | 11,484 |   |              |    |   |                   | 47,118   
|Non-interest expense       |  |                              | 82,547    |                 | 877    |   |              |    |   |                   | 83,424   
|                           |  |                              |           |                 |        |   |              |     |   |                   |          
|Income before income taxes |  |                              | 84,533    |                 | 10,408 |   |              |    |   |                   | 94,941   
|Income tax expense         |  |                              | 31,338    |                 | 4,128  |   |              |    |   |                   | 35,466   
|                           |  |                              |           |                 |        |   |              |     |   |                   |          
|Net income                 |  | $                            | 53,195    |                 | 6,280  |   |              |    |   |                   | 59,475   
|                           |  |                              |           |                 |        |   |              |     |   |                   |          
|Average assets             |  | $                            | 5,203,707 |                 | 10,768 |   |              |    |   |                   | 5,214,475
|                           |  |                              |           |                 |        |   |              |     |   |                   |          



20. Fair Values of Financial
Instruments



SFAS No. 107, Disclosures about Fair
Value of Financial Instruments requires the disclosure of estimated fair values of all asset, liability and off-balance sheet financial instruments. The estimated fair value amounts under SFAS No.107 have been determined as of a specific point
in time utilizing available market information, assumptions and appropriate valuation methodologies. Accordingly, the estimated fair values presented herein are not necessarily representative of the underlying value of the Company. Rather the
disclosures are limited to reasonable estimates of the fair value of only the Companys financial instruments. The use of assumptions and various valuation techniques, as well as the absence of secondary markets for certain financial
instruments, will likely reduce the comparability of fair value disclosures between financial institutions. The Company does not plan to sell most of its assets or settle most of its liabilities at these values.



112



---

##### Table of Contents

MAF Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements  (Continued)



The estimated fair values of the Companys financial instruments as of December 31, 2003 and
2002 are set forth in the following table below.



|                                |  |                        |           |                   |           |                |           |            |          
|------------------------------- |  | ---------------------- | --------- | ----------------- | --------- | -------------- | --------- | ---------- | ---------
|                                |  | December 31, 2003      |           | December 31, 2002
|                                |  | CarryingAmount         |           | Fair Value        |           | CarryingAmount |           | Fair Value
|                                |  | (Dollars in thousands)
|Financial assets:               |  |                        |           |                   |           |                |           |            |          
|Cash and cash equivalents       |  | $                      | 221,962   |                   | 221,962   |                | 262,680   |            | 262,680  
|Investment securities           |  |                        | 365,334   |                   | 365,334   |                | 308,235   |            | 308,235  
|Mortgage-backed securities      |  |                        | 971,969   |                   | 971,969   |                | 365,638   |            | 365,638  
|Loans receivable                |  |                        | 6,369,107 |                   | 6,520,305 |                | 4,530,932 |            | 4,643,035
|Interest receivable             |  |                        | 31,168    |                   | 31,168    |                | 27,513    |            | 27,513   
|                                |  |                        |           |                   |           |                |           |            |          
|Total financial assets          |  | $                      | 7,959,540 |                   | 8,110,738 |                | 5,494,998 |            | 5,607,101
|                                |  |                        |           |                   |           |                |           |            |          
|Financial liabilities:          |  |                        |           |                   |           |                |           |            |          
|Non-maturity deposits           |  | $                      | 3,249,219 |                   | 3,249,219 |                | 2,116,747 |            | 2,116,747
|Deposits with stated maturities |  |                        | 2,331,236 |                   | 2,349,507 |                | 1,634,490 |            | 1,651,839
|Borrowed funds                  |  |                        | 2,299,427 |                   | 2,374,666 |                | 1,556,500 |            | 1,671,254
|Interest payable                |  |                        | 9,575     |                   | 9,575     |                | 6,852     |            | 6,852    
|                                |  |                        |           |                   |           |                |           |            |          
|Total financial liabilities     |  | $                      | 7,889,457 |                   | 7,982,967 |                | 5,314,589 |            | 5,446,692
|                                |  |                        |           |                   |           |                |           |            |          



The following methods
and assumptions are used by the Company in estimating the fair value amounts for its financial instruments.



Cash and cash equivalents. The carrying value of cash and cash equivalents approximates fair value due to the relatively short period of time
between the origination of the instruments and their expected realization.



Investment securities and mortgage-backed securities. The fair value of these financial instruments were estimated using quoted market prices, when available. If quoted market prices were not available, fair
value was estimated using quoted market prices for similar assets. The fair value of FHLB of Chicago stock is based on its redemption value.



Loans receivable.The fair value of loans receivable held for investment is estimated based on contractual cash flows adjusted for
prepayment assumptions, discounted using the current rate at which similar loans would be made to borrowers with similar credit ratings and remaining terms to maturity. The fair value of mortgage loans held for sale are based on estimated values
that could be obtained in the secondary market.



Interest
receivable and payable. The carrying value of interest receivable, net of the reserve for uncollected interest, and interest payable approximates fair value due to the relatively short period of time between accrual and expected realization.



Deposits. The fair value of deposits with no stated
maturity, such as demand deposit, passbook savings, NOW and money market accounts, are disclosed as the amount payable on demand. The fair value of fixed-maturity deposits is the present value of the contractual cash flows discounted using interest
rates currently being offered for deposits with similar remaining terms to maturity.



Borrowed funds. The fair value of FHLB of Chicago advances and reverse repurchase agreements is the present value of the contractual cash flows, discounted by the current rate offered for similar remaining
maturities. The carrying value of the unsecured term bank loan approximates fair value due to the short term to repricing and adjustable rate nature of the loan.



Commitments to extend credit and standby letters of credit. The fair value of commitments to extend credit is
estimated based on current levels of interest rates versus



113



---

##### Table of Contents

MAF Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements  (Continued)



the committed rates. As of December 31, 2003 and 2002, the fair value of the Banks mortgage loan commitments of
$561.7 million and $751.9 million, respectively, was $1.8 million and $9.9 million, respectively, which represents the differential between the committed value and value at current rates. The fair value of the standby letters of credit approximate
the recorded amounts of related fees and are not material at December 31, 2003 and 2002.



21. Selected Quarterly Financial Data (Unaudited)



The following are the consolidated results of operations on a quarterly basis:



|                                                    |  |                                                 |        |               |        |              |        |               |       
|--------------------------------------------------- |  | ----------------------------------------------- | ------ | ------------- | ------ | ------------ | ------ | ------------- | ------
|                                                    |  | Year Ended December 31, 2003                   
|                                                    |  | FirstQuarter                                    |        | SecondQuarter |        | ThirdQuarter |        | FourthQuarter
|                                                    |  | (Dollars in thousands, except per shareamounts)
|Interest income                                     |  | $                                               | 77,026 |               | 73,925 |              | 78,160 |               | 87,319
|Interest expense                                    |  |                                                 | 35,971 |               | 33,362 |              | 33,252 |               | 34,367
|                                                    |  |                                                 |        |               |        |              |        |               |       
|Net interest income                                 |  |                                                 | 41,055 |               | 40,563 |              | 44,908 |               | 52,952
|Provision for loan losses                           |  |                                                 |       |               |       |              |       |               |      
|                                                    |  |                                                 |        |               |        |              |        |               |       
|Net interest income after provision for loan losses |  |                                                 | 41,055 |               | 40,563 |              | 44,908 |               | 52,952
|Net gain on sale of assets                          |  |                                                 | 7,119  |               | 8,841  |              | 6,345  |               | 3,071 
|Income from real estate operations                  |  |                                                 | 1,635  |               | 1,687  |              | 3,010  |               | 4,993 
|Other non-interest income                           |  |                                                 | 7,261  |               | 6,445  |              | 7,668  |               | 13,558
|Non-interest expense                                |  |                                                 | 26,675 |               | 26,744 |              | 29,409 |               | 37,369
|                                                    |  |                                                 |        |               |        |              |        |               |       
|Income before income taxes                          |  |                                                 | 30,395 |               | 30,792 |              | 32,522 |               | 37,205
|Income tax expense                                  |  |                                                 | 11,107 |               | 11,253 |              | 12,016 |               | 13,105
|                                                    |  |                                                 |        |               |        |              |        |               |       
|Net income                                          |  | $                                               | 19,288 |               | 19,539 |              | 20,506 |               | 24,100
|                                                    |  |                                                 |        |               |        |              |        |               |       
|Basic earnings per share                            |  | $                                               | .83    |               | .84    |              | .82    |               | .86   
|                                                    |  |                                                 |        |               |        |              |        |               |       
|Diluted earnings per share                          |  | $                                               | .81    |               | .82    |              | .79    |               | .84   
|                                                    |  |                                                 |        |               |        |              |        |               |       
|Cash dividends declared per share                   |  | $                                               | .18    |               | .18    |              | .18    |               | .18   
|                                                    |  |                                                 |        |               |        |              |        |               |       
|Stock price information:                            |  |                                                 |        |               |        |              |        |               |       
|High                                                |  | $                                               | 35.43  |               | 38.09  |              | 40.40  |               | 44.80 
|Low                                                 |  |                                                 | 32.61  |               | 32.90  |              | 36.97  |               | 38.20 
|Close                                               |  |                                                 | 33.65  |               | 37.07  |              | 38.20  |               | 41.90 
|                                                    |  |                                                 |        |               |        |              |        |               |       



|                                                    |  |                                                 |        |               |        |              |        |               |       
|--------------------------------------------------- |  | ----------------------------------------------- | ------ | ------------- | ------ | ------------ | ------ | ------------- | ------
|                                                    |  | Year Ended December 31, 2002                   
|                                                    |  | FirstQuarter                                    |        | SecondQuarter |        | ThirdQuarter |        | FourthQuarter
|                                                    |  | (Dollars in thousands, except per shareamounts)
|Interest income                                     |  | $                                               | 81,556 |               | 81,882 |              | 82,966 |               | 83,086
|Interest expense                                    |  |                                                 | 45,592 |               | 43,745 |              | 42,026 |               | 40,102
|                                                    |  |                                                 |        |               |        |              |        |               |       
|Net interest income                                 |  |                                                 | 35,964 |               | 38,137 |              | 40,940 |               | 42,984
|Provision for loan losses                           |  |                                                 |       |               |       |              |       |               | 300   
|                                                    |  |                                                 |        |               |        |              |        |               |       
|Net interest income after provision for loan losses |  |                                                 | 35,964 |               | 38,137 |              | 40,940 |               | 42,684
|Net gain on sale of assets                          |  |                                                 | 2,832  |               | 3,342  |              | 5,953  |               | 4,501 
|Income from real estate operations                  |  |                                                 | 2,897  |               | 160    |              | 3,791  |               | 2,869 
|Other non-interest income                           |  |                                                 | 7,945  |               | 8,092  |              | 6,910  |               | 7,071 
|Non-interest expense                                |  |                                                 | 23,581 |               | 24,286 |              | 25,441 |               | 26,034
|                                                    |  |                                                 |        |               |        |              |        |               |       
|Income before income taxes                          |  |                                                 | 26,057 |               | 25,445 |              | 32,153 |               | 31,091
|Income tax expense                                  |  |                                                 | 9,415  |               | 9,059  |              | 11,503 |               | 10,798
|                                                    |  |                                                 |        |               |        |              |        |               |       
|Net income                                          |  | $                                               | 16,642 |               | 16,386 |              | 20,650 |               | 20,293
|                                                    |  |                                                 |        |               |        |              |        |               |       
|Basic earnings per share                            |  | $                                               | .72    |               | .71    |              | .89    |               | .87   
|                                                    |  |                                                 |        |               |        |              |        |               |       
|Diluted earnings per share                          |  | $                                               | .70    |               | .69    |              | .87    |               | .85   
|                                                    |  |                                                 |        |               |        |              |        |               |       
|Cash dividends declared per share                   |  | $                                               | .15    |               | .15    |              | .15    |               | .15   
|                                                    |  |                                                 |        |               |        |              |        |               |       
|Stock price information:                            |  |                                                 |        |               |        |              |        |               |       
|High                                                |  | $                                               | 35.29  |               | 40.11  |              | 38.04  |               | 35.41 
|Low                                                 |  |                                                 | 28.70  |               | 34.37  |              | 29.60  |               | 28.60 
|Close                                               |  |                                                 | 35.25  |               | 37.60  |              | 30.90  |               | 34.00 
|                                                    |  |                                                 |        |               |        |              |        |               |       



114



---

##### Table of Contents

Independent Auditors Report



The Board of Directors

MAF Bancorp, Inc.



We have audited the accompanying consolidated statements of
financial condition of MAF Bancorp, Inc. and subsidiaries as of December 31, 2003 and 2002, and the related consolidated statements of operations, changes in stockholders equity and cash flows for each of the years in the three-year period
ended December 31, 2003. 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 auditing standards generally
accepted in the United States of America. 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 financial position of MAF Bancorp, Inc. and subsidiaries as of December 31, 2003 and 2002, and the
results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2003, in conformity with accounting principles generally accepted in the United States of America.



As discussed in Notes 1 and 10 to the consolidated financial statements, the
Company changed its method of accounting for goodwill in 2002.



KPMG LLP



Chicago, Illinois

February 20, 2004



115



---

##### Table of Contents

Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosures. None.



Item 9A. Controls and Procedures.



As of the end of the period covered by this report, the Companys Chief Executive Officer and Chief Financial Officer carried out an evaluation under their supervision, with the participation of other members of management as they
deemed appropriate, of the effectiveness of the design and operation of the Companys disclosure controls and procedures as contemplated by Rule 13a-15 under the Securities Exchange Act of 1934. Based upon, and as of the date of that
evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Companys disclosure controls and procedures are effective, in all material respects, in timely alerting them to material information relating to the Company
(and its consolidated subsidiaries) and in ensuring that information required to be included in the periodic reports the Company files or submits to the SEC under the Securities Exchange Act is recorded, processed, summarized and reported as
required.



There were no changes in the Companys internal
control over financial reporting during the three months ended December 31, 2003 that have materially affected, or are reasonably likely to affect materially, the Companys internal control over financial reporting.



PART III



Item 10. Directors and Executive Officers of the Registrant



Information regarding directors of the registrant is included in the registrants proxy statement under the headings Election of Directors and Transactions with Certain Related Persons and Other
Information the information included therein is incorporated herein by reference. Information regarding the executive officers of the Company included in this Form 10-K is included in Item 1. Business. Information regarding
beneficial ownership reporting compliance is included in the Companys proxy statement under the heading Section 16(a) Beneficial Ownership Reporting Compliance and the information included therein is incorporated by reference.



The Company has adopted a code of ethics as required by the
listing standards of the Nasdaq National Market and the SEC. This code applies to all of its directors, officers and employees. The Company has also adopted a charter for each of its audit committee, administrative/compensation committee and
nominating and corporate governance committee and has posted the code of ethics and the nominating and corporate governance committee charter on the Companys website at www.mafbancorp.com. The Company will post on its website any
amendments to the code of ethics and waivers, if any, applicable to any of its directors or executive officers. The foregoing information will also be available in print to any shareholder who requests such information.



Item 11. Executive Compensation



Information regarding compensation of executive officers and directors is included in the registrants proxy statement under the headings Directors Compensation, and Executive Compensation (excluding
Executive Compensation-Compensation Committee Report and Executive Compensation-Stock Performance Graph) and the information included therein is incorporated herein by reference.



Item 12. Security Ownership of Certain Beneficial Owners and Management



Information regarding security ownership of certain beneficial owners and management is included in the Companys proxy statement under the headings
Voting Securities, and Security Ownership of Certain Beneficial Owners, and Information With Respect to Nominees, Continuing Directors and Others, and the information included therein is incorporated herein by
reference.



116



---

##### Table of Contents

Equity Compensation Plans



The following table summarizes certain information about the equity compensation plans of the Company as of December 31, 2003:



|                                                           |  |                                                                                         |        |  |                                                                          |       |                                                                                                                                        |           |    
|---------------------------------------------------------- |  | --------------------------------------------------------------------------------------- | ------ |  | ------------------------------------------------------------------------ | ----- | -------------------------------------------------------------------------------------------------------------------------------------- | --------- | ---
|Plan Category                                              |  | Number Of SecuritiesTo Be Issued UponExercise OfOutstanding Options,Warrants And Rights |        |  | Weighted-AverageExercise Price OfOutstanding Options,Warrants And Rights |       | Number Of SecuritiesRemaining Available For Future IssuanceUnder EquityCompensation Plans(Excluding SecuritiesReflected In Column (A)) |          
|                                                           |  | (A)                                                                                     |        |  | (B)                                                                      |       | (C)                                                                                                                                    |          
|Equity compensation plans approved by security holders     |  | 3,299,603                                                                               | (1)(2) |  | $                                                                        | 27.22 |                                                                                                                                        | 983,831   |    
|Equity compensation plans not approved by security holders |  |                                                                                        |        |  |                                                                          |      |                                                                                                                                        | 19,529    | (3)
|                                                           |  |                                                                                         |        |  |                                                                          |       |                                                                                                                                        |           |    
|Total                                                      |  | 3,299,603                                                                               |        |  | $                                                                        | 27.22 |                                                                                                                                        | 1,003,360 |    
|                                                           |  |                                                                                         |        |  |                                                                          |       |                                                                                                                                        |           |    

---

|(1) | Includes 280,932 stock options exercisable at a weighted average price of $21.40 per share relating to options granted under plans of acquired entities that were
converted into MAF Bancorp stock options. No further grants will be made under such plans.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Includes 26,258 restricted stock units granted to certain non-executive employees.
|--- | ----------------------------------------------------------------------------------

|(3) | Represents shares reserved for issuance under deferred compensation plans, which shares may
be issued to executive officers and directors, if any, electing to defer cash compensation otherwise payable to them. The number of shares allocated to plan participants is determined based on the fair market value of shares at the time of
compensation deferral.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Item 13. Certain Relationships and Related Transactions



Information regarding certain relationships and related transactions is included in the Companys proxy statement under the heading Transactions with Certain Related Persons and Other Information, and
the information included therein is incorporated herein by reference.



Item 14. Principal Accountant Fees and Services



Information regarding fees paid to the independent auditors and the pre-approval policies and procedures of the Companys audit committee is included in the Companys proxy statement under the heading
Independent Auditors, and the information included therein is incorporated herein by reference.



PART IV



Item 15. Exhibits, Financial Statements Schedules and Reports on Form 8-K



| | (a)(1) | Financial Statements
| | ------ | --------------------



The following consolidated financial statements of the registrant and its subsidiaries are filed as a part of this document under Item 8. Financial
Statements and Supplementary Data.



Consolidated
Statements of Financial Condition at December 31, 2003 and 2002.



Consolidated Statements of Operations for the years ended December 31, 2003, 2002 and 2001.



Consolidated Statements of Changes in Stockholders Equity for the years ended December 31, 2003, 2002 and 2001.





117



---

##### Table of Contents

Consolidated Statements of Cash Flows for the years ended December 31, 2003, 2002 and 2001.



Notes to Consolidated Financial Statements.



Independent Auditors Report.



| | (a)(2) | Financial Statement Schedules
| | ------ | -----------------------------



All schedules are omitted because they are not required or are not applicable or the required information is shown in the consolidated financial
statements or notes thereto.



| | (a)(3) | Exhibits
| | ------ | --------



The following exhibits are either filed as part of this report or are incorporated herein by reference:



Exhibit No. 2. Plan of Acquisition, Reorganization, Arrangement, Liquidation
or Succession



| | 2.1 | Agreement and Plan of Reorganization by and among MAF Bancorp, Inc. and St. Francis Capital Corporation dated as of May 20, 2003 (Incorporated herein by reference to Exhibit 2.1 to
Registrants Form 8-K dated May 21, 2003).
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Exhibit No. 3. Certificate of Incorporation and By-laws.



| | 3.1 | Restated Certificate of Incorporation. (Incorporated herein by reference to Exhibit 3.1 to Registrants Form 8-K dated December 19, 2000).
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------



| | 3.2 | Amended and Restated By-laws of Registrant. (Incorporated herein by reference to Exhibit No. 3 to Registrants September 30, 2003 Form 10-Q).
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------



Exhibit No. 10. Material Contracts



| | 10.1 | Mid America Bank, fsb Management Recognition and Retention Plan and Trust Agreement. (Incorporated herein by reference to Exhibit No. 10 to Registrants June 30, 1992 Form
10-K).*
| | ---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 10.2 | MAF Bancorp, Inc. 1990 Incentive Stock Option Plan, as amended. (Incorporated herein by reference to Exhibit No. 10 to Registrants June 30, 1999 Form 10-Q and to Exhibit A to
Registrants Proxy Statement, dated March 23, 1998, relating to the 1998 Annual Meeting of Shareholders, File No. 0-18121).*
| | ---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 10.3 | Amendment dated May 23, 2000 to the MAF Bancorp, Inc. 1990 Incentive Stock Option Plan, as amended. (Incorporated herein by reference to Exhibit No. 10 to Registrants December
31, 2000 Form 10-K).*
| | ---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 10.4 | MAF Bancorp, Inc. 1993 Amended and Restated Premium Price Stock Option Plan. (Incorporated herein by reference to Exhibit No. 10 to Registrants June 30, 1999 Form 10-Q and to
Exhibit No. 10 to Registrants December 31, 1998 Form 10-K).*
| | ---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 10.5 | Amendment dated May 23, 2000 to the MAF Bancorp, Inc. 1993 Amended and Restated Premium Price Stock Option Plan. (Incorporated herein by reference to Exhibit No. 10 to
Registrants December 31, 2000 Form 10-K).*
| | ---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 10.6 | MAF Bancorp, Inc. 2000 Stock Option Plan (Incorporated herein by reference to Exhibit B filed as part of Registrants Proxy Statement dated March 23,
| | ---- | -----------------------------------------------------------------------------------------------------------------------------------------------------



118



---

##### Table of Contents

| |  | 2001, relating to the 2001 Annual Meeting of Shareholders, File No. 0-18121).*
| |  | ------------------------------------------------------------------------------



| | 10.7 | MAF Bancorp, Inc. Stock Option Gain Deferral Plan (Incorporated herein by reference to Exhibit No. 10 to Registrants June 30, 1999 Form 10-Q).*
| | ---- | ------------------------------------------------------------------------------------------------------------------------------------------------



| | 10.8 | Amendment dated March 27, 2001 to the MAF Bancorp, Inc. Stock Option Gain Deferral Plan (Incorporated herein by reference to Exhibit No. 10 to Registrants March 31, 2001 Form
10-Q).*
| | ---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 10.9 | Amendment dated February 26, 2002 to the MAF Bancorp, Inc. Stock Option Gain Deferral Plan. (Incorporated herein by reference to Exhibit No. 10 to Registrants December 31,
2001 Form 10-K).*
| | ---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 10.10 | MAF Bancorp, Inc. Stock Option Gain Deferral Plan Trust Agreement (Incorporated herein by reference to Exhibit No. 10 to Registrants September 30, 1999 Form 10-Q).*
| | ----- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 10.11 | Amendment dated May 16, 2001 to the MAF Bancorp, Inc. Stock Option Gain Deferral Plan Trust Agreement (Incorporated herein by reference to Exhibit No. 10 to Registrants June
30, 2001 Form 10-Q).*
| | ----- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 10.12 | MAF Bancorp, Inc. Incentive Compensation Plan (Incorporated herein by reference to Exhibit 10.1 to Registrants Form S-4/A dated October 14, 2003, Registration No.
333-108742).*
| | ----- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 10.13 | Fidelity Bancorp, Inc. 1993 Incentive Stock Option Plan (Incorporated herein by reference to Exhibit 4.2 to the Form S-8 Registration Statement filed by Fidelity Bancorp, Inc. with
the Commission on April 20, 1994, Registration No. 33-78000).*
| | ----- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 10.14 | Fidelity Bancorp, Inc. 1993 Stock Option Plan for Outside Directors (Incorporated herein by reference to Exhibit 4.1 to the Form S-8 Registration Statement filed by Fidelity
Bancorp, Inc. with the Commission on April 20, 1994, Registration No. 33-78000).*
| | ----- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 10.15 | St. Francis Capital Corporation 1993 Incentive Stock Option Plan (Incorporated herein by reference to Exhibit 4.3 to the Form S-8 Registration Statement filed by St. Francis Capital
Corporation with the Commission on September 29, 1993, Registration No. 33-70012).*
| | ----- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 10.16 | St. Francis Capital Corporation 1997 Stock Option Plan, as amended (Incorporated herein by reference to Exhibit 1 to Amendment No. 1 to the Form S-8 Registration Statement filed by
St. Francis Capital Corporation with the Commission on April 2, 1999, Registration No. 333-24057).*
| | ----- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 10.17 | Reliance Bancshares, Inc. 1997 Stock Option Plan (Incorporated herein by reference to Exhibit 4.2 to the Form S-8 Registration Statement filed by Reliance Bancshares, Inc. with the
Commission on June 3, 1997, Registration No. 333-28375).*
| | ----- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 10.18 | Amendment dated November 21, 2003 to the St. Francis Capital Corporation 1993 Incentive Stock Option Plan, 1997 Stock Option Plan, as amended, and the Reliance Bancshares, Inc. 1997
Stock Option Plan (Incorporated herein by reference to Exhibit 99.4 to the Form S-8 Registration Statement filed by MAF Bancorp, Inc. with the Commission on December 5, 2003, Registration No. 333-110986).*
| | ----- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 10.19 | Credit Agreement dated as of November 30, 2001, as amended through November 29, 2002, between MAF Bancorp, Inc. and Harris Trust and
| | ----- | ------------------------------------------------------------------------------------------------------------------------------------



119



---

##### Table of Contents

| |  | Savings Bank. (Incorporated herein by reference to Exhibit No. 10 to Registrants December 31, 2002 Form 10-K).
| |  | ---------------------------------------------------------------------------------------------------------------



| | 10.20 | Amendment dated November 28, 2003, of the Credit Agreement dated as of November 30, 2001, as amended, between MAF Bancorp, Inc. and Harris Trust and Savings Bank.+
| | ----- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 10.21 | Mid America Federal Savings and Loan Association Deferred Compensation Trust Agreement. (Incorporated herein by reference to Exhibit No. 10 to Registrants June 30, 1990 Form
10-K).*
| | ----- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 10.22 | Amendment dated May 16, 2001 to the Mid America Bank, fsb Deferred Compensation Trust Agreement. (Incorporated herein by reference to Exhibit No. 10 to Registrants June 30,
2001 Form 10-Q).*
| | ----- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 10.23 | Mid America Bank, fsb Directors Deferred Compensation Plan. (Incorporated herein by reference to Exhibit No. 10 to Registrants December 31, 1997 Form 10-K).*
| | ----- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 10.24 | Mid America Bank, fsb Executive Deferred Compensation Plan. (Incorporated herein by reference to Exhibit No. 10 to Registrants December 31, 1997 Form 10-K).*
| | ----- | --------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 10.25 | Deferred Compensation Agreement dated January 1, 1999 between St. Francis Bank, F.S.B. and Thomas R. Perz.*+
| | ----- | ------------------------------------------------------------------------------------------------------------



| | 10.26 | Deferred Compensation Agreements dated January 1, 1998, January 1, 1996, January 19, 1994 and November 18, 1987 between St. Francis Capital Corporation, St. Francis Bank, F.S.B.,
Bank Wisconsin and Thomas R. Perz.*+
| | ----- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 10.27 | MAF Bancorp, Inc. Executive Annual Incentive Plan. (Incorporated herein by reference to Exhibit No. 10 to Registrants June 30, 1994 Form 10-K).*
| | ----- | -------------------------------------------------------------------------------------------------------------------------------------------------



| | 10.28 | Amendment dated January 30, 2001 to the MAF Bancorp, Inc. Executive Annual Incentive Plan. (Incorporated herein by reference to Exhibit No. 10 to Registrants December 31, 2000
Form 10-K).*
| | ----- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 10.29 | MAF Bancorp, Inc. Shareholder Value Long-Term Incentive Plan, as amended. (Incorporated herein by reference to Exhibit No. 10 to Registrants December 31, 1999 Form 10-K).*
| | ----- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 10.30 | Amendment dated January 30, 2001 to the MAF Bancorp, Inc. Shareholder Value Long-Term Incentive Plan, as amended. (Incorporated herein by reference to Exhibit No. 10 to
Registrants December 31, 2000 Form 10-K).*
| | ----- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 10.31 | Mid America Bank, fsb Supplemental Executive Retirement Plan, as amended. (Incorporated herein by reference to Exhibit No. 10 to Registrants December 31, 1998 Form 10-K). *
| | ----- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 10.32 | Amendment dated March 27, 2001 to the Mid America Bank, fsb Supplemental Executive Retirement Plan, as amended. (Incorporated herein by reference to Exhibit No. 10 to
Registrants March 31, 2001 Form 10-Q).*
| | ----- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 10.33 | Fidelity Federal Savings Bank Supplemental Retirement Plan, as amended.*+
| | ----- | -------------------------------------------------------------------------



| | 10.34 | Form of Employment Agreement, as amended, between MAF Bancorp, Inc. and Allen Koranda, Kenneth Koranda and Jerry Weberling.*+
| | ----- | -----------------------------------------------------------------------------------------------------------------------------



120



---

##### Table of Contents

| | 10.35 | Form of Employment Agreement, as amended, between Mid America Bank, fsb and Allen Koranda, Kenneth Koranda and Jerry Weberling.*+
| | ----- | ---------------------------------------------------------------------------------------------------------------------------------



| | 10.36 | Form of Special Termination Agreement, as amended, between MAF Bancorp, Inc., and Kenneth Rusdal and various officers.*+
| | ----- | ------------------------------------------------------------------------------------------------------------------------



| | 10.37 | Form of Special Termination Agreement, as amended, between Mid America Bank, fsb, and Kenneth Rusdal and various officers.*+
| | ----- | ----------------------------------------------------------------------------------------------------------------------------



| | 10.38 | Employment Agreement between MAF Bancorp, Inc. and Thomas R. Perz.*+
| | ----- | --------------------------------------------------------------------



| | 10.39 | Employment Agreement between Mid America Bank, fsb and Thomas R. Perz.*+
| | ----- | ------------------------------------------------------------------------



| | 10.40 | Agreement Regarding Post-Employment Restrictive Covenants between MAF Bancorp, Inc. and Thomas R. Perz.*+
| | ----- | ---------------------------------------------------------------------------------------------------------



| | 10.41 | Agreement Regarding Post-Employment Restrictive Covenants between MAF Bancorp, Inc., Mid America Bank, fsb and David C. Burba. (Incorporated herein by reference to Exhibit No. 10 to
Registrants December 31, 1998 Form 10-K).*
| | ----- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 10.42 | Amendment dated October 19, 2001 to the Agreement Regarding Post-Employment Restrictive Covenants between MAF Bancorp, Inc., Mid America Bank, fsb and David C. Burba. (Incorporated
herein by reference to Exhibit No. 10 to Registrants December 31, 2001 10-K).*
| | ----- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

---

|* | Indicates management contracts or compensatory plans or arrangements required to be filed as an exhibit.
|- | --------------------------------------------------------------------------------------------------------

|+ | Filed herewith.
|- | ---------------



121



---

##### Table of Contents

Exhibit No. 11. Statement re: Computation of Per Share Earnings for the periods indicated. Included in
Item 8. Footnote 1. Summary of Significant Accounting Policies.



Exhibit No. 12. Statements re: Computation of ratio of earnings to fixed charges.+



Exhibit No. 21. Subsidiaries of the Registrant.+



Exhibit No. 23. Consent of KPMG LLP.+



Exhibit No. 24. Power of Attorney (Included on Signature Page)



Exhibit No. 31.1. Certification of Chief Executive Officer.+



Exhibit No. 31.2. Certification of Chief Financial Officer.+



Exhibit No. 32.1. Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2003.+



| | (b) | Reports on Form 8-K
| | --- | -------------------



On October 20, 2003, MAF Bancorp, Inc. filed a Current Report on Form 8-K (Items 5, 7 and 12) announcing its 2003 third quarter earnings results and a
copy of the press release was included as an exhibit.



On
October 24, 2003, MAF Bancorp, Inc. filed a Current Report on Form 8-K (Items 5 and 7) announcing that all regulatory approvals for the St. Francis Capital Corporation acquisition had been received. Information regarding scheduling the
companies respective shareholder meetings and the timing for closing of the merger was also provided. A copy of the press release was included as an exhibit.



On December 3, 2003, MAF Bancorp, Inc. filed a Current Report on Form 8-K (Items 2 and 7) announcing it had completed its
acquisition of St. Francis Capital Corporation. A copy of the press release dated December 1, 2003 was included as an exhibit. Audited financial statements of St. Francis Capital Corporation were also included with the filing.



122



---

##### Table of Contents

SIGNATURES



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



MAF Bancorp, Inc.(Registrant)By:

/s/ Allen H. KorandaAllen H. KorandaChairman of the Board andChief Executive OfficerMarch 11, 2004(Date)




KNOW ALL MEN BY
THESE PRESENTS, that each person whose signature appears below constitutes and appoints Allen H. Koranda or Kenneth Koranda or either of them, his true and lawful attorney-in-fact and agents, with full power of substitution and re-substitution, for
him and in his name, place and stead, in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K, and to file the same, with all exhibits thereto, and all other documents in connection therewith, with the Securities
and Exchange Commission, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming said attorneys-in-fact and agents or their substitutes or substitute may lawfully do or cause to be done by virtue hereof.



Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and on the dates indicated.



|    |  |                                                                                                                    |  |               
|--- |  | ------------------------------------------------------------------------------------------------------------------ |  | --------------
|By: |  | /s/ Allen H. Koranda                                                                                               |  | March 11, 2004
|    |  | Allen H. Koranda Chairman of the Board and Chief Executive Officer (Principal Executive Officer)                   |  | (Date)        
|    |  |                                                                                                                   
|By: |  | /s/ Jerry A. Weberling                                                                                             |  | March 11, 2004
|    |  | Jerry A. Weberling Executive Vice President and Chief Financial Officer and Director (Principal Financial Officer) |  | (Date)        
|    |  |                                                                                                                   
|By: |  | /s/ Christine Roberg                                                                                               |  | March 11, 2004
|    |  | Christine Roberg First Vice President and Controller (Principal Accounting Officer)                                |  | (Date)        



123



---

##### Table of Contents

|    |  |                                            |  |               
|--- |  | ------------------------------------------ |  | --------------
|    |  |                                           
|By: |  | /s/ Kenneth Koranda                        |  | March 11, 2004
|    |  | Kenneth Koranda Vice Chairman of the Board |  | (Date)        
|    |  |                                           
|By: |  | /s/ Robert Bowles, M.D.                    |  | March 11, 2004
|    |  | Robert Bowles, M.D. Director               |  | (Date)        
|    |  |                                           
|By: |  | /s/ David C. Burba                         |  | March 11, 2004
|    |  | David C. Burba Director                    |  | (Date)        
|    |  |                                           
|By: |  | /s/ Terry Ekl                              |  | March 11, 2004
|    |  | Terry Ekl Director                         |  | (Date)        
|    |  |                                           
|By: |  | /s/ Harris W. Fawell                       |  | March 11, 2004
|    |  | Harris W. Fawell Director                  |  | (Date)        
|    |  |                                           
|By: |  | /s/ Joe F. Hanauer                         |  | March 11, 2004
|    |  | Joe F. Hanauer Director                    |  | (Date)        
|    |  |                                           
|By: |  | /s/ Barbara L. Lamb                        |  | March 11, 2004
|    |  | Barbara L. Lamb Director                   |  | (Date)        
|    |  |                                           
|By: |  | /s/ Thomas R. Perz                         |  | March 11, 2004
|    |  | Thomas R. Perz Director                    |  | (Date)        
|    |  |                                           
|By: |  | /s/ Raymond S. Stolarczyk                  |  | March 11, 2004
|    |  | Raymond S. Stolarczyk Director             |  | (Date)        
|    |  |                                           
|By: |  | /s/ F. William Trescott                    |  | March 11, 2004
|    |  | F. William Trescott Director               |  | (Date)        
|    |  |                                           
|By: |  | /s/ Lois B. Vasto                          |  | March 11, 2004
|    |  | Lois B. Vasto Director                     |  | (Date)        
|    |  |                                           
|By: |  | /s/ Andrew J. Zych                         |  | March 11, 2004
|    |  | Andrew J. Zych Director                    |  | (Date)        



124



---

##### Table of Contents

EXHIBIT INDEX



|            |  |                                                                                                                                                                                                                                                                                                             
|----------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                                                                                                                                                                                 
|2.1         |  | Agreement and Plan of Reorganization by and among MAF Bancorp, Inc. and St. Francis Capital Corporation dated as of May 20, 2003. (Incorporated herein by reference to Exhibit 2.1 to
Registrants Form 8-K dated May 21, 2003).                                                                            
|            | 
|3.1         |  | Restated Certificate of Incorporation. (Incorporated herein by reference to Exhibit 3.1 to Registrants Form 8-K dated December 19, 2000).                                                                                                                                                                  
|            | 
|3.2         |  | Amended and Restated By-laws of Registrant. (Incorporated herein by reference to Exhibit No. 3 to Registrants September 30, 2003 Form 10-Q).                                                                                                                                                               
|            | 
|10.1        |  | Mid America Bank, fsb Management Recognition and Retention Plan and Trust Agreement. (Incorporated herein by reference to Exhibit No. 10 to Registrants June 30, 1992 Form
10-K).*                                                                                                                         
|            | 
|10.2        |  | MAF Bancorp, Inc. 1990 Incentive Stock Option Plan, as amended. (Incorporated herein by reference to Exhibit No. 10 to Registrants June 30, 1999 Form 10-Q and to Exhibit A to
Registrants Proxy Statement, dated March 23, 1998, relating to the 1998 Annual Meeting of Shareholders, File No. 0-18121).*
|            | 
|10.3        |  | Amendment dated May 23, 2000 to the MAF Bancorp, Inc. 1990 Incentive Stock Option Plan, as amended. (Incorporated herein by reference to Exhibit No. 10 to Registrants December 31, 2000
Form 10-K).*                                                                                                      
|            | 
|10.4        |  | MAF Bancorp, Inc. 1993 Amended and Restated Premium Price Stock Option Plan. (Incorporated herein by reference to Exhibit No. 10 to Registrants June 30, 1999 Form 10-Q and to Exhibit
No. 10 to Registrants December 31, 1998 Form 10-K).*                                                               
|            | 
|10.5        |  | Amendment dated May 23, 2000 to the MAF Bancorp, Inc. 1993 Amended and Restated Premium Price Stock Option Plan. (Incorporated herein by reference to Exhibit No. 10 to Registrants
December 31, 2000 Form 10-K).*                                                                                         
|            | 
|10.6        |  | MAF Bancorp, Inc. 2000 Stock Option Plan (Incorporated herein by reference to Exhibit B filed as part of Registrants Proxy Statement dated March 23, 2001, relating to the 2001 Annual
Meeting of Shareholders, File No. 0-18121)*                                                                         
|            | 
|10.7        |  | MAF Bancorp, Inc. Stock Option Gain Deferral Plan (Incorporated herein by reference to Exhibit No. 10 to Registrants June 30, 1999 Form 10-Q).*                                                                                                                                                            
|            | 
|10.8        |  | Amendment dated March 27, 2001 to the MAF Bancorp, Inc. Stock Option Gain Deferral Plan (Incorporated herein by reference to Exhibit No. 10 to Registrants March 31, 2001 Form
10-Q).*                                                                                                                     
|            | 
|10.9        |  | Amendment dated February 26, 2002 to the MAF Bancorp, Inc. Stock Option Gain Deferral Plan. (Incorporated herein by reference to Exhibit No. 10 to Registrants December 31, 2001 Form
10-K).*                                                                                                              





---

##### Table of Contents

|            |  |                                                                                                                                                                                                                                                                                                                                                                                                     
|----------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                                                                                                                                                                                                                                                                         
|10.10       |  | MAF Bancorp, Inc. Stock Option Gain Deferral Plan Trust Agreement. (Incorporated herein by reference to Exhibit No. 10 to Registrants September 30, 1999 Form 10-Q).*                                                                                                                                                                                                                              
|            | 
|10.11       |  | Amendment dated May 16, 2001 to the MAF Bancorp, Inc. Stock Option Gain Deferral Plan Trust Agreement. (Incorporated herein by reference to Exhibit No. 10 to Registrants June 30, 2001
Form 10-Q).*                                                                                                                                                                                               
|            | 
|10.12       |  | MAF Bancorp, Inc. Incentive Compensation Plan. (Incorporated herein by reference to Exhibit 10.1 to Registrants Form S-4/A dated October 14, 2003, Registration No.
333-108742).*                                                                                                                                                                                                                  
|            | 
|10.13       |  | Fidelity Bancorp, Inc. 1993 Incentive Stock Option Plan. (Incorporated herein by reference to Exhibit 4.2 to the Form S-8 Registration Statement filed by Fidelity Bancorp, Inc. with the
Commission on April 20, 1994, Registration No. 33-78000).*                                                                                                                                                
|            | 
|10.14       |  | Fidelity Bancorp, Inc. 1993 Stock Option Plan for Outside Directors. (Incorporated herein by reference to Exhibit 4.1 to the Form S-8 Registration Statement filed by Fidelity Bancorp, Inc.
with the Commission on April 20, 1994, Registration No. 33-78000).*                                                                                                                                    
|            | 
|10.15       |  | St. Francis Capital Corporation 1993 Incentive Stock Option Plan. (Incorporated herein by reference to Exhibit 4.3 to the Form S-8 Registration Statement filed by St. Francis Capital
Corporation with the Commission on September 29, 1993, Registration No. 33-70012).*                                                                                                                          
|            | 
|10.16       |  | St. Francis Capital Corporation 1997 Stock Option Plan, as amended. (Incorporated herein by reference to Exhibit 1 to Amendment No. 1 to the Form S-8 Registration Statement filed by St.
Francis Capital Corporation with the Commission on April 2, 1999, Registration No. 333-24057).*                                                                                                           
|            | 
|10.17       |  | Reliance Bancshares, Inc. 1997 Stock Option Plan. (Incorporated herein by reference to Exhibit 4.2 to the Form S-8 Registration Statement filed by Reliance Bancshares, Inc. with the
Commission on June 3, 1997, Registration No. 333-28375).*                                                                                                                                                     
|            | 
|10.18       |  | Amendment dated November 21, 2003 to the St. Francis Capital Corporation 1993 Incentive Stock Option Plan, 1997 Stock Option Plan, as amended, and the Reliance Bancshares, Inc. 1997 Stock
Option Plan. (Incorporated herein by reference to Exhibit 99.4 to the Form S-8 Registration Statement filed by MAF Bancorp, Inc. with the Commission on December 5, 2003, Registration No. 333-110986).*
|            | 
|10.19       |  | Credit Agreement dated as of November 30, 2001, as amended through November 29, 2002, between MAF Bancorp, Inc. and Harris Trust and Savings Bank. (Incorporated herein by reference to Exhibit
No. 10 to Registrants December 31, 2002 Form 10-K).                                                                                                                                                



2



---

##### Table of Contents

|            |  |                                                                                                                                                                                                                        
|----------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                                                                                            
|10.20       |  | Amendment dated November 28, 2003, of the Credit Agreement dated as of November 30, 2001, as amended, between MAF Bancorp, Inc. and Harris Trust and Savings Bank.+                                                    
|            | 
|10.21       |  | Mid America Federal Savings and Loan Association Deferred Compensation Trust Agreement. (Incorporated herein by reference to Exhibit No. 10 to Registrants June 30, 1990 Form
10-K).*                                 
|            | 
|10.22       |  | Amendment dated May 16, 2001 to the Mid America Bank, fsb Deferred Compensation Trust Agreement. (Incorporated herein by reference to Exhibit No. 10 to Registrants June 30, 2001 Form
10-Q).*                        
|            | 
|10.23       |  | Mid America Bank, fsb Directors Deferred Compensation Plan. (Incorporated herein by reference to Exhibit No. 10 to Registrants December 31, 1997 Form 10-K).*                                                        
|            | 
|10.24       |  | Mid America Bank, fsb Executive Deferred Compensation Plan. (Incorporated herein by reference to Exhibit No. 10 to Registrants December 31, 1997 Form 10-K).*                                                         
|            | 
|10.25       |  | Deferred Compensation Agreement dated January 1, 1999 between St. Francis Bank, F.S.B and Thomas R. Perz.*+                                                                                                            
|            | 
|10.26       |  | Deferred Compensation Agreements dated January 1, 1998, January 1, 1996, January 19, 1994 and November 18, 1987 between St. Francis Capital Corporation, St. Francis Bank, F.S.B., Bank
Wisconsin and Thomas R. Perz.*+
|            | 
|10.27       |  | MAF Bancorp, Inc. Executive Annual Incentive Plan. (Incorporated herein by reference to Exhibit No. 10 to Registrants June 30, 1994 Form 10-K).*                                                                      
|            | 
|10.28       |  | Amendment dated January 30, 2001 to the MAF Bancorp, Inc. Executive Annual Incentive Plan. (Incorporated herein by reference to Exhibit No. 10 to Registrants December 31, 2000 Form
10-K).*                          
|            | 
|10.29       |  | MAF Bancorp, Inc. Shareholder Value Long-Term Incentive Plan, as amended. (Incorporated herein by reference to Exhibit No. 10 to Registrants December 31, 1999 Form
10-K).*                                           
|            | 
|10.30       |  | Amendment dated January 30, 2001 to the MAF Bancorp, Inc. Shareholder Value Long-Term Incentive Plan, as amended. (Incorporated herein by reference to Exhibit No. 10 to Registrants
December 31, 2000 Form 10-K).*   
|            | 
|10.31       |  | Mid America Bank, fsb Supplemental Executive Retirement Plan, as amended. (Incorporated herein by reference to Exhibit No. 10 to Registrants December 31, 1998 Form 10-K).
*                                          
|            | 
|10.32       |  | Amendment dated March 27, 2001 to the Mid America Bank, fsb Supplemental Executive Retirement Plan, as amended. (Incorporated herein by reference to Exhibit No. 10 to Registrants March
31, 2001 Form 10-Q).*        
|            | 
|10.33       |  | Fidelity Federal Savings Bank Supplemental Retirement Plan, as amended.*+                                                                                                                                              



3



---

##### Table of Contents

|            |  |                                                                                                                                                                                                                                                                     
|----------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                                                                                                                                         
|10.34       |  | Form of Employment Agreement, as amended, between MAF Bancorp, Inc. and Allen Koranda, Kenneth Koranda and Jerry Weberling.*+                                                                                                                                       
|            | 
|10.35       |  | Form of Employment Agreement, as amended, between Mid America Bank, fsb and Allen Koranda, Kenneth Koranda and Jerry Weberling.*+                                                                                                                                   
|            | 
|10.36       |  | Form of Special Termination Agreement, as amended, between MAF Bancorp, Inc., and Kenneth Rusdal and various officers.*+                                                                                                                                            
|            | 
|10.37       |  | Form of Special Termination Agreement, as amended, between Mid America Bank, fsb, and Kenneth Rusdal and various officers.*+                                                                                                                                        
|            | 
|10.38       |  | Employment Agreement between MAF Bancorp, Inc. and Thomas R. Perz.*+                                                                                                                                                                                                
|            | 
|10.39       |  | Employment Agreement between Mid America Bank, fsb and Thomas R. Perz.*+                                                                                                                                                                                            
|            | 
|10.40       |  | Agreement Regarding Post-Employment Restrictive Covenants between MAF Bancorp, Inc. and Thomas R. Perz.*+                                                                                                                                                           
|            | 
|10.41       |  | Agreement Regarding Post-Employment Restrictive Covenants between MAF Bancorp, Inc., Mid America Bank, fsb and David C. Burba. (Incorporated herein by reference to Exhibit No. 10 to
Registrants December 31, 1998 Form 10-K).*                                   
|            | 
|10.42       |  | Amendment dated October 19, 2001 to the Agreement Regarding Post-Employment Restrictive Covenants between MAF Bancorp, Inc., Mid America Bank, fsb and David C. Burba. (Incorporated herein by
reference to Exhibit No. 10 to Registrants December 31, 2001 10-K).*
|            | 
|11          |  | Statement re: Computation of Per Share Earnings. (Included in Note 1 to Registrants Consolidated Financial Statements set forth in Item 8 of this Report).                                                                                                         
|            | 
|12          |  | Statements re: Computation of ratio of earnings to fixed charges.+                                                                                                                                                                                                  
|            | 
|21          |  | Subsidiaries of the Registrant.+                                                                                                                                                                                                                                    
|            | 
|23          |  | Consent of KPMG LLP.+                                                                                                                                                                                                                                               
|            | 
|24          |  | Power of Attorney (Included on Signature Page)                                                                                                                                                                                                                      
|            | 
|31.1        |  | Certification of Chief Executive Officer.+                                                                                                                                                                                                                          
|            | 
|31.2        |  | Certification of Chief Financial Officer.+                                                                                                                                                                                                                          
|            | 
|32.1        |  | Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2003.+                                                                                     

---

|* | Indicates management contracts or compensatory plans or arrangements required to be filed as an exhibit.
|- | --------------------------------------------------------------------------------------------------------



|+ | Filed herewith.
|- | ---------------



4