<PAGE>

================================================================================

                       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 year ended December 31, 1999

                        Commission file number 0-18121

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

                               MAF Bancorp, Inc.

                 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.   X
           ------

Based upon the closing price of the registrant's common stock as of March 1,
2000, the aggregate market value of the voting stock held by non-affiliates of
the registrant was $323,962,659.*

The number of shares of Common Stock outstanding as of March 1, 2000: 23,660,162

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

                      Documents Incorporated by Reference

PART III -- Portions of the Proxy Statement for the Annual Meeting of
Shareholders to be held on April 26, 2000 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. Also included are shares
  held by various employee benefit plans where trustees are (i) directors or
  executive officers of the registrant or (ii) required to vote a portion of
  unallocated shares at the direction of employees.

================================================================================
<PAGE>

                                    PART I

Item 1.  Business

General

     MAF Bancorp, Inc. ("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 consumer banking business through its wholly-
owned subsidiary, Mid America Bank, fsb ("Bank") and, to a lesser extent, in the
residential real estate development business.

     The Bank is a consumer-oriented financial institution offering various
financial services to its customers through 25 retail banking offices.  The
Bank's market area is generally comprised of the western suburbs of Chicago,
including DuPage County, which has the second highest per capita income in
Illinois, as well as the northwest side of Chicago.  It is principally engaged
in the business of attracting deposits from the general public 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 also makes multi-family mortgage, residential construction, land
acquisition and development and a variety of consumer loans.  The Bank also has
a small portfolio of commercial real estate. Through two wholly-owned
subsidiaries, MAF Developments, Inc. ("MAF Developments") and NW Financial, Inc.
("NW Financial"), the Company and the Bank are also engaged in real estate
development activities, primarily residential development.  Additionally, the
Bank operates an insurance agency, Mid America Insurance Agency, Inc., which
provides general insurance services, a title agency, Centre Point Title
Services, Inc., which provides general title services for the Bank's loan
customers, and Mid America Investment Services, Inc. ("Mid America
Investments"), which offers investment services and securities brokerage
primarily to Bank customers through its affiliation with INVEST, a registered
broker-dealer.  Mid America Investments was formerly known as Mid America
Development Services, Inc.

     For financial information regarding the Company's two separate lines of
business (consumer banking and land development), see "Note 21. Segment
Information" to the audited consolidated financial statements of the Company
included in "Item 8. Financial Statements and Supplementary Data."

     On December 31, 1998, the Company successfully completed its acquisition of
Westco Bancorp, Inc. ("Westco"), and its Bank subsidiary, First Federal Savings
and Loan of Westchester ("Westchester").  The Company acquired $245.2 million in
loans, $259.5 million in deposits, and a full service branch along with a
satellite drive-up facility.  On May 30, 1996, the Company acquired N.S.
Bancorp, Inc. ("Northwestern"), and its Bank subsidiary, Northwestern Savings
Bank.  At acquisition, Northwestern had $749.7 million in loans, which were
primarily one- to four family residential mortgage loans, and $872.0 million in
deposits, which were serviced from six branch locations.  All but one of the
branches are in markets which the Bank did not service in the past.

     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 regulated by the Office of Thrift
Supervision ("OTS") and the FDIC. 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.

     The Company's executive offices are located at 55th Street and Holmes
Avenue, Clarendon Hills, Illinois 60514-1500. The telephone number is
(630) 325-7300.

                                       2
<PAGE>

Market Data

     Based on total assets at December 31, 1999, the Bank is one of the largest
financial institutions headquartered in the Chicago metropolitan area, with its
home office located in Clarendon Hills, Illinois in the southeastern portion of
DuPage County.  Through its network of 25 retail banking offices, the Bank
serves the residential communities of western Cook County, northern Will County,
eastern Kane County and DuPage County, as well as the northwest side of the City
of Chicago.

Competition

     The Bank is faced with increasing competition in attracting retail customer
business, including deposit accounts and loan originations.  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, convenience of branch locations, ease of business
transactions, and office hours.  Competition for loan products comes primarily
from other mortgage brokers, savings institutions, commercial banks and mortgage
banking companies.  Factors affecting business include interest rates, terms,
fees, and customer service.

Regulatory Environment

     The Bank is subject to extensive regulation, supervision and examination by
the 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.

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. The
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.  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.  Factors which could have a material adverse
effect on the operations and future prospects of the Company and the
subsidiaries include, but are not limited to, unexpected changes in interest
rates, general economic conditions, legislative/regulatory changes, 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, demand for loan products, deposit flows, cost and
availability of wholesale borrowings, delays in completing the pending branch
acquisition, competition, demand for financial services in the Company's market
area, the possible short-term dilutive effect of potential acquisitions, and
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.

                                       3
<PAGE>

Executive Officers of the Registrant

  The following executive officers were employed by the Company and the Bank as
of January 1, 2000.


        Name                 Age                   Position(s) Held
        ----                 ---                   ----------------

Allen H. Koranda              53    Chairman of the Board and Chief Executive
                                    Officer of the Company and the Bank

Kenneth Koranda               50    President and Director of the Company and
                                    the Bank

David C. Burba                52    Executive Vice President and Director of
                                    the Company and the Bank

Jerry A. Weberling            48    Executive Vice President, Chief Financial
                                    Officer and Director of the Company and
                                    the Bank

Gerard J. Buccino             38    Senior Vice President and Controller of
                                    the Company and the Bank

William Haider                48    Senior Vice President of the Company and
                                    the Bank; President of Mid America
                                    Investments, NW Financial and
                                    MAF Developments

Michael J. Janssen            40    Senior Vice President of the Company and
                                    the Bank

David W. Kohlsaat             45    Senior Vice President of the Company and
                                    the Bank

Thomas Miers                  48    Senior Vice President of the Company and
                                    the Bank

Kenneth Rusdal                58    Senior Vice President of the Company and
                                    the Bank

Sharon Wheeler                47    Senior Vice President of the Company and
                                    the Bank

Gail Brzostek                 51    First Vice President of the Bank

Alan W. Schatz                41    First Vice President of the Bank

Diane Stutte                  51    First Vice President of the Bank

Carolyn Pihera                57    Vice President and Corporate Secretary of
                                    the Company and the Bank

                                       4
<PAGE>

Biographical Information

     Set forth below is certain information with respect to executive officers
of the Company and the Bank. Unless otherwise indicated, the principle
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. He is also Senior Vice President and a director of Mid America
Investments. 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 President of the Company since August, 1989, and
of the Bank since July 1984. He joined the Bank in 1972. He is also Chairman of
Mid America Investments. 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.

     David C. Burba joined the Company as Executive Vice President on January 1,
1999 in conjunction with the acquisition of Westco.  He had previously served as
Chairman of the Board and President of Westco since 1992 and President of First
Federal Savings and Loan of Westchester since 1978.  Mr. Burba holds a Bachelor
of Arts degree from Carthage College.

     Jerry A. Weberling has been Executive Vice President and Chief Financial
Officer of the Company and the Bank since July 1993. Prior to that, he was
Senior Vice President of the Company since August, 1989, and Senior Vice
President and Chief Financial Officer of the Bank from March 1990 to July 1993.
He was Senior Vice President and Controller from 1986 to March 1990.  He joined
the Bank in 1984.  He is a certified public accountant.  Mr. Weberling holds a
Bachelor of Science degree from Northern Illinois University.

     Gerard J. Buccino has been Senior Vice President and Controller of the
Company and the Bank since July 1996. Prior to that he was First Vice President
and Controller of the Company and the Bank from July 1993 to July 1996 and Vice
President and Controller of the Company and the Bank from March 1990 to July
1993. 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.  Prior to that he was Vice President of the Company since April
1993 and of the Bank since 1987.  He is President of MAF Developments, and NW
Financial, managing the real estate development activities of the Company.
Mr. Haider holds a Bachelor of Science degree from Southern Illinois
University. He joined the Bank in 1984.

     Michael J. Janssen has been Senior Vice President - Investor Relations and
Taxation of the Company and the Bank since July 1996.  Prior to that he was
First Vice President - Investor Relations and Taxation of the Company and the
Bank from July 1993 to July 1996, and Vice President of the Company from March
1990 to July 1993.  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 of Taxation degree from DePaul University.

                                       5
<PAGE>

     David W. Kohlsaat has been Senior Vice President - Administration since
July 1996. Prior to that he was First Vice President - Administration of the
Company from July 1993 to July 1996, and is responsible for retail deposit
administration and human resources. He has been Vice President of the Company
since April 1993 and of the Bank since 1980. Mr. Kohlsaat holds a Bachelor of
Science degree from Southern Methodist University. He joined the Bank in 1976.

     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.  Prior
to that he was Senior Vice President - Marketing.  Mr. Miers holds a Bachelor of
Science degree from George Williams College.  He joined the Bank in 1979.

     Kenneth Rusdal has been Senior Vice President of the Company since
April 1993 and Senior Vice President - Operations and Information Systems since
January 1992. Prior to that he was Senior Vice President-Information Systems
from 1987 through 1991.  He also served as Vice President of Software
Development for FISERV, Inc., where he was employed from 1983 to 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.

     Gail Brzostek has been First Vice President - Check Operations and VISA
services since July 1996.  Prior to that she was Vice President - Check
Operations since 1985.  She joined the Bank in 1967.

     Alan W. Schatz has been First Vice President - Secondary Marketing of the
Bank since July 1996. Prior to that he was Vice President - Secondary Marketing
of the Bank from September 1992 to July 1996. Prior to that he served as the
Director of Trading and Risk Management at First Illinois Mortgage Corporation
where he was employed from 1987 until 1992. Mr. Schatz holds a Bachelor of
Science degree from the University of Illinois at Chicago and a Master of
Business Administration degree from Rosary College.

     Diane Stutte has been First Vice President - Teller Operations since July
1996.  Prior to that, she was Vice President - Teller Operations of the Bank
since 1985.  She joined the Bank in 1970.

     Carolyn Pihera has been Vice President since 1979 and Corporate Secretary
to the Board of Directors of the Company since August 1989 and of the Bank since
1980. She joined the Bank in 1959.

  Employees

  The Bank employs a total of 947 full time equivalent employees as of
December 31, 1999. Management considers its relationship with its employees to
be excellent.

Item 2. Properties

  The Company's business is conducted through 25 retail banking offices,
including the Company's executive office location in Clarendon Hills, Illinois,
and a 30,000 square foot loan processing and servicing center located in
Naperville, Illinois, which the Bank leases.  The Bank has its own data
processing equipment.  The data processing equipment primarily consists of
mainframe hardware, network servers, personal computers and ATMs.  At
December 31, 1999, the data processing equipment owned has a net book value
of $2.9 million.

                                       6
<PAGE>

     The following table sets forth information regarding the executive office
and the Bank's 25 branches. At December 31, 1999, the net book value of premises
and related equipment was $42.5 million.

<TABLE>
<CAPTION>
                                                                                                              Net Book Value
                                                 Date Leased            Date Lease         % of Total          December 31,
            Location                             or Acquired              Expires           Deposits               1999
            --------                             ------------          -------------       -----------        --------------
                                                                            (Dollars in thousands)
<S>                                              <C>                   <C>                 <C>                <C>
  Executive and Home Office
  55th Street and Holmes Avenue
  Clarendon Hills, Illinois                        1975/1986                owned                8.23%               $ 4,478

  Branches

  Chicago, Illinois
  2300 North Western Avenue                          1996                   owned                4.75                  1,612
  3844 West Belmont Avenue                           1996                   owned               10.31                    370
  6333 North Milwaukee Avenue                        1996                    2001                4.79                      2
  5075 South Archer Avenue                           1996                   owned                8.07                  1,260

  Norridge, Illinois
  4100 North Harlem Avenue                           1996                    2000                 .54                      3
  4350 North Harlem Avenue                           1997                   owned(1)             5.71                  2,277
  6401 North Harlem Avenue                           1999                    2004                1.06                     --

  Cicero, Illinois
  5900/5847 West Cermak Road                      1939/1978                 owned               10.53                  1,477
  4830 West Cermak Road                              1970                   owned                1.53                    446

  Berwyn, Illinois
  6620 West Ogden Avenue                             1996                   owned                 .85                  1,188
  6650 West Cermak Road                              1996                   owned                3.07                    399

  Riverside, Illinois
  40 East Burlington                                 1977                   owned                3.74                    838

  LaGrange Park, Illinois
  1921 East 31st Street                              1981                   owned                3.72                  1,124

  Broadview, Illinois
  800 Broadview Village Square                       1997                    2012                 .10                    188

  Western Springs, Illinois
  40 West 47th Street                                1978                   owned                3.09                    786

  Downers Grove, Illinois
  7351 South Lemont Road                             1997                   owned(2)              .66                    771

  Naperville, Illinois
  1001 South Washington                              1974                   owned                6.61                  1,915
  9 East Ogden Avenue                                1982                   owned                1.80                  1,192
  1308 South Naper Boulevard                         1987                   owned                2.81                  1,432
  3135 Book Road                                     1997                   owned                1.41                  1,746

  Westchester, Illinois
  2121 South Mannheim Road                           1998                   owned                9.26                  1,463

  Wheaton, Illinois
  250 East Roosevelt Road                            1977                   owned                3.14                    823
  161 Danada Square East                             1988                    2008                1.56                    240

  St. Charles, Illinois
  2600 East Main Street                              1979                   owned                2.66                  2,013

  Other fixed assets                                                                               --                 14,446
                                                                                               ------               --------
    Total                                                                                      100.00%              $ 42,489
                                                                                               ======               ========
</TABLE>
-------------
(1)  Land lease expires in 2006
(2)  Land lease expires in 2007.

                                       7
<PAGE>

Item 3.  Legal Proceedings

     As of December 31, 1999, there are no outstanding legal proceedings against
the Company.  There are various actions pending against the Bank but, in the
opinion of management, the probable liability resulting from these suits is
unlikely, individually or in the aggregate, to have a material effect on the
Bank's or the Company's financial statements.


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

     None.


                                    PART II

Item 5.  Market for the Registrant's Common Stock and Related Stockholders
         Matters

     The Company's common stock trades on the Nasdaq Stock Market under the
symbol "MAFB." As of March 1, 2000, the Company had 2,067 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.


<TABLE>
<CAPTION>
                              December 31, 1999                                        December 31, 1998
                  ---------------------------------------------            -----------------------------------------
                   High         Low         Close      Dividend            High        Low       Close      Dividend
                  ------      --------     -------     --------            -----     -------    -------     --------
<S>               <C>         <C>          <C>         <C>                 <C>        <C>       <C>         <C>
First Quarter     $27.50         21.75       22.25        .07              26.33       21.67      25.38       .047
Second Quarter     25.13         21.50       24.25        .09              29.25       23.88      24.25       .070
Third Quarter      24.31         18.88       19.88        .09              25.00       18.75      23.50       .070
Fourth Quarter     23.69         19.88       20.94        .09              26.94       19.13      26.50       .070
</TABLE>

  The Company declared $0.34 per share in dividends during the year ended
December 31, 1999, and $0.257 per share in dividends for the year ended
December 31, 1998. 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 7. Management's Discussion
and Analysis of Financial Condition and Results of Operations - Regulation and
Supervision - Federal Savings Institution Regulation - Limitation on Capital
Distributions."

                                       8
<PAGE>

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."

<TABLE>
<CAPTION>
                                                                              December 31,
                                                  ------------------------------------------------------------        June 30,
                                                      1999              1998           1997            1996             1996
                                                  -----------       ----------       ---------      ----------       ---------
                                                                     (Dollars in thousands, except per share data)
<S>                                                <C>               <C>             <C>             <C>             <C>
Selected Financial Data:
 Total assets                                      $4,658,065        4,121,087       3,457,664       3,230,341       3,117,149
 Loans receivable, net                              3,884,569        3,319,076       2,707,127       2,430,113       2,293,399
 Mortgage-backed securities                           133,954          183,603         283,008         359,587         418,102
 Interest-bearing deposits                             51,306           24,564          57,197          55,285          37,496
 Federal funds sold                                    35,013           79,140          50,000          24,700           5,700
 Investment securities                                281,129          260,945         177,803         171,818         171,251
 Real estate held for development or sale              15,889           25,134          31,197          28,112          26,620
 Deposits                                           2,699,242        2,656,872       2,337,013       2,262,226       2,254,100
 Borrowed funds                                     1,526,363        1,034,500         770,013         632,897         537,696
 Subordinated capital notes, net                           --               --          26,779          26,709          26,676
 Stockholders' equity                                 352,921          344,996         263,411         250,625         242,226
 Book value per share                                   14.76            13.81           11.70           10.62           10.41
 Tangible book value per share(1)                       12.20            11.32           10.31            9.16            8.88
</TABLE>

<TABLE>
<CAPTION>

                                                             Year Ended December 31,              Six Months Ended   Year Ended
                                                   -------------------------------------------       December 31,      June 30,
                                                      1999              1998           1997             1996             1996
                                                   ----------        ---------       ---------       ---------        ----------
                                                                         (Dollars in thousands, except per share data)
<S>                                                <C>               <C>             <C>               <C>              <C>
Selected Operating Data:
Interest income                                    $  285,092        247,263         238,987           112,827           143,095
Interest expense                                      168,401        150,575         145,216            68,631            93,221
                                                   ----------        -------         -------           -------           -------
 Net interest income                                  116,691         96,688          93,771            44,196            49,874
Provision for loan losses                               1,100            800           1,150               700               700
                                                   ----------        -------         -------           -------           -------
 Net interest income after provision
  for loan losses                                     115,591         95,888          92,621            43,496            49,174
Non-interest income:
 Gain (loss) on sale of loans receivable
  and mortgage-backed securities                        2,583          3,204             432               (32)              198
 Gain on sale of investment securities                  1,776            816             404               251               188
 Income from real estate operations                     9,630          4,517           6,876             4,133             4,786
 Deposit account service charges                       10,200          8,626           7,217             3,219             4,894
 Loan servicing fee income                              1,761          1,400           2,278             1,249             2,394
 Recovery (impairment) of mortgage
  servicing rights                                        900         (1,269)             --                --                --
 Other                                                  7,994          8,256           5,438             3,139             4,640
                                                   ----------        -------         -------           -------           -------
   Total non-interest income                           34,844         25,550          22,645            11,959            17,100
 Non-interest expense:
  Compensation and benefits                            37,845         34,494          30,472            14,503            21,209
  Office occupancy and equipment                        7,274          6,645           6,203             2,652             3,774
  Federal deposit insurance premiums                    1,585          1,438           1,468             2,338             3,255
  Special SAIF assessment                                  --             --              --            14,216                --
  Other                                                20,976         16,366          16,468             7,369             9,548
                                                   ----------        -------         -------           -------           -------
   Total non-interest expense                          67,680         58,943          54,611            41,078            37,786
                                                   ----------        -------         -------           -------           -------
   Income before income taxes
    and extraordinary items                            82,755         62,495          60,655            14,377            28,488
Income taxes                                           31,210         23,793          22,707             5,602            10,805
                                                   ----------        -------         -------           -------           -------
   Income before extraordinary items                   51,545         38,702          37,948             8,775            17,683
Extraordinary items(2)                                     --           (456)             --                --              (474)
                                                   ----------        -------         -------           -------           -------
   Net income                                      $   51,545         38,246          37,948             8,775            17,209
                                                   ==========        =======         =======           =======           =======
 Basic earnings per share                          $     2.13           1.70            1.64               .37              1.31
                                                   ==========        =======         =======           =======           =======
 Diluted earnings per share                        $     2.07           1.65            1.59               .36              1.23
                                                   ==========        =======         =======           =======           =======
</TABLE>

                                       9
<PAGE>

<TABLE>
<CAPTION>

                                                              Year Ended December 31,            Six Months Ended    Year Ended
                                                   -------------------------------------------     December 31,       June 30,
                                                      1999              1998           1997           1996(3)           1996
                                                   ----------        ---------       ---------       ---------       ----------
                                                                     (Dollars in thousands, except per share data)
<S>                                                <C>               <C>             <C>           <C>               <C>
Selected Financial Ratios and
 Other Data:
Return on average assets                                 1.20%            1.07%           1.14%           1.11%(4)         .85%
Return on average equity                                14.98            13.87           14.69           14.18 (4)       14.21
Average stockholders' equity
 to average assets                                       8.03             7.73            7.79            7.80            6.00
Stockholders' equity to total assets                     7.58             8.37            7.62            7.76            7.77
Tangible and core capital to
 total assets (Bank only)                                6.32             6.67            6.88            6.96            7.02
Risk-based capital ratio (Bank only)                    12.32            13.42           14.34           15.05           15.36
Interest rate spread during period                       2.52             2.47            2.62            2.64            2.24
Net yield on average interest-earning assets             2.88             2.85            2.98            2.96            2.62
Average interest-earning assets to average
 interest-bearing liabilities                          108.56           108.62          107.99          107.98          107.83
Non-interest expense to average assets                   1.58             1.65            1.65            1.70 (4)        1.87
Non-interest expense to average assets
 and average loans serviced for others                   1.25             1.28            1.26            1.27 (4)        1.27
Efficiency ratio                                        45.19            48.54           47.07           47.79 (4)       56.58
Ratio of earnings to fixed charges:
 Including interest on deposits                          1.48x            1.41x           1.41x           1.41x (4)       1.30x
 Excluding interest on deposits                          2.18x            2.11x           2.26x           2.35x (4)       1.93x
Non-performing loans to total loans                       .40%             .43             .39             .55             .56
Non-performing assets to total assets                     .50              .54             .32             .46             .44
Cumulative one-year gap                                (11.47)           (4.23)           (.80)           7.50            5.22
Number of deposit accounts                            314,396          305,411         275,055         259,041         255,960
Mortgage loans serviced for others                 $1,226,874        1,065,126         997,204       1,045,740       1,040,260
Loan originations                                   1,711,337        1,754,009       1,091,824         469,452         989,753
Full-service customer service facilities                   25               24              22              20              20

Stock Price and Dividend Information:
High                                               $    27.50            29.25           24.46           15.67           12.00
Low                                                     18.88            18.75           14.78            9.89            9.19
Close                                                   20.94            26.50           23.58           15.45           10.89

Cash dividends declared per share                         .34             .257            .180             .08            .142
Dividend payout ratio                                   15.96%           15.12%          10.98%          21.62%          10.84%
</TABLE>
-------------
(1) In computing tangible book value per share, the Company excludes goodwill
    and core deposit intangible assets from stockholders' equity.

(2) The extraordinary items in the years ended December 31, 1998 and June 30,
    1996 represent charges for the early extinguishment of debt, net of tax
    benefits.

(3) Ratios for the six months ended December 31, 1996 are annualized.

(4) Excludes the effect of the special SAIF assessment of $14.2 million ($8.7
    million after tax) for the six months ended December 31, 1996. Including the
    impact of the special SAIF assessment, the Company's actual ratios were as
    follows: Return on average assets of .56%; Return on average equity of
    7.12%; Non-interest expense to average assets of 2.60%; Non-interest expense
    to average assets and average loans serviced for others of 1.95%; Efficiency
    ratio of 73.09%; Ratio of earnings to fixed charges including interest on
    deposits of 1.20x; and Ratio of earnings to fixed charges excluding interest
    on deposits of 1.67x.

                                       10
<PAGE>

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

  Overview

     Net income for the Company was $51.5 million, or $2.07 per diluted share
($2.13 per basic share) for the year ended December 31, 1999, an increase of 25%
over the prior year.  Net income in 1998 of $38.2 million, or $1.65 per diluted
share ($1.70 per basic share) includes a $456,000, or $.02 per share
extraordinary charge for the early extinguishment of the Company's $27.6 million
of 8.32% subordinated capital notes.  Net income was $37.9 million, or $1.59 per
diluted share ($1.64 per basic share) for the year ended December 31, 1997.

     During 1999, the Company witnessed a period of rapidly rising interest
rates over the course of the year, with the 10-Year Treasury bond rising nearly
150 basis points and the six-month Treasury bill rising approximately 110 basis
points. The Company met the challenging interest rate environment with continued
positive results in its core banking operations.

     .  The Bank originated $1.7 billion in mortgage loans in 1999, as
        compared to record originations in 1998 of $1.8 billion. Additionally,
        the Bank increased loans receivable by 17.0%

     .  Deposit account service charges, mainly earned from checking accounts,
        grew 18.3% to $10.2 million in 1999 due to continued success from the
        Bank's direct mail strategy and further growth in its debit card
        program.

     .  Income from real estate operations increased $5.1 million, or 113.2%,
        to $9.6 million in 1999 compared to $4.5 million in 1998 primarily due
        to $5.2 million of gains on the sale of three commercial parcels and
        strong lot sales in Tallgrass, the Company's newest residential project.

     .  The Company's efficiency ratio improved to 45.19% in 1999, compared in
        48.54% in 1998. In addition, the Company's 1999 non-interest expense to
        average assets ratio of 1.58% declined slightly compared to 1.65% in
        1998.

Acquisitions and Expansion Activity

     On September 10, 1999, the Bank purchased a branch office from the Northern
Trust Company, with approximately $22.2 million of deposits.  The Company
received primarily cash in the transaction.  The transaction was recorded as a
purchase, and generated goodwill and a core deposit premium totaling $3.1
million.  The Company also assumed the lease for the branch.

     On December 31, 1998, the Company completed its acquisition of Westco
Bancorp for stock totaling approximately $90.0 million. The Company issued 3.3
million shares in the acquisition. The transaction was accounted for as a
purchase. The Company valued the assets and liabilities of Westco at fair value,
and created goodwill and core deposit intangible assets aggregating $33.3
million as a result of the transaction.

     On May 30, 1996, the Company completed its acquisition of Northwestern, for
cash and stock totaling $269.7 million.  The Company paid $41.18 per share of
Northwestern in the form of $20.1799 cash and .8549 shares of the Company's
common stock.  The Company issued 11.7 million shares in the acquisition. The
cash portion of the purchase was made from existing cash, as well as funds from
Northwestern due to their excess capital position as of the acquisition date.
Additionally, the Company obtained a $35.0 million unsecured term bank loan with
a local commercial bank.  The transaction was accounted for as a purchase. As
such, the Company valued the assets and liabilities of Northwestern at fair
value, and created goodwill and core deposit intangible assets aggregating $35.9
million as a result of the transaction.

                                       11
<PAGE>

     Subsequent to December 31, 1999, the Company announced that it had entered
into an agreement to purchase two branches (Burbank and Tinley Park, Illinois)
of M&I Bank, FSB, Milwaukee, WI.  The branch acquisition will expand the
Company's banking franchise into the southwest side of Chicago, a market the
Company has targeted for future growth.  The transaction, which is expected to
close in the second quarter of 2000, involves approximately $90.0 million of
deposits and the related branch buildings.  Based on the estimated 12.9% deposit
premium, the Company expects to pay approximately $11.6 million.  The Company
expects the transaction to be neutral to reported earnings per share in the
first year of operations

     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 DuPage County and
the City of Chicago. 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 future acquisitions, if any, will likely be valued at a premium to book
value, and many times 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 earnings per share dilution depending on the Company's
success in integrating the operations of businesses acquired and the level of
cost savings and revenue enhancements that may be achieved.

Net Interest Income

     Net interest income is the principal source of earnings for the Company,
and consists 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.

     Net interest income before the provision for loan losses was $116.7 million
in 1999, $96.7 million in 1998 and $93.8 million in 1997. The net interest
margin (net interest income divided by average interest-earning assets) for the
same periods were 2.88%, 2.85%, and 2.98%, respectively.

     The past twelve months has continued to be a volatile period for U.S.
Treasury rates. While 1998 was primarily a year of rapidly falling interest
rates across the entire U.S. Treasury yield curve, as well as a period of
flattening of the Treasury yield curve, 1999 was nearly the opposite. Rapidly
rising interest rates were experienced throughout the year. Although some
positive slope was added back to the yield curve, the yield curve remained
relatively flat compared to recent history.

     Borrowers generally favor long-term fixed-rate mortgage loans in falling
interest rate environments and adjustable-rate mortgage loans in a period of
rising interest rates.  In addition, periods of rising interest rates normally
curtail overall loan origination activity, as the demand for refinancing
transactions declines, and new home purchase activity slows.  In 1999, despite
the rapid increase in interest rates, the Bank was able to originate nearly
equal the record loan volume produced in 1998, albeit with a bias toward
adjustable-rate products.  Loan production in 1999 was 43.5% adjustable-rate,
compared to 24.1% in 1998.  The strong origination levels in 1999 are
attributable to expansion of the Bank's loan officer staff, as well as a
continued strong housing market in the Midwest.

                                       12
<PAGE>

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 on a
fully taxable equivalent basis 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.


<TABLE>
<CAPTION>
                                              Year Ended                     Year Ended                    Year Ended
                                     December 31, 1999 vs. 1998      December 31, 1998 vs. 1997     December 31, 1997 vs. 1996
                                    -----------------------------  ------------------------------  -----------------------------
                                                    Due To                         Due To                          Due To
                                      Total   -------------------   Total   ---------------------   Total   --------------------
                                     Change    Volume     Rate     Change     Volume       Rate    Change     Volume      Rate
                                    --------  --------  ---------  -------  -----------  --------  -------  -----------  -------
                                                                         (In thousands)
<S>                                <C>         <C>        <C>      <C>          <C>       <C>      <C>          <C>       <C>
Interest-earning assets:
Loans receivable                   $ 41,072    50,259     (9,187)  13,550       22,083    (8,533)  44,935       43,941      994
Mortgage-backed securities           (4,542)   (4,029)      (513)  (8,131)      (6,660)   (1,471)    (427)      (1,614)   1,187
Investment securities                 2,943     2,951         (8)   2,982        4,231    (1,249)   1,870        1,211      659
Interest-bearing deposits              (437)     (358)       (79)  (2,191)      (2,656)      465    1,637        1,890     (253)
Federal funds sold                   (1,215)   (1,227)        12    1,952        1,591       361    1,900        1,949      (49)
                                   --------    ------    -------   ------       ------   -------   ------       ------   ------
 Total interest income               37,821    47,596     (9,775)   8,162       18,589   (10,427)  49,915       47,377    2,538
                                   --------    ------    -------   ------       ------   -------   ------       ------   ------

Interest-bearing liabilities:
Deposits                              3,877    12,380     (8,503)  (2,793)       1,294    (4,087)  17,740       17,855     (115)
Borrowed funds                       13,949    17,955     (4,006)   8,152       11,244    (3,092)  10,246       11,143     (897)
                                   --------    ------    -------   ------       ------   -------   ------       ------   ------
 Total interest expense              17,826    30,335    (12,509)   5,359       12,538    (7,179)  27,986       28,998   (1,012)
                                   --------    ------    -------   ------       ------   -------   ------       ------   ------
Net change                         $ 19,995    17,261      2,734    2,803        6,051    (3,248)  21,929       18,379    3,550
                                   ========    ======    =======   ======       ======   =======   ======       ======   ======

</TABLE>

     Interest income on loans receivable increased $41.1 million in 1999 to
$253.5 million, while increasing $13.6 million in 1998 and $44.9 million in
1997. The increase in interest income on loans receivable over the last three
years is attributable to growth in Bank's loan portfolio through loan
originations and acquisitions. The Company's acquisition of Northwestern in 1996
dramatically increased the capital base of the Company, and the Bank's strategy
has been to leverage this capital by holding higher levels of loans receivable
in portfolio. Average loans receivable increased $702.4 million in 1999,
approximately $245.0 million of which is due to the purchase of Westco. The
remaining increase in 1999 is primarily due to continued robust loan
originations, a greater percentage of which were adjustable-rate loans that were
held in portfolio, as well as a slower pace of loan prepayments due to generally
rising interest rates. The growth in loans receivable during 1998 was comprised
primarily of newly originated fixed-rate loans with associated prepayment
penalties throughout the first five years of the loans. During the second
quarter of 1999, the Bank ceased adding these prepayment protected fixed-rate
loans to its portfolio.

     The average yield on loans receivable has been steadily falling since 1997.
The average yield on loans receivable decreased 31 basis points in 1999 to
7.11%, after falling 32 basis points during 1998.  The average yield on loans
receivable was 7.74% in 1997.  Long term interest rates had been steadily
falling during 1997 and 1998, but made a dramatic turnaround in 1999, when they
increased approximately 150 basis points.  Although interest rates increased
during 1999, the average yield on loans receivable continued to fall in 1999 due
to the heavier mix of hybrid adjustable rate loans with lower initial interest
rates and the lower-yielding fixed-rate loans added to the Bank's portfolio
during 1997, 1998 and early 1999.  The decrease in 1998 was due to an increase
in prepayments and modifications of higher yielding loans.

                                       13
<PAGE>

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, on a
tax equivalent basis, 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, 1999 includes fees which are considered
adjustments to yield.

<TABLE>
<CAPTION>

                                                                                   Year Ended December 31,
                                                            -----------------------------------------------------------------------
                                                                          1999                                   1998
                                                            ---------------------------------      --------------------------------
                                                                                      Average                               Average
                                                                                       Yield/                                Yield/
                                                              Balance    Interest       Cost         Balance    Interest      Cost
                                                            ----------   --------    ---------     ----------   --------   ---------
                                                                                 (Dollars in thousands)
<S>                                                         <C>          <C>         <C>           <C>          <C>        <C>
Assets:
Interest-earning assets:
Loans receivable                                            $3,565,375   253,499       7.11%       $2,862,954    212,427     7.42%
Mortgage-backed securities                                     151,119     9,433       6.24           215,377     13,975     6.49
Investment securities(1)                                       265,011    16,551       6.25           217,757     13,608     6.25
Interest-bearing deposits                                       27,969     1,961       7.01            33,042      2,398     7.26
Federal funds sold                                              51,860     3,796       7.32            68,621      5,011     7.30
                                                            ----------  --------                   ----------    -------
   Total interest-earning assets                             4,061,334   285,240       7.02         3,397,751    247,419     7.28
Non-interest earning assets                                    222,357                                171,764
                                                            ----------                             ----------
   Total assets                                             $4,283,691                             $3,569,515
                                                            ==========                             ==========

Liabilities and stockholders' equity:
Interest-bearing liabilities:
Deposits                                                     2,553,732    99,665       3.90         2,247,306     95,788     4.26
Borrowed funds and subordinated debt                         1,187,262    68,736       5.79           880,872     54,787     6.22
                                                            ----------  --------                   ----------    -------
Total interest-bearing liabilities                           3,740,994   168,401       4.50         3,128,178    150,575     4.81
Non-interest bearing deposits                                  112,760                                 92,790
Other liabilities                                               85,831                                 72,713
                                                            ----------                             ----------
Total liabilities                                            3,939,585                              3,293,681
Stockholders' equity                                           344,106                                275,834
                                                            ----------                             ----------
Liabilities and stockholders' equity                        $4,283,691                             $3,569,515
                                                            ----------                             ----------
Net interest income/interest rate spread                                $116,839       2.52%                    $ 96,844     2.47%
                                                                        ========       ====                     ========     ====
Net earning assets/net yield on average
    interest-earning assets                                 $  320,340                 2.88%       $  269,573                2.85%
                                                            ==========                 ====        ==========                ====
Ratio of interest-earning assets to
  interest-bearing liabilities                                 108.56%                                 108.62%
                                                               =======                                 ======


<CAPTION>
                                                                 Year Ended December 31,
                                                      ------------------------------------------               At December 31,
                                                                          1997                                      1999
                                                      ------------------------------------------            ---------------------
                                                                                         Average
                                                                                          Yield/                           Yield/
                                                       Balance         Interest            Cost              Balance        Cost
                                                      ---------        --------          --------           ---------     --------
                                                                             (Dollars in thousands)
<S>                                                   <C>              <C>                <C>               <C>           <C>
Assets:
Interest-earning assets:
Loans receivable                                     $2,568,736         198,877             7.74%            $3,901,845      7.18%
Mortgage-backed securities                              316,617          22,106             6.98                133,954      6.53
Investment securities(1)                                151,640          10,626             7.01                281,129      6.74
Interest-bearing deposits                                70,297           4,589             6.53                 51,306      5.24
Federal funds sold                                       46,427           3,059             6.59                 35,013      5.27
                                                     ----------        --------                              ----------
   Total interest-earning assets                      3,153,717         239,257             7.59              4,403,247      7.09
Non-interest earning assets                             162,947                                                 254,818
                                                     ----------                                              ----------
   Total assets                                      $3,316,664                                              $4,658,065
                                                     ==========                                              ==========
Liabilities and stockholders' equity:
Interest-bearing liabilities:
Deposits                                              2,217,908          98,581             4.44              2,581,321     4.02
Borrowed funds and subordinated debt                    702,451          46,635             6.64              1,526,363     5.98
                                                     ----------        --------                              ----------
Total interest-bearing liabilities                    2,920,359         145,216             4.97              4,107,684     4.75
Non-interest bearing deposits                            73,109                                                 117,921
Other liabilities                                        64,838                                                  79,539
                                                     ----------                                             -----------
Total liabilities                                     3,058,306                                               4,305,144
Stockholders' equity                                    258,358                                                 352,921
                                                     ----------                                              ----------
Liabilities and stockholders' equity                 $3,316,664                                              $4,658,065
                                                     ==========                                              ==========
Net interest income/interest rate spread                               $ 94,041             2.62%                           2.35%
                                                                       ========             =====                           =====
Net earning assets/net yield on average
    interest-earning assets                          $  233,358                             2.98%            $  295,563      N/A
                                                     ==========                             ====             ==========
Ratio of interest-earning assets to
  interest-bearing liabilities                           107.99%                                                 107.20%
</TABLE>

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

(1)  Includes average balances of $57.7 million, $39.4 million, and $28.9
     million stock in Federal Home Loan Bank of Chicago for the years ended
     December 31, 1999, 1998 and 1997, respectively.  At December 31, 1999, the
     Bank owned $75.0 million of FHLB stock.  Income on a tax equivalent basis
     is computed assuming an effective tax rate of 40.0%.

                                       14
<PAGE>

     Interest income from mortgage-backed securities decreased $4.5 million in
1999 to $9.4 million, while decreasing $8.1 million in 1998, and $427,000 in
1997. Due to the ability to originate mortgage loans for its own portfolio, the
Bank has reduced its holdings of mortgage-backed securities generally through
normal amortization and prepayments. Average mortgage-backed securities were
$151.1 million in 1999. Average mortgage-backed securities decreased $64.3
million during 1999, and $101.2 million during 1998.

     Interest income from investment securities increased $3.0 million in 1999
to $16.4 million, while increasing $3.1 million in 1998 and $1.9 million in
1997. The average balance of investment securities has been steadily rising over
the past two years, from $151.6 million in 1997 to $265.0 million in 1999. The
increase has been primarily in various fixed and adjustable-rate asset backed
securities that offer the Bank a suitable yield with a fairly predictable
average life. The average yield on investment securities remained relatively
steady in 1999, after falling 76 basis points in 1998. The decline in yield
during 1998 was primarily due to newer investment security purchases carrying
lower interest rates due to falling U.S. Treasury rates.

     The average cost of deposits has steadily fallen over the past three years.
In 1999, average deposits increased $306.4 million, primarily due to the
acquisition of Westco. The average cost of deposits decreased 36 basis points
due to lower repricing on certificate of deposit accounts and increased checking
balances that carry little or no interest rate. Upward repricing on certificates
of deposit accounts began during the latter half of 1999 and will likely lead to
an increase in the Bank's cost of deposits into 2000. The average balance of
deposits in 1998 was relatively unchanged compared to 1997, while the average
cost decreased 18 basis points due primarily to falling interest rates and a
reduction in the passbook rate of interest.

     Interest expense on borrowed funds increased $13.9 million to $68.7 million
in 1999, while increasing $8.2 million in 1998, compared to 1997. Average
borrowings increased $306.4 million in 1999 and $178.4 million in 1998, in
conjunction with the Bank increasing its loans receivable portfolio. Due to the
lack of deposit inflows, except for deposits obtained in acquisitions, this
growth has been funded almost primarily with FHLB of Chicago advances. The
Bank's advance portfolio is almost an entirely fixed-rate portfolio, some of
which are callable at par by the FHLB of Chicago at their discretion. The
average cost of borrowings decreased 43 basis points in 1999, due primarily to
maturing higher rate fixed-rate advances replaced by lower cost borrowings
during the first half of 1999. The cost of new borrowings in the latter half of
1999 and beyond have been and are likely to continue to be higher than the
average cost on borrowings outstanding due to the rapid rise in interest rates.
In 1998, the average cost of borrowings decreased 42 basis points due to the
downward repricing of maturing advances, and the use of callable borrowings to
fund long-term fixed-rate loan originations held for investment. These callable
advances carry a lower interest rate than non-callable borrowings in return for
the option for the issuer to call the borrowings prior to final maturity.

     Recent increases in U. S. Treasury rates and flattening of the yield curve,
as well as expected additional Federal Reserve Board interest rate increases, is
expected to have a negative impact on the Bank's net interest margin in 2000. In
addition, competition for deposits has increased, as retail deposits have become
a cheaper funding source than wholesale borrowings. The Bank is currently
holding for portfolio adjustable-rate loans originations that tend to reduce
interest rate risk exposure but carry lower interest rates. The net interest
margin will also be pressured by the expected repricing of maturing certificates
of deposits and refinancing of maturing and called FHLB advances at higher
rates.

                                       15
<PAGE>

Provision for loan losses

     The provision for loan losses is recorded to provide coverage for losses
inherent in the Bank's loan portfolio.  The Company recorded a provision for
loan losses of $1.1 million in 1999, compared to $800,000 in 1998, and
$1.2 million in 1997.  The allowance for loan losses is based on management's
continuous evaluation of the risk inherent in the Bank's loan portfolio,
including its composition of loans and economic conditions that may affect the
borrower's ability to make payments.  In assessing its provision for loan losses
in 1999, management took into account the continued increase of one-to-four
family loans as a percentage of total outstanding loans in its portfolio.  At
December 31, 1999, the Bank's allowance for loan losses was $17.3 million, or
110.4% of non-performing loans, and .44% of total loans, compared to $16.8
million, or 119.4% of non-performing loans and .52% of total loans at
December 31, 1998.

Non-interest income

     Non-interest income is another significant source of revenue for the
Company. It consists of fees earned on products and services, gains and losses
from loan sale activity and income from real estate operations. Although changes
in interest rates can have an impact on earnings from these sources, the impact
is generally not nearly as dramatic as the impact on net interest income. Non-
interest income was $34.8 million, $25.6 million and $22.6 million for the years
ended December 31, 1999, 1998 and 1997, respectively.

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

<TABLE>
<CAPTION>

                                                       Year Ended  December 31,
                                                      ---------------------------
                                                        1999      1998     1997
                                                      --------  --------  -------
                                                            (In thousands)
<S>                                                   <C>       <C>       <C>
Gain (loss) on sale and writedown of:
 Loans receivable                                     $ 2,448     3,003      419
 Mortgage-backed securities                               135       201       13
 Investment securities                                  1,776       816      404
 Foreclosed real estate                                   (57)      212       17
Income from real estate operations                      9,630     4,517    6,876
Deposit account service charges                        10,200     8,626    7,217
Brokerage commissions                                   2,566     2,812    2,050
Mortgage loan related fees                              2,040     2,302    1,265
Loan servicing fee income                               1,761     1,400    2,278
Recovery (impairment) of mortgage servicing rights        900    (1,269)       -
Insurance commissions                                     527       456      447
Safe deposit box fees                                     405       311      275
Bank owned life insurance                               1,210       458        -
Loss on real estate owned operations, net                (216)      (43)     (47)
Other                                                   1,519     1,748    1,431
                                                      -------    ------   ------
                                                      $34,844    25,550   22,645
                                                      =======    ======   ======
</TABLE>

     Gain on sale of loans and mortgage-backed securities. The Bank recorded a
net gain on the sale of loans receivable and mortgage-backed securities of $2.6
million in 1999, compared to $3.2 million in 1998, and $432,000 in 1997. Loan
sales were $402.9 million, $437.5 million, and $105.8 million, in 1999, 1998,
and 1997, respectively. The decrease in gains in 1999 is primarily due to the
7.9% decrease in loan sale volume, as well as lower loan sale margins due to
rising interest rates. The large increase in loan sale profits in 1998 compared
to 1997 is primarily attributable to the $331.7 million increase in loan sales.
Given the current demand for adjustable-rate mortgage loans and increased
pricing competition for

                                       16
<PAGE>

loan originations, gain on sale of loans in 2000 will be significantly less than
in 1999, due to lower originations of long-term fixed-rate loans and reduced
margins on sale. The Bank expects to offset some of the reduction in fixed-rate
loan sale profits with the sale of some of its ARM loan originations in 2000.

     The gains and losses on mortgage-backed securities included in the above
figures represent the sale of loans originated by the Bank and swapped into
mortgage-backed securities prior to sale. The Bank swapped and sold $62.6
million in 1999, compared to $26.6 million in 1998, and $3.4 million in 1997.
Sales of swaps versus whole loans to FNMA or FHLMC are primarily determined by
price differences at the time of sale, and are executed in a manner to maximize
profit to the Bank.  The Bank has generally held few of its own swaps in
portfolio.

     Gain on sale of investment securities. The Company had net gains on the
sale of investment securities of $1.8 million in 1999, compared to $816,000 in
1998, and $404,000 in 1997. Net gains in these periods have been generated
primarily from the sale of marketable equity securities of national and regional
bank and thrift companies. During 1999, management elected to sell a portion of
its equity holdings in light of market conditions, as well as generate funds for
its stock buyback program. The 1998 results included a $375,000 writedown
required on certain marketable equity securities and $76,000 in net gains from
the sale of the Bank's 100% beneficial interests in its two special purpose
finance subsidiaries, Mid America Finance Corporation ("MAFC") and Northwestern
Acceptance Corporation ("NWAC").

     Income from real estate operations.  Income from real estate operations was
$9.6 million in 1999, $4.5 million in 1998 and $6.9 million in 1997. The 113.2%
increase in 1999 is primarily attributable to the sale of three commercial
parcels that the Company acquired with the Northwestern acquisition in 1996. A
summary of income from real estate operations is as follows:

<TABLE>
<CAPTION>
                                                              Year Ended December 31,
                                           -----------------------------------------------------------
                                                1999                  1998                 1997
                                           ----------------      ----------------    -----------------
                                           Lots      Income      Lots      Income     Lots
                                           Sold      (Loss)      Sold      (Loss)     Sold      Income
                                           ----      -------     ----      -------    ----      ------
                                                              (Dollars in thousands)
<S>                                        <C>       <C>         <C>       <C>        <C>       <C>
     Woodbridge                              --      $5,163        15      $  153      133      $3,452
     Tallgrass of Naperville                252       3,457        20         114       --          --
     Reigate Woods                           11         509        20         930       11         610
     Harmony Grove                            7         479       184       2,851      120       1,588
     Creekside of Remington                  42         172        12          29        8          16
     Ashbury                                 --        (150)       --         297        8         290
     Clow Creek Farm                         --          --         6         260       18         700
     Woods of Rivermist                      --          --         2           5        5         220
     Fields of Ambria                        --          --         6        (122)       9          --
                                           ----      ------      ----      ------      ---      ------
                                            312      $9,630       265      $4,517      312      $6,876
                                           ====      ======      ====      ======      ===      ======
</TABLE>

     Current year activity was marked by $5.2 million in income from commercial
real estate sales in the Woodbridge project, where 41 acres of the project's
remaining 48-acre commercial parcel were sold. All of the residential lots in
Woodbridge had been sold previous to 1999. In addition, 1999 also included
strong results from the Company's Tallgrass of Naperville project, currently
expected to be a 926-lot development. In addition to the 252 lots sold in 1999,
226 lots are under contract at December 31, 1999. The Reigate Woods subdivision
had 11 lot sales in 1999, and ten lots remaining at December 31, 1999. The lot
sale activity in Creekside of Remington represents a bulk sale of lots under an
agreement with a local builder. The remaining 75 lots are also under contract
with this builder, and expected to close in the second quarter of 2000, at a
minimal profit to the Company. The Company also completed the sell out of the
Harmony Grove subdivision. Management currently expects a moderate decrease in
income

                                       17
<PAGE>

from real estate operations in 2000. Although it is expected that income from
the Tallgrass subdivision will increase significantly in 2000 compared to 1999,
it is not expected to offset the decrease in income from the Woodbridge
commercial parcel.

     The Harmony Grove subdivision was the largest contributor to income from
real estate operations in 1998, with 184 lot sales nearly completing the sell
out of the project. The Tallgrass of Naperville project sold its first 20 lots
in December 1998. The Company sold out of four projects in 1998. The Ashbury
profit of $297,000 represents the sale of a small commercial parcel adjacent to
the residential parcel. The remaining lot sales in Clow Creek Farm, Woods of
Rivermist and Fields of Ambria had small profit margins, or losses in the case
of Fields of Ambria due to sale discounts, extended marketing costs, and
additional costs to complete these projects.

     Deposit account service charges. Deposit account service charges totaled
$10.2 million in 1999, compared to $8.6 million in 1998, and $7.2 million in
1997. The primary source of these fees is from checking account charges for
insufficient funds, service charges, sustained overdraft fees, debit card usage,
and automated teller machine services. Increases are a function of the number of
checking accounts the Bank maintains, new fees charged for services, as well as
increases in existing fee schedules. The number of checking accounts maintained
by the Bank was 103,000, 94,000, and 82,000 at December 31, 1999, 1998, and
1997, respectively.

     Brokerage commissions. Through the Bank's affiliation with INVEST, the Bank
offers non-traditional investment products to its customers such as mutual
funds, annuities and other brokerage services. Commission revenue decreased to
$2.6 million in 1999, compared to $2.8 million in 1998, and $2.1 million in
1997. The decrease in 1999 is due to broker turnover that led to lost customer
transaction volume. The improvement from 1997 to 1998 in commissions was due to
increased sales of mutual funds and other non-traditional products, an increased
sales force, an increase in the number of locations which provide INVEST
services, as well as sharing a greater percentage of current commission revenue
and trailer fee income with INVEST than in the past.

     Mortgage loan related fees. Mortgage loan related fees include late charge
income on loans owned and serviced by the Bank, inspection fee income for
construction loans and loan modification income for refinance transactions.
Income from these sources was $2.0 million in 1999, $2.3 million in 1998, and
$1.3 million in 1997. The primary reason for the decrease in 1999 was a
reduction of loan modification fee income due to the reduction in refinance
activity. The Bank introduced the loan modification option in 1998 to allow the
customer to lower the interest rate and/or modify other loan terms for a fee, in
lieu of processing a new loan. The Bank treats the modified loan as if it was
paid off, and amortizes any remaining deferred fees or expenses into interest
income. Mortgage loan related fee income in 1998 includes $723,000 from loan
modifications.

     Loan servicing fee income. Loan servicing fee income is generated from
loans that the Bank has originated and sold, or from purchased servicing, 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 1/4 of 1% for fixed-
rate mortgages and 1/4 to 3/8 of 1% for ARM loans on the outstanding principal
balance of the sold loan being serviced. Loan servicing fee income is reduced by
the amortization of capitalized mortgage servicing rights, and impairment
valuations against recorded values of mortgage servicing rights.

                                       18
<PAGE>

     Loan servicing fee income, including the recovery of prior period valuation
allowances and/or impairment writedowns recognized, was $2.7 million in 1999,
compared to $131,000 in 1998, and $2.3 million in 1997. The following table
shows the components of loan servicing fee income in dollars and as a percentage
of loans serviced for others for the periods indicated:

<TABLE>
<CAPTION>
                                                                             Year Ended December 31,
                                                                 -------------------------------------------
                                                                    1999             1998            1997
                                                                 -----------      ----------      ----------
                                                                            (Dollars in thousands)
<S>                                                              <C>             <C>              <C>
Gross servicing revenue--                                        $    3,032           2,708           2,705
Amortization of mortgage servicing rights                            (1,271)         (1,308)           (427)
Impairment of mortgage servicing rights                                  --          (1,269)             --
Impairment recovery of mortgage servicing rights                        900              --              --
                                                                 ----------       ---------       ---------
Loan servicing fee income, net                                   $    2,661             131           2,278
                                                                 ==========       =========       =========

As a percentage of average loans serviced for others:
Gross servicing revenue                                                .264%           .265            .264
Amortization of mortgage servicing rights                             (.111)          (.128)          (.042)
Impairment of mortgage servicing rights                                  --           (.124)             --
Impairment recovery of mortgage servicing rights                       .078              --              --
                                                                 ----------       ---------       ---------
Loan servicing fee income                                              .231%           .013            .222
                                                                 ==========       =========       =========
Average balance of loans serviced for others                     $1,148,514       1,020,919       1,024,720
Loan sales for the year                                             402,891         437,549         105,817
                                                                 ===========      =========       =========
</TABLE>

     Due to the dramatic increase in long-term market rates of interest
throughout the year, prepayments on loans serviced for others slowed in 1999.
With loan sale activity remaining consistent with 1998 levels, the Bank's
average balance of loans serviced for others increased 12.5% during 1999. In
addition, the increase in interest rates also led to a $900,000 recovery of
previously established impairment valuations on the loans serviced for others
portfolio due to a lowering of management's estimated prepayment assumptions.
During 1998, the decline in long-term U.S. Treasury rates led to increased
prepayment activity in the loans serviced for others portfolio, that led to the
large increase in amortization of capitalized mortgage servicing rights, when
compared to the prior year. Although the Bank sold $437.5 million of loans in
1998, the average balance of loans serviced for others was flat compared to 1997
due to this prepayment activity. In addition, in 1998 an analysis of the value
of the Bank's mortgage servicing rights led to a $1.3 million impairment
writedown due to the impact of higher expected prepayment speeds on the net
present value of expected cash flows from these servicing rights. At December
31, 1999, 1998, and 1997, the weighted-average coupon rate on the loans serviced
for others portfolio was 7.28%, 7.39%, and 7.74%, respectively.

     The Bank also services a majority of the loans that it holds in its own
portfolio for investment purposes. The following table sets forth information as
to the Bank's total loan servicing portfolio.

<TABLE>
<CAPTION>
                                                                               December 31,
                                                 ---------------------------------------------------------------------
                                                         1999                      1998                    1997
                                                 --------------------      --------------------    -------------------
                                                   Amount     Percent        Amount     Percent      Amount     Percent
                                                 ----------   -------      ----------   -------    ----------   -------
                                                                          (Dollars in thousands)
<S>                                              <C>          <C>          <C>          <C>        <C>          <C>
Loans owned by the Bank                          $3,733,250    75.27%      $3,020,941    73.93%    $2,284,748    69.62%
Loans serviced for others                         1,226,874    24.73        1,065,126    26.07        997,204    30.38
                                                 ----------   ------       ----------   ------     ----------   ------
  Total loans serviced                           $4,960,124   100.00%      $4,086,067   100.00%    $3,281,952   100.00%
                                                 ==========   ======       ==========   ======     ==========   ======
</TABLE>

                                       19
<PAGE>

     Income from Bank owned life insurance. In 1998, the Bank invested $20.0
million in bank owned life insurance ("BOLI") to help fund the cost of certain
employee benefit plan expenses. The Bank's BOLI investment consists of the
purchase of life insurance on the lives of certain employees from an insurance
carrier with a Standard and Poors rating of AA+. The Company 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. To the benefit of the Company, this income is free from
income taxes. Death benefits paid to the Company will be revenue in the periods
received, if any. In 1999, CSV income recognized on these life insurance
policies totaled $1.2 million compared to $458,000 in 1998.

Non-interest expense

     Non-interest expense was $67.7 million in 1999, compared to $58.9 million
in 1998, and $54.6 million in 1997. The table below shows the composition of
non-interest expense for the periods indicated.

<TABLE>
<CAPTION>
                                                Year Ended December 31,
                                              ----------------------------
                                               1999        1998      1997
                                              -------     ------    ------
                                                      (In thousands)
<S>                                           <C>         <C>       <C>
Compensation                                  $29,435     26,892    23,898
Employee benefits                               8,410      7,602     6,574
                                              -------     ------    ------
 Total compensation and benefits               37,845     34,494    30,472
Occupancy expense                               4,929      4,649     4,554
Furniture, fixture and equipment expense        2,345      1,996     1,649
Federal deposit insurance premiums              1,585      1,438     1,468
Advertising and promotion                       3,149      2,281     2,737
Data processing                                 2,611      2,267     2,098
Professional fees                               1,657      1,166     1,154
Stationery, brochures and supplies              1,236      1,153     1,045
Postage                                         1,423      1,148     1,042
Telephone                                       1,158        775       666
ATM network fees                                  518        546       569
OTS assessment fees                               577        512       483
Correspondent banking services                    500        432       462
Insurance costs                                   485        432       413
Amortization of goodwill                        2,648      1,336     1,341
Amortization of core deposit intangible         1,236      1,075     1,296
Other                                           3,778      3,243     3,162
                                              -------     ------    ------
                                              $67,680     58,943    54,611
                                              =======     ======    ======
</TABLE>

     Compensation expense. Compensation expense was $29.4 million for the year
ended December 31, 1999, compared to $26.9 million for the year ended
December 31, 1998, primarily attributable to increased personnel from the Westco
acquisition and the acquired branch operations. Compensation expense in 1998
increased 12.5% from 1997 due primarily to increased loan officer commissions,
loan department incentive pay and overtime compensation due to increased loan
originations and refinance activity, as well as a 7.5% increase in the Company's
headcount related to new branch operations and increased loan staffing.

     Employee benefits expense. Employee benefits expense increased $808,000 to
$8.4 million in 1999. The increase is primarily attributable to a $650,000
increase in employer FICA taxes due to increased compensation expense, and taxes
related to stock option exercises. In addition, the Bank increased its
contribution to its ESOP and profit sharing plans by $320,000 in 1999. Employee
benefits expense increased $1.0 million in 1998 from 1997 due to a $310,000
increase in employer FICA taxes resulting from increased compensation expense,
$150,000 due to increased contributions to the Bank's ESOP and profit sharing
plans, as well as increased medical insurance costs.

                                       20
<PAGE>

     Occupancy and equipment expense. Occupancy expenses increased $280,000, or
6.0%, during 1999 due to the new locations resulting from the Westco acquisition
and the branch purchase. Occupancy expenses were relatively constant between
1998 and 1997. Furniture and equipment costs increased $349,000 in 1999 due to
the addition of new branches and an upgraded voice mail system. During 1998,
furniture and equipment costs increased $347,000 primarily due to increased
depreciation from interior renovation work done at various branch locations.

     FDIC insurance expense. FDIC insurance increased $147,000 to $1.6 million
in 1999 primarily due to higher deposit levels resulting from the acquisition of
Westco. Costs remained relatively constant between the year ended December 31,
1998 and 1997, as the Bank's average deposits were stable. The Bank has paid the
lowest rate allowed by regulation for savings institutions over the past three
years and expects to continue to qualify for the most favorable rate. During
these years, the lowest rate has remained the same at .0648% per $100 of
deposits. On January 1, 2000, the lowest rate allowed by regulation decreased to
approximately .021% per $100 of deposits as required by previous legislation. As
such, the Bank expects its FDIC insurance costs to decrease by approximately 65%
in 2000.

     Advertising and promotion expense. Advertising and promotion expenses
increased $868,000 to $3.1 million in 1999. The primary reason for the increase
is a radio-based branding and advertising campaign initiated in the first
quarter of 1999. Advertising and promotion expenses decreased $456,000 to $2.3
million in 1998. The decrease was due to the reduction of advertising by the
Bank in anticipation of the branding campaign. In addition, the Bank scaled back
direct mail efforts promoting its Totally Free checking account.

     Data processing expense. Data processing expenses increased $344,000 to
$2.6 million in 1999 primarily due to costs associated with implementation of
the Bank's Year 2000 Plan, as well as upgrading the Company's communication
network. Data processing expenses were $2.3 million in 1998, or 8.1% more than
in 1997, due to increased expenditures for the Bank's PC network, including a
limited amount of costs related to upgrading systems to Year 2000 compliance.

     Other non-interest expenses. Other non-interest expense include costs
related to the day-to-day operations of the Company, as well as costs for the
implementation of strategic initiatives as well as more recently, for Year 2000
compliance. Professional fees increased $491,000 to $1.7 million in 1999
primarily due to legal and accounting expenses related to the formation of a
mortgage real estate investment trust in connection with a new tax planning
initiative. Professional fees in 1998 were relatively constant with amounts in
1997. During 1999, the Company incurred increased postage expense primarily due
to the acquisition of Westco, as well as incremental postage costs relating to
special Year 2000 mailings to customers. Telephone expense in 1999 increased due
to the acquisition of Westco, the addition of a call center for customer
service, as well as increased staffing levels. Other expense increases were
primarily due to the acquisition of Westco. Other non-interest expense was
relatively flat in 1998 compared to 1997.

     Amortization of core deposit intangible. Amortization of core deposit
intangibles increased $161,000 to $1.2 million in 1999 primarily due to the
acquisition of Westco. Amortization of core deposit intangibles totaled $1.1 in
1998, compared to $1.3 million for the year ended December 31, 1997. The Bank is
amortizing its core deposit intangible on an accelerated method over 10 years.

     Amortization of goodwill. Amortization of goodwill increased $1.3 million
to $2.6 million in 1999, primarily due to the acquisition of Westco.
Amortization of goodwill in 1998 and 1997 were relatively equal due to no
additional acquisition activity in 1998. The Bank amortizes goodwill over a
period not to exceed 25 years using the straight-line method.

                                       21
<PAGE>

Income taxes

     Income tax expense from continuing operations was $31.2 million in 1999,
(effective income tax rate of 37.7%) compared to $23.8 million (effective income
tax rate of 38.1%) in 1998. The lower effective income tax rate in the current
period compared to a year ago was primarily the result of proactive tax planning
involving the transfer of Bank portfolio assets to a newly formed operating
subsidiary. This structure generated net tax savings of approximately $1.2
million for 1999. These savings were offset in 1999 by approximately $350,000 in
after-tax professional fees and other costs incurred. While the effective tax
rate may vary from quarter to quarter, the Company currently expects the new
structure to result in a lowering of its effective income tax rate to
approximately 37.0% - 37.5% for the year ending December 31, 2000, depending on
the balances of the assets in the subsidiary, the amount and composition of
financial statement and taxable earnings for calendar 2000 and various other
factors. The change in the effective tax rate in 1999 compared to 1998 was also
affected by a decrease in the amount of income tax benefits recognized in the
current year compared to 1998, relating to the resolution of prior years' income
tax issues. Income tax expense from continuing operations was $22.7 million in
1997 (effective income tax rate of 37.4%).

Extraordinary Items

     During the year ended December 31, 1998, the Company incurred an
extraordinary charge of $456,000, or $.02 per diluted share, net of income tax
benefits of $294,000, related to the early call of its $27.6 million, 8.32%
subordinated capital notes due September 2005. The call provision in the
indenture allowed for early redemption at par plus accrued interest.

Review of Financial Condition

     Total assets increased $537.0 million, or 13.0%, to $4.66 billion at
December 31, 1999, compared to $4.12 billion at December 31, 1998, due primarily
to an increase in loans receivable funded with borrowed funds. While the Company
intends to continue to grow the balance sheet, management expects that the
recent rise in interest rates and anticipated further tightening actions by the
Federal Reserve Board will begin to slow the economy and housing market
activity. This, in turn, will likely lead to more moderate balance sheet growth
than experienced in 1999. Along with planned new deposit gathering initiatives
and its pending branch acquisition expected to close in the second quarter, the
Company expects its reliance on wholesale borrowings for funding loan growth in
2000 to be reduced.

     Cash, interest-bearing deposits and federal funds sold increased a combined
$341,000 to $158 million at December 31, 1999.

     Investment securities classified as held to maturity increased $892,000 to
$12.0 million as of December 31, 1999 as maturing investments were reinvested
primarily in U.S. Government securities. The $24.1 million increased investment
in FHLB of Chicago stock was required by the growth in the Bank's FHLB of
Chicago advance portfolio.

     Investment securities available for sale decreased $5.0 million to $194.1
million at December 31, 1999. The Company purchased a total of $89.3 million of
investment securities, which consisted primarily of asset-backed securities,
U.S. Government and Agency securities, and marketable equity securities, offset
by maturities of securities totaling $54.5 million. The Company also sold $7.0
million of marketable equity securities, for gains of $1.3 million, as well as
U.S. Government agency securities of $27.8 million for a gain of $446,000. At
December 31, 1999, this portfolio had net unrealized losses of $5.5 million,
compared to net unrealized gains of $912,000 at December 31, 1998.

     Mortgage-backed securities classified as held to maturity decreased $34.3
million to $94.3 million as of December 31, 1999. The decrease is primarily due
to the reinvestment of funds received from amortization and prepayments into
loans receivable.

                                       22
<PAGE>

     Mortgage-backed securities classified as available for sale decreased $15.4
million to $39.7 million at December 31, 1999. The decrease is primarily due to
amortization and prepayments of $15.0 million with these funds being reinvested
in loans receivable. At December 31, 1999, net unrealized losses in the
available for sale portfolio were $550,000, compared to an unrealized loss of
$205,000 at December 31, 1998.

     Included in total mortgage-backed securities at December 31, 1999 are $75.2
million of CMO's with a weighted average life of 5.5 years that are primarily
collateralized by the Federal National Mortgage Association ("FNMA"), the
Federal Home Loan Mortgage Corporation ("FHLMC") and the Government National
Mortgage Association ("GNMA") mortgage-backed securities, and to a lesser extent
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
with the proceeds reinvested 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. Investments and
mortgage-backed securities classified as held to maturity cannot be sold except
under extraordinary and very restrictive circumstances. Generally, these
investments are acquired for investment after taking into account the Bank's
cash flow needs, the investment's projected cash flows, the Bank's overall
interest rate and maturity structure of the liability base used to fund these
investment's and the net interest spread obtained.

     Loans receivable increased 17.0%, or $565.5 million to $3.88 billion at
December 31, 1999. The Bank originated $1.7 billion of mortgage loans during the
current year, including $902.0 million of adjustable-rate loans that are
typically held in portfolio. This volume was offset by amortization and
prepayments of $737.0 million, and sales of $402.9 million. The loans sold
represent long-term conforming fixed-rate mortgages, which are sold as a means
of limiting interest-rate risk. Loans held for sale decreased substantially to
$12.6 million at December 31, 1999 compared to $89.4 million at December 31,
1998 due to higher interest rates curtailing the production of long-term fixed-
rate mortgage loans near the end of the year.

     The allowance for loan losses increased $506,000 to $17.3 million as of
December 31, 1999. The increase is due to a provision for loan losses of $1.1
million, offset by net charge-offs of $594,000. As of December 31, 1999, the
Bank's ratio of the allowance for loan losses to total non-performing loans was
110.4%, compared to 119.4% as of December 31, 1998. The ratio of the allowance
for loan losses to total loans decreased to .44% at December 31, 1999, compared
to .52% at December 31, 1998. During 1999, the Bank's loan portfolio continued
to become more concentrated in single-family residential mortgage loans that
management perceives to carry lower risk than other types of loans in its
portfolio.

     Real estate held for development or sale decreased $9.2 million to $15.9
million at December 31, 1999. A summary of real estate held for development or
sale is as follows:

<TABLE>
<CAPTION>
                                               December 31,
                                         -----------------------
                                          1999             1998
                                         -------          ------
                                             (In thousands)
      <S>                                <C>              <C>
      Tallgrass of Naperville            $11,720           17,817
      Creekside of Remington               1,657            1,456
      Harmony Grove                        2,112            3,419
      Reigate Woods                          400            2,436
      Woodbridge                              --                6
                                         -------           ------
                                         $15,889           25,134
                                         =======           ======
</TABLE>

                                       23
<PAGE>

     The decrease in the 926-lot Tallgrass of Naperville project is primarily
due to strong lot sales in Unit 1 and 2 of the project during the current year,
where the Company sold 252 lots during 1999. At December 31, 1999, an additional
226 lots were under contract. The $200,000 increased investment in the Creekside
of Remington project is due to capitalized costs spent in conjunction with an
agreement to sell the remaining lots in bulk. At December 31, 1999, the
remaining 75 lots of this subdivision were under contract and are expected to be
sold in the second quarter of 2000. The Harmony Grove project was sold out
during the current year.

     The Reigate Woods subdivision decreased primarily due to eleven homesite
sales in 1999. At December 31, 1999, ten homesites remained of which three were
under contract. The Company expects the complete sell-out of the project during
2000. The decline in the Woodbridge project is due to the sale of 41 acres of
the 48-acre commercial parcel in this project. The remaining 7 acres are
currently expected to be sold during 2000 at approximately $1.0 million of pre-
tax profit. At December 31, 1999, 3.2 acres were under contract. The Company
continues to look for additional parcels of land for future development in light
of the strong lot sales to date in its Tallgrass subdivision.

     Premises and equipment increased $1.8 million to $42.5 million at
December 31, 1999. The increase is primarily due to purchases of $5.8 million,
offset by depreciation and amortization of $4.0 million. The Company's purchases
in 1999 related to data processing equipment as well as branch facility upgrades
and expansion.

     Foreclosed real estate decreased to $7.4 million at December 31, 1999,
compared to $8.4 million at December 31, 1998. The decrease is primarily due to
sales of single-family residences, and $428,000 of writedowns on two commercial
properties.

     Other assets increased $7.9 million to $49.6 million at December 31, 1999.
The increase is primarily attributable to an increase in mortgage servicing
rights of $3.1 million to $7.3 million at December 31, 1999, ($900,000 of which
relates to the recovery of a previously established impairment valuation), as
well as a $2.4 million increase in the cash surrender value of life insurance
policies maintained in conjunction with the Company's Bank owned life insurance
program ("BOLI"), and deferred compensation plans. The Bank has $32.9 million in
cash surrender value of life insurance at December 31, 1999.

     Intangible assets decreased by $1.0 million, to $61.2 million at
December 31, 1999. The decrease is primarily due to the amortization of
previously recorded goodwill and core deposit intangibles totaling $3.9 million,
offset by the addition of $3.1 million of goodwill from the Bank's branch
acquisition.

     Deposits increased $42.4 million to $2.70 billion as of December 31, 1999.
The increase is primarily due to the branch acquisition that increased deposits
by $22.2 million, interest credited to deposits of $97.5 million offset by
savings outflows of $75.6 million.

     Borrowed funds increased $491.9 million, or 47.6%, to $1.53 billion at
December 31, 1999. The Bank funded its increase in loans receivable primarily
with FHLB of Chicago advances, which increased $505.0 million during the current
year. As of December 31, 1999, the Bank had $1.48 billion of FHLB of Chicago
advances at a weighted average rate and term to maturity of 6.01% and 4.2 years,
respectively, compared to $975.5 million at a weighted average rate and term to
maturity of 5.83% and 4.6 years, respectively, as of December 31, 1998. Of the
FHLB advances at December 31, 1999, $510.0 million of advances, with a weighted
average term to maturity of 7.8 years, contain various call provisions, with a
weighted average term to call of 2.7 years. The calls are most likely exercised
by the issuer in a period of rising interest rates. Management currently
anticipates $100.0 million of FHLB of Chicago advances outstanding at
December 31, 1999, with a weighted average maturity of 5.9 years and a
weighted average rate of 5.23%, will be called during 2000 due to increases in
interest rates. Management expects these borrowings will need to be refinanced
at higher prevailing interest rates. Reverse repurchase agreements decreased by
$10.0 million due to $30.0 million in maturities offset by a new fundings of
$20.0 million.

                                       24
<PAGE>

     Stockholders' equity of the Company grew to $352.9 million at December 31,
1999, compared to $345.0 million at December 31, 1998, an increase of $7.9
million. The increase in stockholders' equity is primarily due to comprehensive
income of $47.4 million, offset by the payment of cash dividends of $8.2 million
and the repurchase of $35.6 million of common stock (1,565,591 shares).

Lending Activities

     General. The Bank's lending activities reflect its focus as a consumer
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, and experienced record loan volume in
1998 due to a robust economy and high refinance activity attributable to falling
long-term interest rates. In addition to traditional retail originations, the
Bank operates a wholesale lending operation that purchases loans from brokers
and correspondents. In connection with these activities, the Bank has
traditionally held the origination of adjustable-rate or shorter-term loans for
its portfolio and sold a portion of its long-term fixed-rate loans directly into
the secondary market. The Bank originates and purchases long-term fixed-rate
mortgage loans in response to customer demand; however, the Bank sells selected
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
("FNMA") and the Federal Home Loan Mortgage Corporation ("FHLMC"). The volume of
current loan originations sold into the secondary market varies over time based
on the Bank's available cash or borrowing capacity, as well as in response to
the Bank's asset/liability management strategy.

     During the year ended December 31, 1999, the Bank originated and purchased
$749.5 million in fixed-rate one- to four family residential mortgage loans, of
which $611.8 million, or 81.6%, conformed to the balance requirements for sale
to FNMA and FHLMC and $137.7 million, or 18.4%, did not conform to the balance
requirements of these agencies. During the year ended December 31, 1999, the
Bank sold $402.9 million of these loans in the secondary market. The Bank's
"nonconforming" loans are generally designated as such because the principal
loan balance exceeds $240,000 ($252,700 as of January 1, 2000), which is the
FHLMC and FNMA purchase limit, and not because the loans present increased risk
of default to the Bank. Generally, nonconforming loans are held in the Bank's
loan portfolio. 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.

     In early 1997, the Bank started offering its loan products with prepayment
penalties in an effort to mitigate interest rate and prepayment risks in a
declining rate environment. The borrower receives a lower interest rate in
return for accepting prepayment penalties based on the original loan balance.
The penalty is 2% for the initial three years on ARM loans that are fixed for
the initial three-year period. The penalty for 10, 15, 20 and 30 year fixed rate
loans, seven year balloon loans and ARM loans that are fixed for the initial
five-year period is 3% for the first three years, 2% in year four and 1% in year
five. The Bank discontinued offering the fixed-rate prepayment protected product
in the second quarter of 1999. At December 31, 1999, the Bank had $956.5 million
of prepayment penalty loans, or 24.5% of its loans receivable, compared to
$617.3 million, or 18.5% as of December 31, 1998.


     As a result of its acquisition of Northwestern, the Bank acquired a $749.7
million loan portfolio. Included in the portfolio as of the acquisition date was
a $670.5 million nationwide portfolio of single-family residential mortgage
loans that had been purchased through brokers as part of Northwestern's loan
strategy. Collateral for this portfolio is spread throughout 35 states.
Consistent with its strategy to focus primarily on the local market area, the
Bank has allowed this portfolio to amortize and prepay and plans to hold the
existing loans to maturity without replacement. Due to normal amortization and
prepayments, this portfolio had a balance of $161.6 million at December 31,
1999.

                                       25
<PAGE>

     Loan Portfolio Composition. The following table sets forth the composition
of the Bank's loan and mortgage-backed securities portfolio in dollar amounts
and in percentages at the dates indicated:

<TABLE>
<CAPTION>
                                                                                       December 31,
                                                          ------------------------------------------------------------------
                                                                      1999                                 1998
                                                          ----------------------------          ----------------------------
                                                                               Percent                               Percent
                                                                                 of                                    of
                                                            Amount              Total              Amount             Total
                                                          ----------           -------           ----------          -------
                                                                                   (Dollars in thousands)
<S>                                                       <C>                <C>                <C>                 <C>
Real estate loans:
  One- to four family:
    Held for investment                                   $3,479,425            89.05%           $2,877,482           86.07%
    Held for sale                                             12,601              .32                89,406            2.67
  Multi-family                                               164,878             4.22               137,254            4.11
  Commercial                                                  38,817              .99                43,069            1.29
  Construction                                                27,707              .71                28,429            0.85
  Land                                                        28,602              .73                24,765            0.74
                                                          ----------           ------            ----------          ------
       Total real estate loans                             3,752,030            96.02             3,200,405           95.73
                                                          ----------           ------            ----------          ------
Other loans:
  Consumer loans:
  Equity lines of credit                                      98,483             2.52                91,915            2.75
  Home equity loans                                           48,397             1.24                42,398            1.27
  Other                                                        5,373              .14                 6,015            0.18
                                                          ----------           ------            ----------          ------
       Total consumer loans                                  152,253             3.90               140,328            4.20
  Commercial business loans                                    3,132              .08                 2,356            0.07
                                                          ----------           ------            ----------          ------
       Total other loans                                     155,385             3.98               142,684            4.27
                                                          ----------           ------            ----------          ------
       Total loans receivable                              3,907,415           100.00%            3,343,089          100.00%
                                                                               ======                                ======

Less:
  Loans in process                                            11,893                                 10,698
  Unearned discounts, premiums
    and deferred loan fees, net                               (6,323)                                (3,455)
  Allowance for loan losses                                   17,276                                 16,770
                                                          ----------                             ----------
Loans receivable, net                                     $3,884,569                             $3,319,076
                                                          ==========                             ==========
Mortgage-backed securities:
  GNMA held to maturity                                   $    1,115                                  1,782
  FHLMC held to maturity                                      37,804                                 53,750
  FHLMC available for sale                                     2,716                                  3,976
  FNMA held to maturity                                       13,385                                 17,421
  FNMA available for sale                                      3,711                                  6,133
  CMOs held to maturity                                       41,947                                 55,585
  CMOs available for sale                                     33,276                                 44,956
                                                          ----------                             ----------
Total mortgage-backed securities                          $  133,954                                183,603
                                                          ==========                             ==========
</TABLE>

<PAGE>
<TABLE>
<CAPTION>
                                                                      December 31,
                                                  ----------------------------------------------------            June 30,
                                                            1997                       1996                         1996
                                                  ------------------------   -------------------------      -----------------------
                                                                   Percent                     Percent                      Percent
                                                                     of                          of                           of
                                                     Amount         Total        Amount         Total         Amount         Total
                                                   ----------      -------     ----------      -------      ----------      -------
                                                                                (Dollars in thousands)
<S>                                                <C>             <C>         <C>             <C>          <C>             <C>
Real estate loans:
  One- to four family:
    Held for investment                            $2,408,393       88.27%     $2,160,525       87.93%      $2,032,102       87.57%
    Held for sale                                       6,537        0.24           6,495        0.26            9,314        0.40
  Multi-family                                        105,051        3.85          92,968        3.78           94,713        4.08
  Commercial                                           35,839        1.31          46,313        1.89           46,101        1.99
  Construction                                         17,263        0.63          17,263        0.70           16,090        0.69
  Land                                                 24,425        0.90          25,685        1.05           26,644        1.15
                                                   ----------      ------      ----------      ------       ----------      ------
       Total real estate loans                      2,597,508       95.20       2,349,249       95.61        2,224,964       95.88
                                                   ----------      ------      ----------      ------       ----------      ------
Other loans:
  Consumer loans:
    Equity lines of credit                             88,106        3.23          86,614        3.53           79,193        3.41
    Home equity loans                                  34,447        1.26          14,251        0.58           10,525        0.45
    Other                                               5,793         .21           5,009        0.20            4,110        0.18
                                                   ----------      ------      ----------      ------       ----------      ------

       Total consumer loans                           128,346        4.70         105,874        4.31           93,828        4.04
  Commercial business loans                             2,659        0.10           1,871        0.08            1,821        0.08
                                                   ----------      ------      ----------      ------       ----------      ------
       Total other loans                              131,005        4.80         107,745        4.39           95,649        4.12
                                                   ----------      ------      ----------      ------       ----------      ------
       Total loans receivable                       2,728,513      100.00%      2,456,994      100.00%       2,320,613      100.00%
                                                                   ======                      ======                       ======
 Less:
   Loans in process                                     6,683                       7,620                        6,715
   Unearned discounts, premiums
     and deferred loan fees, net                         (772)                      1,347                        3,245
   Allowance for loan losses                           15,475                      17,914                       17,254
                                                   ----------                  ----------                   ----------
Loans receivable, net                              $2,707,127                  $2,430,113                   $2,293,399
                                                   ==========                  ==========                   ==========
Mortgage-backed securities:
  GNMA held to maturity                                 2,442                       3,248                        3,637
  FHLMC held to maturity                              103,037                     138,963                      157,468
  FHLMC available for sale                              5,706                       7,425                        8,052
  FNMA held to maturity                                22,796                      29,343                       32,044
  FNMA available for sale                               9,610                      12,029                       13,565
  CMOs held to maturity                                82,174                      95,104                      100,232
  CMOs available for sale                              52,243                      73,475                      103,104
                                                   ----------                  ----------                   ----------
Total mortgage-backed securities                      283,008                     359,587                      418,102
                                                   ==========                  ==========                   ==========
</TABLE>

                                       26
<PAGE>

     The following table shows the composition of the Bank's fixed and
adjustable-rate loan portfolio as well as the Bank's mortgage-backed securities
portfolio as of the dates indicated.

<TABLE>
<CAPTION>
                                                                                    December 31,
                                                   -----------------------------------------------------------------------------
                                                           1999                        1998                        1997
                                                   ----------------------       ---------------------      ---------------------
                                                     Amount       Percent         Amount      Percent        Amount      Percent
                                                   ----------     -------       ----------    -------      ----------    -------
                                                                                (Dollars in thousands)
<S>                                                <C>            <C>           <C>           <C>          <C>           <C>
Adjustable-rate loans:
 Real estate:
  One-to four family                               $1,614,377       41.33%      $1,261,915      37.74%     $1,489,757      54.59%
  Multi-family                                        102,112        2.61           77,270       2.32          75,562       2.77
  Commercial                                           19,889         .51           19,384        .58          16,128        .60
  Construction                                         27,399         .70           28,121        .84          16,041        .59
  Land                                                 19,220         .48           17,319        .52          16,268        .59
                                                   ----------      ------       ----------     ------      ----------     ------
   Total adjustable-rate real estate loans          1,782,997       45.63        1,404,009      42.00       1,613,756      59.14
 Consumer                                             100,936        2.59           96,867       2.90          89,992       3.30
 Commercial business                                    2,303         .05            1,009        .03           2,080        .07
                                                   ----------      ------       ----------     ------      ----------     ------
   Total adjustable-rate loans receivable           1,886,236       48.27        1,501,885      44.93       1,705,828      62.51
                                                   ----------      ------       ----------     ------      ----------     ------
Fixed-rate loans:
 Real estate:
  One-to four-family                                1,865,048       47.72        1,615,567      48.33         918,636      33.68
  One-to four-family held for sale                     12,601         .32           89,406       2.67           6,537        .24
  Multi-family                                         62,766        1.61           59,984       1.79          29,489       1.08
  Commercial                                           18,928         .48           23,685        .71          19,711        .71
  Construction                                            308         .01              308        .01           1,222        .04
  Land                                                  9,382         .25            7,446        .22           8,157        .31
                                                   ----------      ------       ----------     ------      ----------     ------
   Total fixed-rate real estate loans               1,969,033       50.39        1,796,396      53.73         983,752      36.06
 Consumer                                              51,317        1.31           43,461       1.30          38,354       1.40
 Commercial business                                      829         .03            1,347        .04             579        .03
                                                   ----------      ------       ----------     ------      ----------     ------
   Total fixed-rate loans receivable                2,021,179       51.73        1,841,204      55.07       1,022,685      37.49
                                                   ----------      ------       ----------     ------      ----------     ------
   Total loans receivable                           3,907,415      100.00%       3,343,089     100.00%      2,728,513     100.00%
                                                                   ======                      ======                     ======
Less:
 Loans in process                                      11,893                       10,698                      6,683
 Unearned discounts, premiums and
  deferred loan fees, net                              (6,323)                      (3,455)                      (772)
 Allowance for loan losses                             17,276                       16,770                     15,475
                                                   ----------                   ----------                 ----------
   Loans receivable, net                           $3,884,569                   $3,319,076                 $2,707,127
                                                   ==========                   ==========                 ==========
Mortgage-backed securities:
 Adjustable-rate                                   $   78,446       58.68%      $   94,493      51.59%     $  125,195      44.35%
 Fixed-rate held by the Bank                           55,245       41.32           88,686      48.41         126,638      44.86
 Fixed-rate held by finance subsidiaries (1)               --          --               --         --          30,467      10.79
                                                   ----------      ------       ----------     ------      ----------     ------
 Total mortgage-backed securities                     133,691      100.00%         183,179     100.00%        282,300     100.00%
                                                                   ======                      ======                     ======
Unamortized premiums                                      263                          424                        708
                                                   ----------                   ----------                 ----------
 Mortgage-backed securities, net                   $  133,954                   $  183,603                 $  283,008
                                                   ==========                   ==========                 ==========
Summary:
  Adjustable rate loans:
   Loans receivable                                $1,886,236       46.67%      $1,501,885      42.59%     $1,705,828      57.24%
   Mortgage-backed securities                          78,446        1.94           94,493       2.68         125,195       4.20
                                                   ----------      ------       ----------     ------      ----------     ------
     Total adjustable-rate loans                    1,964,682       48.61        1,596,378      45.27       1,831,023      61.44
  Fixed-rate loans:
   Loans receivable                                 2,021,179       50.02        1,841,204      52.21       1,022,685      34.31
   Mortgage-backed securities (2)                      55,245        1.37           88,686       2.52         126,638       4.25
                                                   ----------      ------       ----------     ------      ----------     ------
     Total fixed-rate loans                         2,076,424       51.39        1,929,890      54.73       1,149,323      38.56
                                                   ----------      ------       ----------     ------      ----------     ------
     Total loan portfolio (2)                      $4,041,106      100.00%      $3,526,268     100.00%     $2,980,346     100.00%
                                                   ==========      ======       ==========     ======      ==========     ======
</TABLE>

---------------------------
(1) See "Subsidiary activities - Mid America Finance Corporation and
    Northwestern Acceptance Corporation."
(2) Excludes the fixed-rate mortgage-backed securities held by finance
    subsidiaries, which are duration matched.

                                       27
<PAGE>

Loan Maturity

     The following table shows the contractual maturity of the Bank's loan
portfolio at December 31, 1999. The loan amounts do not reflect scheduled
principal amounts that have been repaid.  Principal repayments and prepayments
on mortgage loans totaled $737.0 million, $942.1 million, and $706.6  million
for the years ended December 31, 1999, 1998 and 1997, respectively.

<TABLE>
<CAPTION>

                                                                    At December 31, 1999
                                 ---------------------------------------------------------------------------------------------
                                               Real Estate Mortgage Loans                       Other loans
                                 --------------------------------------------------------  ---------------------
                                   One-to
                                    Four-      Multi-                                                  Commercial
                                   Family      Family   Commercial  Construction    Land    Consumer    Business       Total
                                 ----------    -------  ----------  ------------  -------  ---------  -----------  ------------
                                                                        (In thousands)
<S>                              <C>           <C>        <C>       <C>           <C>      <C>         <C>          <C>
Amount due:
 One year or less                $        1        136        45          861        226      1,405         470          3,144
                                 ----------    -------    ------       ------     ------    -------       -----     ----------
 After one year
  1 year to 2 years                   8,598      4,330       253       21,683      3,990      8,230       1,633         48,717
  2 years to 3 years                  5,714        947       560          671     17,486     12,224          20         37,622
  3 years to 5 years                120,255      6,098     8,632        4,492        269     26,914         696        167,356
  5 years to 10 years               320,041     27,563     8,242            -         67    103,219         313        459,445
  10 years to 20 years              481,910     66,273    18,348            -      4,559        261           -        571,351
  Over 20 years                   2,542,906     59,531     2,737            -      2,005          -           -      2,607,179
                                 ----------    -------    ------       ------     ------    -------       -----     ----------
   Total after 1 year             3,479,424    164,742    38,772       26,846     28,376    150,848       2,662      3,891,670
                                 ----------    -------    ------       ------     ------    -------       -----     ----------
   Total amount due              $3,479,425    164,878    38,817       27,707     28,602    152,253       3,132      3,894,814
                                 ==========    =======    ======       ======     ======    =======       =====
Less:
 Loans in process                                                                                                      (11,893)
 Deferred yield adjustments                                                                                              6,323
 Allowance for loan losses                                                                                             (17,276)
                                                                                                                    ----------
 Total loans receivable, net                                                                                         3,871,968
Mortgage loans held for sale                                                                                            12,601
                                                                                                                    ----------
 Total loans, net                                                                                                   $3,884,569
                                                                                                                    ==========
</TABLE>


     The following table sets forth at December 31, 1999 the dollar amount of
loans receivable held for investment due after December 31, 2000, and whether
such loans have fixed or adjustable interest rates.

<TABLE>
<CAPTION>

                                                         Due After December 31, 2000
                                        ---------------------------------------------------------------
                                              Fixed                 Adjustable                  Total
                                        -------------               ----------               ----------
                                                                  (In thousands)
<S>                                      <C>                         <C>                     <C>
Real estate loans:
 One-to four-family                        $1,858,386                1,621,038                3,479,424
 Multi-family                                  58,756                  105,986                  164,742
 Commercial                                    19,047                   19,725                   38,772
 Construction                                     308                   26,538                   26,846
 Land                                           9,186                   19,190                   28,376
Consumer                                       50,943                   99,905                  150,848
Commercial business                             1,368                    1,294                    2,662
                                           ----------                ---------                ---------
 Total loans receivable                    $1,997,994                1,893,676                3,891,670
                                           ==========                =========                =========
</TABLE>

                                       28
<PAGE>

     Retail Residential Mortgage Lending. 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. At
December 31, 1999, the Bank's one- to four family residential mortgage loans
totaled $3.5 billion, or 89.4% of the Bank's total loans receivable. The Bank
emphasizes the origination of conventional hybrid ARM loans and shorter-term to
maturity or repricing and jumbo loans for retention in its portfolio and fixed-
rate conforming loans for both portfolio purposes as well as for sale in the
secondary market. The Bank's retail residential mortgage originations are
predominantly in the Bank's market area. During 1999, the Bank originated $432.6
million of residential ARM loans, representing 34.6% of the total loans
originated by the Bank, all of which were held in portfolio. During the same
period, the Bank originated $712.9 million of fixed-rate residential mortgage
loans, representing 57.0% of the total mortgage loans originated by the Bank
during that period.

     The Bank currently offers a number of ARM loan programs under which the
interest rate may be fixed for the initial one-, three-, or five-year period.
Most of the Bank's residential ARM loans adjust on an annual basis following the
initial one-, three- or five-year fixed-rate period. The Bank also offered,
until recently, ARM loans that are fixed for an initial five or seven-year
period that reprice once at the end of the initial period for the remaining 25
or 23 year term based on a spread above the weekly average of U.S. Treasury
securities adjusted to a constant maturity of ten years (the "ten year Treasury
constant maturity index"). The Bank's ARM loans generally carry an initial
interest rate that is less than the fully indexed rate for the loan. The initial
discount rate is determined by the Bank in accordance with market and
competitive factors. After the initial fixed-rate period, the interest rates on
the ARM loans that adjust annually reprice based on a spread above the published
weekly average yield on United States Treasury securities, adjusted to a
constant maturity of one year (the "one-year Treasury constant maturity index").
Interest rates and origination fees on ARM loans are priced to be competitive in
the local market. These loans are subject to limitations on annual interest rate
adjustments of 2%, as well as a lifetime interest rate cap adjustment of 6%, and
are originated for terms of up to 40 years. At December 31, 1999, the weighted
average term to repricing of the Bank's ARM loan portfolio was 2.45 years.

     The Bank also 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
generally originates its fixed-rate and adjustable-rate mortgage loans in a form
consistent with secondary market standards.

     The Bank offers a mortgage loan modification program 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 periods of heavy refinance activity such as
1998, by limiting the disruption to its loan operations, as well as reducing the
costs associated with refinance activity of existing borrowers.

     The Bank's residential mortgage loans customarily include due-on-sale
clauses giving the Bank the right to declare the loan immediately due and
payable in the event, among other things, the borrower sells or otherwise
disposes of the property subject to the mortgage and the loan is not repaid. The
Bank has enforced due-on-sale clauses in its mortgage contracts for the purpose
of increasing its loan portfolio yield, often through the authorization of
assumptions of existing loans at higher rates of interest and the imposition of
assumption fees. ARM loans may be assumed provided homebuyers meet the Bank's
underwriting standards and the applicable fees are paid.

                                       29
<PAGE>

     Loan applications are reviewed in accordance with the underwriting
standards approved by the Bank's Board of Directors and which generally conform
to FNMA standards. Loans in excess of $1.5 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.

     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 a property 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 limiting
the loan-to-value ratio on originated 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 the FNMA in an amount sufficient to reduce the Bank's
exposure to no greater than the 75% level. 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.

     Wholesale Residential Lending. The Bank's wholesale loan origination
division that purchases loans from brokers and correspondents for a fee
generally ranging from 1.25% to 1.50%. Generally, the Bank offers the same type
of loan products, both fixed-rate and adjustable-rate loans, at interest rates
similar to those it offers on retail originations. The purchase of these loans
does not necessitate the Bank to incur the processing costs associated with its
retail originations. The Bank acts as the supplier of funds for the mortgage
broker who is responsible for the processing and closing of the loan. The Bank
performs its normal underwriting procedures on wholesale-originated loans
similar to retail loans, and can refuse to purchase any loan which does not meet
its underwriting criteria. Wholesale originations were $344.1 million for 1999,
compared to $346.2 million for 1998.

     Purchased Loans. At December 31, 1999, the Bank had $161.6 million,
compared to $232.7 million at December 31, 1998, of purchased residential
mortgage loans, nearly all were acquired in the acquisition of Northwestern. The
vast majority of purchased loans are adjustable-rate loans secured by properties
which serve as the primary residence of the borrower, and which are located
primarily in metropolitan areas located in 35 states. The decrease in the
balance is primarily due to prepayments and amortization which have not been
replaced with new purchases since the Bank's current policy is to not purchase
loans outside of its market area. At December 31, 1999, purchased loans were
being serviced by 81 companies, the largest of which serviced $32.6 million, or
20.2% of total purchased loans. The loans in this portfolio were underwritten
with substantially the same underwriting standards as for loans originated by
the Bank. One variation from these guidelines is that loans exceeding FNMA and
FHLMC limits could be purchased up to $400,000 with a loan-to-value-ratio of 80%
or less, and up to $300,000 with a loan-to-value ratio of 90% or less with
private mortgage insurance. At December 31, 1999, $56.3 million, or 34.8% of the
loans in the purchased loan portfolio are in excess of the current FNMA limit of
$252,700. In addition to these underwriting guidelines, original executed
promissory notes with proper endorsements are in the possession of the Bank.

                                       30
<PAGE>

     Construction and Land Lending. The Bank originates loans to finance the
construction of one-to four family residences, primarily in its market area. At
December 31, 1999, the Bank had $27.7 million of loans to finance the
construction of one-to four family residences. 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, 1999, the Bank's construction
and land loans totaled $56.3 million, or 1.4%, of total loans receivable.

     The Bank uses underwriting and construction loan guidelines for financing
primarily individual, owner-occupied houses where qualified contractors are
involved. Construction loans are 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. Construction loans are based on
the appraised value of the property, as determined by an independent appraiser,
and an analysis of the potential marketability and profitability of the project.
Construction loans generally have terms 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 area. At December 31, 1999, the Bank had land
loans to developers totaling $12.5 million. At December 31, 1999, the largest
aggregate amount of land acquisition and development loans to a single developer
amounted to $12.1 million. Loans to developers are generally short-term loans
with terms of three to five years. By policy, the loan-to-value ratio may not
exceed 80% and generally is less than 75%. The majority of such loans are based
on the prime rate, or the London interbank offering rate ("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, 1999, the Bank had land loans outstanding to local
builders totaling $8.2 million. Such loans are generally for terms of up to
three years and are generally granted at rates similar to rates quoted for 30-
year fixed-rate 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, 1999, the Bank had land loans to
individuals totaling $7.9 million. Such loans are made for up to 15-year terms
with adjustable or fixed interest rates which 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 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.

                                       31
<PAGE>

     Multi-family Lending. The Bank originates multi-family residential mortgage
loans in its market area. At December 31, 1999, the Bank had multi-family loans
of $164.9 million, including a portfolio of purchased participating interests of
$2.1 million related to low-income housing. Multi-family loans represent 4.2% of
total loans receivable at December 31, 1999. ARM loans represented 61.9% of the
multi-family residential loan portfolio at December 31, 1999. Such loans are
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
requires a positive net operating income to debt service ratio for loans secured
by multi-family residential property. Loans secured by properties of five or
more units are qualified on the basis of rental income generated by the
property.

     Commercial Real Estate Lending. In connection with the Bank's policy of
maintaining an interest-rate sensitive loan portfolio, the Bank has originated
loans secured by commercial real estate, which generally carry a higher yield
and are made for a shorter term than fixed-rate one- to four family residential
loans. At December 31, 1999, the Bank had $38.8 million of commercial real
estate loans. The Bank's policy has been to originate additional commercial real
estate loans on a limited basis. Commercial real estate loans are generally
granted in amounts up to 80% of the appraised value of the property, as
determined by an independent appraiser previously approved by the Bank. The
Bank's commercial real estate loans are secured by improved properties located
in the Chicago metropolitan area. 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 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 area. 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.

     A loan with an outstanding balance of $5.4 million at December 31, 1999
represents the Bank's largest single commercial real estate loan to one
borrower. The loan is on a shopping center located in Carol Stream, Illinois and
is current as to the payment of principal and interest at December 31, 1999. At
December 31, 1999, the Bank's ten largest commercial real estate loans totaled
$17.4 million, all of which are current and performing in accordance with their
original terms.

     Other Lending. The Bank's other lending activities consist of consumer
lending, primarily home equity loans, fixed-rate second mortgage loans, and to a
lesser extent, commercial business lending. On December 31, 1999, outstanding
balances on home equity lines represented $98.5 million or 2.5% 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 greater than 85% loan-to-value lines of credit is the
designated prime rate plus an increment tiered by the percentage borrowed. 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 $48.4
million of primarily fixed-rate, second mortgage loans that generally amortize
over a five to ten year period.

     Letters of Credit. At December 31, 1999, the Bank had $15.7 million in
standby letters of credit, one of which totals $6.5 million to enhance a
developer's industrial revenue bond financing of commercial real estate parcel
located in the Bank's market area, and included in foreclosed real estate. See
"Asset Quality and Allowance for Loan Losses."

                                       32
<PAGE>

     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 security property unsuitable for use.
This could also have effect on nearby property values. In accordance with FNMA
and FHLMC 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 environmental issues which would subject it to liability at this
time.

      Originations, Purchases, Sales, Swaps of Mortgage Loans and Mortgage-
Backed Securities. The Bank originates and purchases 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 fixed-rate mortgage loans in the secondary
mortgage market to manage its interest rate risk exposure. Substantially all of
these loans are sold without recourse. 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
sold in the secondary mortgage market to investors such as FNMA and FHLMC, as
well as investment banks and other financial institutions.

     The Bank has also exchanged or swapped loans out of its portfolio for
mortgage-backed securities primarily with FNMA and FHLMC. 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 $62.6 million, compared to $26.6 million for the year ended December 31,
1998.

     All of the mortgage-backed securities and CMOs in the Bank's portfolio are
issued by or have collateral backed by FNMA, FHLMC or GNMA, or are backed with
whole loan collateral and have an investment grade rating. Coupon rates at
December 31, 1999, ranged from 5.40% to 16.25%. At December 31, 1999, mortgage-
backed securities, totaled $134.0 million, or 2.9% of total assets. At December
31, 1999, the Bank's mortgage-backed securities portfolio had a market value of
$131.8 million.

                                       33
<PAGE>

     The following table sets forth the Bank's originations, purchases, sales,
swaps and principal repayments of loans receivable and mortgage-backed
securities for the periods indicated.

<TABLE>
<CAPTION>
                                                                Year Ended December 31,
                                                          -----------------------------------
                                                             1999         1998        1997
                                                          -----------  ----------  ----------
                                                                     (In thousands)
<S>                                                       <C>          <C>         <C>
Loans receivable:
 Loans originated:
 Adjustable-rate loans originated:
  One-to four-family                                      $  432,649     213,038     277,788
  Multi-family                                                34,129      18,557      16,803
  Commercial                                                   4,620         906         260
  Construction                                                31,366      31,397      22,739
  Land                                                        14,389       8,335       8,156
  Commercial business                                          1,030         459         811
  Consumer                                                    76,252      67,041      63,572
                                                          ----------   ---------   ---------
   Total adjustable-rate loans originated                    594,435     339,733     390,129
Fixed-rate loans originated:
 One-to four-family                                          712,942   1,012,400     396,823
 Multi-family                                                  9,229      13,087       7,503
 Commercial                                                      938       1,015         133
 Construction                                                     --          --         890
 Land                                                         10,589       7,387       6,738
 Consumer                                                     38,579      33,672      35,079
                                                          ----------   ---------   ---------
  Total fixed-rate loans originated                          772,277   1,067,561     447,166
                                                          ----------   ---------   ---------
  Total loans originated                                   1,366,712   1,407,294     837,295
Loans purchased:
 Fixed-rate one- to four-family real estate                   36,521     186,584     120,385
 Adjustable-rate one- to four-family real estate             307,567     159,607     133,791
 Other                                                           537         524         353
                                                          ----------   ---------   ---------
  Total loans purchased                                      344,625     346,715     254,529
                                                          ----------   ---------   ---------
  Total loans originated and purchased                     1,711,337   1,754,009   1,091,824
                                                          ----------   ---------   ---------
Loans acquired through acquisitions                              399     245,245          --
Loans sold:
 One- to four-family (fixed-rate)                            340,308     410,944     102,459
 Consumer loans                                                1,023       1,164       1,354
                                                          ----------   ---------   ---------
  Total loans sold                                           341,331     412,108     103,813
Mortgage loan swaps (fixed-rate)                              62,583      26,605       3,358
Transfer to foreclosed real estate and charge-offs             6,540       3,864       6,526
Amortization and prepayments                                 736,956     942,101     706,608
                                                          ----------   ---------   ---------
  Total loans sold, loan swaps, transfers,
  amortization and prepayments                             1,147,410   1,384,678     820,305
                                                          ----------   ---------   ---------
Net increase                                              $  564,326     614,576     271,519
                                                          ==========   =========   =========
Mortgage-backed securities:
 Mortgage-backed securities purchased                     $       --      16,218          --
 Mortgage-backed securities swaps                             62,583      26,605       3,358
 Mortgage-backed securities sold                             (62,583)    (26,605)     (3,358)
 Sale of residual interests in finance subsidiaries               --     (30,160)         --
 Amortization and prepayments                                (49,142)    (84,956)    (76,750)
                                                          ----------   ---------   ---------
Net decrease                                              $  (49,142)    (98,898)    (76,750)
                                                          ==========   =========   =========
</TABLE>

                                       34
<PAGE>

Asset Quality and Allowance for Loan Losses

     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
contacts the borrower in order to determine the reason for the delinquency and
to effect a cure, and, where appropriate, reviews 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 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.

     Delinquent Loans. At December 31, 1999, 1998, and 1997, delinquencies in
the Bank's portfolio were as follows:

<TABLE>
<CAPTION>
                                         61-90 Days                                   91 or More Days
                          ----------------------------------------       --------------------------------------------
                                         Principal                                       Principal
                           Number        Balance of       Percent         Number        Balance  of          Percent
                             of          Delinquent          of             of          Delinquent              of
                           Loans           Loans          Total(1)        Loans            Loans             Total(1)
                          -------        ----------       --------       -------        -----------          --------
                                                            (Dollars in thousands)
<S>                        <C>           <C>              <C>             <C>           <C>                  <C>
December 31, 1999            63             $6,280          .16%           130            $13,224              .34%
                             ==             ======          ===            ===            =======              ===
December 31, 1998            41             $4,259          .13%           109            $13,163              .41%
                             ==             ======          ===            ===            =======              ===
December 31, 1997            32             $2,697          .10%            86            $10,134              .37%
                             ==             ======          ===            ===            =======              ===
</TABLE>

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


     Non-Performing Loans. A loan is considered 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 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. The Bank uses these
criteria on one- to four-family residential loans, consumer loans, multi-family
residential loans, and land loans. Impairment for loans considered individually
significant and commercial real estate 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 occurred as a result of the book
value exceeding the fair value.

     A loan (whether considered impaired or not) is classified as non-accrual
when collectibility is in doubt, and is normally analyzed upon the borrower
becoming 90 days past due on contractual principal or interest payments. When a
loan is placed on non-accrual status, or in the process of foreclosure,
previously accrued but unpaid interest is reversed against interest income.
Income is subsequently recorded to the extent cash payments are received, or at
a time when the loan is brought current in accordance with its original terms.

                                       35
<PAGE>

     The following table sets forth information regarding non-accrual loans,
loans which are 91 days or more delinquent but on which the Bank is accruing
interest, non-accrual investment securities, and foreclosed real estate held by
the Bank at the dates indicated.

<TABLE>
<CAPTION>
                                                                                  December 31,
                                                                     ---------------------------------   June 30,
                                                                      1999     1998     1997     1996      1996
                                                                     -------  ------   ------   ------   --------
                                                                             (Dollars in thousands)
<S>                                                                  <C>      <C>      <C>      <C>      <C>
One-to four-family and multi-family loans:
  Non-accrual loans(1)                                               $12,548  10,641    7,039    7,680      5,415
  Accruing loans 91 or more days overdue                                 771   1,381    2,071      896      1,940
                                                                     -------  ------   ------   ------     ------
    Total                                                             13,319  12,022    9,110    8,576      7,355
                                                                     -------  ------   ------   ------     ------
Commercial real estate, construction and land loans:
  Non-accrual loans(1)                                                   607   1,284    1,240    3,762        433
  Accruing loans 91 or more days overdue                                  --      --       --      699        459
  Restructured or renegotiated                                            --      --       --       --      4,299
                                                                     -------  ------   ------   ------     ------
    Total                                                                607   1,284    1,240    4,461      5,191
                                                                     -------  ------   ------   ------     ------
Other loans:
  Non-accrual loans (1)                                                1,683     721      181      353        287
  Accruing loans 91 or more days overdue                                  41      22      124       74         --
                                                                     -------  ------   ------   ------     ------
    Total                                                              1,724     743      305      427        287
                                                                     -------  ------   ------   ------     ------
Total non-performing loans:
  Non-accrual loans (1)                                               14,838  12,646    8,460   11,795      6,135
  Accruing loans 91 or more days overdue                                 812   1,403    2,195    1,669      2,399
  Restructured or renegotiated                                            --      --       --       --      4,299
                                                                     -------  ------   ------   ------     ------
    Total                                                            $15,650  14,049   10,655   13,464     12,833
                                                                     =======  ======   ======   ======     ======
Non-accrual loans to total loans                                         .38%    .39%     .31%     .48%       .27%
Accruing loans 91 or more days overdue to total loans                    .02     .04      .08      .07        .10
Restructured or renegotiated to total loans                               --      --       --       --        .19
                                                                     -------  ------   ------   ------     ------
    Non-performing loans to total loans                                  .40%    .43%     .39%     .55%       .56%
                                                                     =======  ======   ======   ======     ======
Foreclosed real estate:
  One-to four-family                                                 $ 1,220   1,736      489    1,257        888
  Commercial real estate                                               6,195   6,621       --       --         --
                                                                     -------  ------   ------   ------   --------
    Total foreclosed real estate, net of related reserves            $ 7,415   8,357      489    1,257        888
                                                                     =======  ======   ======   ======   ========
Total non-performing assets                                          $23,065  22,406   11,144   14,721     13,721
                                                                     =======  ======   ======   ======   ========
Total non-performing assets to total assets                              .50%    .54%     .32%     .46%       .44%
                                                                     =======  ======   ======   ======   ========
</TABLE>

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


     For the years ended December 31, 1999, 1998 and 1997, the amount of
interest income that would have been recorded on non-accrual loans amounted to
$457,000, $421,000 and $633,000 respectively, if the loans had been current. For
the year ended December 31, 1999, interest income on non-accrual loans that was
included in net income amounted to $387,000.

     Non-performing loans increased $1.6 million to $15.6 million at
December 31, 1999, primarily in one-to-four family residential loans. Non-
performing commercial real estate, construction and land loans decreased by
$677,000 to $607,000 as of December 31, 1999. Asset quality measured by non-
performing loans to total loans receivable was excellent at .40% as of
December 31, 1999.

                                       36
<PAGE>

     Foreclosed real estate includes $6.1 million related to a previously non-
performing $500,000 second mortgage on a commercial real estate loan the Bank
took title to in January 1998. In conjunction with the foreclosure, the Bank
assumed the first mortgage on this property, a $6.0 million industrial revenue
bond. During 1999, the Bank took a fair value writedown of $400,000 on this
property. The industrial revenue bond is current as to interest payments as of
December 31, 1999, and carries an interest rate of 4.20%. The industrial revenue
bond is assumable by any purchaser of the underlying collateral. The Bank has
issued a standby letter of credit against the industrial revenue bond. The
property is currently being marketed for sale by a commercial real estate
broker.

     Classified Assets. The federal regulators have adopted a classification
system for problem assets of insured institutions that covers all problem
assets. 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 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.

     When an insured institution classifies problem assets as either substandard
or doubtful, it is required to establish general allowances for loan losses in
an amount deemed prudent by management. General allowances represent loss
allowances that have been established to recognize the inherent risk associated
with lending activities, but, unlike specific allowances, have not been
allocated to particular problem assets. When an insured institution classifies
problem assets as "loss," it is required either to establish a specific
allowance for losses equal to 100% of the amount of the asset so classified or
to charge off such an amount. An institution's determination as to the
classification of its assets and the amount of its valuation allowances is
subject to review by the institution's Principal Supervisory Agent of the OTS,
who can order the establishment of additional general or specific loss
allowances.

     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, 1999 and 1998, all of the Bank's non-performing loans were
classified as substandard.

     Allowance for Loan Losses. The allowance for loan losses is established
through a provision for loan losses based on management's evaluation of the risk
inherent in its loan portfolio and changes in the nature and volume of its loan
activity. Such evaluation, which includes a review of all loans of which full
collectibility may not be reasonably assured, considers among other matters, the
estimated fair value of the underlying collateral, economic conditions,
historical loan loss experience and other factors that warrant recognition in
providing for an adequate loan loss allowance.

                                       37
<PAGE>

     The following table sets forth the Bank's allowance for loan losses at the
dates indicated.

<TABLE>
<CAPTION>


                                                                                                   Six             Year
                                                      Year Ended December 31,                  Months Ended        Ended
                                            -------------------------------------------         December 31,      June 30,
                                              1999             1998              1997               1996            1996
                                            --------          -------           -------        -------------    -----------
                                                                        (Dollars in thousands)
<S>                                       <C>                 <C>               <C>            <C>               <C>
Balance at beginning of period              $16,770           15,475            17,914               17,254          9,197
Charge-offs:
 One- to four-family                           (522)            (290)             (637)                 (49)          (376)
 Commercial                                     (88)             (25)           (2,994)                  --             --
 Consumer                                      (101)             (87)              (81)                 (17)            --
                                            -------           ------            ------               ------       --------
                                               (711)            (402)           (3,712)                 (66)          (376)
                                            -------           ------            ------               ------       --------
Recoveries:
 One- to four-family                            105                1               106                   25             --
 Commercial                                      --               --                 5                   --             10
 Consumer                                        12               50                12                    1              1
                                            -------           ------            ------               ------       --------
                                                117               51               123                   26             11
                                            -------           ------            ------               ------       --------
Charge-offs, net of recoveries                 (594)            (351)           (3,589)                 (40)          (365)
Provision for loan losses                     1,100              800             1,150                  700            700
Balance related to acquisition                   --              846                --                   --          7,722
                                            -------           ------            ------               ------       --------
Balance at end of period                    $17,276           16,770            15,475               17,914         17,254
                                            =======           ======            ======               ======       ========
Net charge-offs to average
 loans outstanding                              .02%             .01               .14                   --            .03
Allowance for loan losses
 to total loans receivable                      .44%             .52               .57                  .73            .75
Allowance for loan losses
 to total non-performing loans               110.39%          119.37            145.24               133.05         134.45
Allowance for loan losses
 to total non-performing assets               74.90%           74.85            138.86               121.69         124.75
                                            =======           ======            ======               ======       ========
</TABLE>

     At December 31, 1999, the Bank maintained no specific reserves on its loan
portfolio, and is unaware of any specifically identifiable charge-offs in its
loan portfolio. 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 allocated to a particular category should not be
interpreted as the only amount available for future charge-offs that may occur
within that category: it may not be indicative of future charge-off trends and
it may change from year to year based on management's assessment of the risk
characteristics of the loan portfolio.

<TABLE>
<CAPTION>
                                                               Year ended December 31,
                                   ------------------------------------------------------------------------------
                                             1999                     1998                       1997
                                   -------------------------  ------------------------  -------------------------
                                              Loan category              Loan category              Loan category
                                                as a % of                  as a % of                  as a % of
                                   Allowance   Total Loans    Allowance   Total Loans    Allowance   Total Loans
                                   ---------  --------------  ---------  --------------  ---------  --------------
                                                               (Dollars in thousands)
<S>                                <C>        <C>             <C>        <C>             <C>        <C>
One- to four-family residential      $ 8,705       89.37%       $ 8,302       88.74%       $ 8,733       88.51%
Multi-family                           1,235        4.22          1,025        4.11            784        3.85
Commercial real estate                 2,078        0.99          2,354        1.29          1,972        1.31
Construction                             256        0.71            256        0.85            171        0.63
Land                                     346        0.73            296        0.74            294        0.90
Consumer                               1,085        3.98            854        4.27            774        4.80
Unallocated portion                    3,571          NA          3,683          NA          2,747          NA
                                     -------      ------        -------      ------        -------      ------
Total                                $17,276      100.00%       $16,770      100.00%       $15,475      100.00%
                                     =======      ======        =======      ======        =======      ======
</TABLE>

                                       38
<PAGE>

     At December 31, 1999, the Bank's loan portfolio consisted of 89.4% of one-
to four-family real estate loans, with an additional 3.9% being equity lines of
credit or home equity loans on one- to four-family real estate. Based on the
Bank's historical high asset quality, low charge-off experience and
concentration on one- to four-family lending in its market area, management
considers the risk of loss due to these loans as minimal. The remaining 6.7% of
the Bank's portfolio, or $263.1 million, consists of multi-family mortgage,
commercial real estate, construction, land, and other 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. Management has
addressed these risks through its underwriting standards.

     With respect to multi-family loans, 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, 1999, in the
Bank's $164.9 million multi-family portfolio, ten loans are on properties
greater than 36 units and the average multi-family loan size is $295,000. In
addition, almost all of the Bank's construction and land loans are on one- to
four family residential properties. All of the Bank's multi-family, construction
and land loans are secured by properties located in the Chicago metropolitan
area.

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 their assets 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.

     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 Bank is required to maintain liquid assets at minimum levels. See
"Regulation and Supervision - Federal Savings Institution Regulation -
Liquidity." 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 $65.0 million at any one institution.


                                       39
<PAGE>

     The table below sets forth information regarding the carrying value,
weighted average yields and maturities of the Company's investment securities.

<TABLE>
<CAPTION>
                                                                                  At December 31, 1999
                                               ----------------------------------------------------------------------------------
                                                    One Year               1 to                 5 to               More than
                                                     or Less              5 Years             10 Years             10 Years
                                               -------------------  -------------------  -------------------  -------------------
                                                         Weighted             Weighted             Weighted             Weighted
                                               Carrying   Average   Carrying   Average   Carrying   Average   Carrying   Average
                                                Value      Yield     Value      Yield     Value      Yield     Value      Yield
                                               --------  ---------  --------  ---------  --------  ---------  --------  ---------
                                                                                (Dollars in thousands)
<S>                                            <C>       <C>        <C>       <C>        <C>       <C>        <C>       <C>
U.S. Government and agency
  securities:
     Held to maturity                           $    --        --%   $ 9,983      7.31%   $    --        --%   $    --        --%
     Available for sale                          15,006      6.04     31,158      6.21     27,629      6.77      4,825      6.65
Marketable equity securities (1)
     Common stock                                    --        --         --        --         --        --      6,100      6.77
     Preferred stock                                 --        --         --        --         --        --      4,146      3.05
Other investment securities:
     Held to maturity                                --        --      2,016     12.00         --        --         --        --
     Available for sale                           9,315      5.99     26,098      6.14     30,798      6.87     39,030      7.38
                                               --------              -------             --------              -------
        Total                                   $24,321      6.02%   $69,255      6.51%   $58,427      6.82%   $54,101      6.91%
                                               ========     =====    =======     =====    =======     =====    =======     =====

<CAPTION>
                                                                               December 31, 1999
                                                        -----------------------------------------------------------------
                                                                           Total Investment Securities
                                                        -----------------------------------------------------------------
                                                          Average                                              Weighted
                                                           Life            Carrying           Market            Average
                                                         In Years            Value             Value             Yield
                                                        ----------        ----------        ----------        -----------
                                                                                 (Dollars in thousands)
<S>                                                       <C>              <C>               <C>               <C>
U.S. Government and agency
  securities:
     Held to maturity                                        4.38          $  9,983          $ 10,305              7.31%
     Available for sale                                      5.38            78,618            78,618              6.40
Marketable equity securities (1)
     Common stock                                               -             6,100             6,100              6.77
     Preferred stock                                            -             4,146             4,146              3.05
Other investment securities:
     Held to maturity                                        5.01             2,016             2,016             12.00
     Available for sale                                     11.48           105,241           105,241              6.80
                                                                           --------          --------
         Total                                               8.69          $206,104          $206,426              6.65%
                                                            =====          ========          ========             =====
</TABLE>
-------------
    (1)  Marketable equity securities with no stated maturity are included in
         the "More than 10 Years" category, and are categorized as available
         for sale.

                                       40
<PAGE>

     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, 1999 and 1998, the fair value of the
investment securities portfolio was $206.4 million and $211.3 million,
respectively.

<TABLE>
<CAPTION>
                                                    December 31,
                                             --------------------------
                                               1999     1998     1997
                                             --------  -------  -------
                                                   (In thousands)
<S>                                           <C>      <C>      <C>
Interest-bearing deposits                    $ 51,306   24,564   57,197
                                             ========  =======  =======
Federal funds sold                           $ 35,013   79,140   50,000
                                             ========  =======  =======
Investment securities:
Available for sale:
  U.S. Government and agency securities      $ 78,618  119,261   60,933
  Marketable equity securities                 10,246   15,042   14,023
  Other investment securities                 105,241   64,657   44,554
                                             --------  -------  -------
   Total investments available for sale       194,105  198,960  119,510
                                             --------  -------  -------
Held to maturity:
  U.S. Government and agency securities         9,983    9,980   24,844
  Other investment securities                   2,016    1,127      424
                                             --------  -------  -------
   Total investments held to maturity          11,999   11,107   25,268
                                             --------  -------  -------
   Total investment securities               $206,104  210,067  144,778
                                             ========  =======  =======
</TABLE>


     The classification of investments as held to maturity, available for sale,
or for trading purposes is made at the time of purchase based upon management's
intent at that time. At December 31, 1999, $194.1 million of investment
securities were classified as available for sale and recorded at fair value
(cost basis of $199.6 million). At December 31, 1998, $199.0 million were
classified as available for sale (cost basis of $198.0 million). All balances
exclude the Bank's required investment of stock in the Federal Home Loan Bank of
Chicago, which was $75.0 million and $50.9 million at December 31, 1999, and
1998, respectively.

Sources of Funds

     The Bank's primary sources of funds are deposits, amortization and
prepayment of loan principal (including mortgage-backed securities), 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 only
solicits deposits from its market area and does not use brokers to obtain
deposits. 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.

                                       41
<PAGE>

     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:

<TABLE>
<CAPTION>
                                                                             Year Ended
                                 --------------------------------------------------------------------------------------------------
                                        December 31, 1999                December 31, 1998                 December 31, 1997
                                 -------------------------------  --------------------------------  -------------------------------
                                              Percent   Weighted               Percent    Weighted               Percent   Weighted
                                                of      Average                  of       Average                  of      Average
                                  Average      Total    Nominal    Average      Total     Nominal    Average      Total    Nominal
                                  Balance    Deposits     Rate     Balance    Deposits     Rate      Balance    Deposits     Rate
                                 ----------  ---------  --------  ----------  ---------  ---------  ----------  ---------  --------
                                                                       (Dollars in thousands)
   <S>                           <C>         <C>        <C>       <C>         <C>        <C>        <C>         <C>        <C>
   Passbook accounts             $  737,322     27.65%     2.48%  $  647,515     27.67%      2.65%  $  659,391     28.79%     2.85%
   Interest bearing NOW
    accounts                        210,525      7.90      1.28      174,003      7.44       1.34      153,842      6.71      1.56
   Non-interest bearing
    checking                         62,508      2.34        --       50,662      2.16         --       39,280      1.71        --
   Commercial checking accounts      50,252      1.88        --       42,127      1.80         --       33,829      1.48        --
                                 ----------    ------             ----------    ------              ----------    ------
     Total passbook, NOW and
      checking accounts           1,060,607     39.77      1.98      914,307     39.07       2.13      886,342     38.69      2.39
                                 ----------    ------             ----------    ------              ----------    ------
   Money market accounts            158,991      5.96      3.40      134,208      5.74       3.37      130,121      5.68      3.41
   Jumbo deposits                    32,659      1.22      4.90       17,713      0.76       5.47       22,035       .96      5.47
   Certificate accounts with
    original maturities of:
     91 days or less                 50,173      1.88      4.30       33,849      1.45       4.61       23,660      1.03      4.81
     6 months                       273,997     10.28      4.48      254,200     10.86       5.10      292,638     12.77      5.21
     8 months                       134,009      5.03      4.74       26,303      1.12       5.00           --        --        --
     9 months                            --        --        --           --        --         --        1,558       .07      5.19
     10 months                       71,647      2.69      5.34      100,888      4.31       5.44        5,964       .26      5.64
     11 months                       61,957      2.32      4.87           --        --         --           --        --        --
                                 ----------    ------             ----------    ------              ----------    ------
      Total jumbo certificates
       of deposits and 7-day
       to 11 month certificate
       accounts                     624,442     23.42      4.68      432,953     18.50       5.15      345,855     15.09      5.21
                                 ----------    ------             ----------    ------              ----------    ------
   Certificate accounts with
    original maturities of:
     12 months                      158,491      5.95      4.69      170,430      7.28       5.33      211,686      9.24      5.39
     13 months                           --        --        --           --        --         --        8,914       .39      5.83
     15 months                       19,959      0.75      4.95        5,639       .24       5.20           --        --        --
     18 months                      252,819      9.48      5.11      296,749     12.68       5.66      128,695      5.62      5.77
     19 months                          126      0.00      5.80       82,306      3.52       5.93      176,418      7.70      5.91
     24 months                       66,329      2.49      4.86       15,542      0.66       5.61       42,685      1.86      5.64
     25 months                       15,595      0.58      5.45           --        --         --           --        --        --
     30 months                      104,285      3.91      5.63       78,080      3.34       5.83      103,031      4.50      6.15
     35 months                       11,130      0.42      5.74           --        --         --           --        --        --
     36 months                       37,626      1.41      7.74        7,191      0.31       5.46       16,355       .71      5.56
     42 months                       17,582      0.66      5.58       26,560      1.13       6.13       30,445      1.33      6.15
     60 months                      104,454      3.92      5.97      130,123      5.56       6.04      143,108      6.25      6.01
     61 months to 120 months         34,056      1.28      6.06       46,008      1.97       6.89       67,362      2.94      7.52
                                 ----------    ------             ----------    ------              ----------    ------
      Total 12-month to
       120-month certificate
       accounts and other
       certificate accounts         822,452     30.85      5.37      858,628     36.69       5.77      928,699     40.54      5.92
                                 ----------    ------             ----------    ------              ----------    ------
      Total deposits             $2,666,492    100.00%     3.74%  $2,340,096    100.00%      4.09%  $2,291,017    100.00%     4.30%
                                 ==========    ======      ====   ==========    ======       ====   ==========    ======      ====
</TABLE>

                                       42
<PAGE>

     The net increase in deposits in 1999 is primarily due to $22.2 million
acquired from the branch acquisition, interest credited to deposits, offset by
outflows during the period. In 1998, the increase in deposits is primarily due
to the acquisition of Westco. The following table presents the deposit activity
of the Bank for the periods indicated:

<TABLE>
<CAPTION>
                                           Year Ended December 31,
                                   --------------------------------------
                                       1999         1998         1997
                                   ------------  -----------  -----------
                                                (In thousands)
<S>                                <C>           <C>          <C>
Deposit transactions               $ 9,323,669    7,603,609    6,274,978
Withdrawal transactions             (9,399,302)  (7,636,545)  (6,294,936)
                                   -----------   ----------   ----------
Net withdrawal transactions            (75,633)     (32,936)     (19,958)
Interest credited on deposits           97,510       90,651       94,873
                                   -----------   ----------   ----------
  Net transaction activity              21,877       57,715       74,915
Deposits acquired, net                  22,195      262,144           --
Amortization of premiums                (1,702)          --         (128)
                                   -----------   ----------   ----------
  Net increase in deposits         $    42,370      319,859       74,787
                                   ===========   ==========   ==========
</TABLE>


     The following table presents, by various rate categories, the amount of
certificate accounts outstanding at December 31, 1999, 1998, and 1997, and the
periods to maturity of the certificate accounts outstanding at December 31,
1999:

<TABLE>
<CAPTION>
                                                                 Period to Maturity December 31, 1999
                                        December 31,             -------------------------------------
                            -----------------------------------   Within    1 to 3    Over
                               1999         1998        1997     One Year    Years   3 Years    Total
                            ----------  ------------  ---------  ---------  -------  -------  ---------
                                                          (In thousands)
<S>                         <C>            <C>         <C>        <C>       <C>       <C>      <C>
Certificate accounts:
  Less than 5.00%           $  525,916       425,242     31,286    494,111   21,667   10,138    525,916
  5.00% to 5.99%               774,505       823,619    939,265    556,403  182,734   35,368    774,505
  6.00% to 6.99%               130,976       167,371    286,476     47,209   73,476   10,291    130,976
  7.00% to 7.99%                28,614        24,391     12,048     27,710      783      121     28,614
  8.00% and greater              9,331        14,080     28,136      9,331        -        -      9,331
                            ----------     ---------  ---------  ---------  -------   ------  ---------
   Total                    $1,469,342     1,454,703  1,297,211  1,134,764  278,660   55,918  1,469,342
                            ==========     =========  =========  =========  =======   ======  =========

</TABLE>

     At December 31, 1999, the Bank had outstanding $224.8 million in
certificate accounts in amounts of $100,000 or more maturing as follows:

<TABLE>
<CAPTION>

           Period to Maturity                               Amount
           ------------------                            --------------
                                                         (In thousands)
<S>                                                      <C>
       Three months or less                                $ 61,674
       Over three through six months                         55,140
       Over six through 12 months                            57,978
       Over 12 months                                        49,991
                                                           --------
          Total                                            $224,783
                                                           ========
</TABLE>

                                       43
<PAGE>

     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 reverse repurchase agreements, when they are a less costly source
of funds or can be reinvested at a positive rate of return.

     A summary of the Company's borrowed funds at December 31, 1999 and 1998 is
as follows:
<TABLE>
<CAPTION>
                                                                 December 31, 1999                     December 31, 1998
                                                       ---------------------------------------      ----------------------
                                                                          Weighted                  Weighted
                                                       Interest Rate      Average                   Average
                                                           Range           Rate       Amount         Rate         Amount
                                                       -------------      --------  ----------      --------    ----------
                                                                          (Dollars in thousands)
<S>                                                    <C>                <C>       <C>             <C>         <C>
Fixed-rate advances from FHLB due:
 Within 1 year                                         5.63% - 7.91%       6.63%       105,000       6.31%      $  190,000
 1 to 2 years                                          5.07  - 6.84        6.28        390,000       6.63          105,000
 2 to 3 years                                          5.75  - 6.43        6.21        275,000       6.41          165,000
 3 to 4 years                                          5.84  - 6.78        6.35         55,500       5.97           55,000
 4 to 5 years                                          6.48  - 6.61        6.54         65,000       6.39              500
 5 to 6 years                                          4.87  - 6.73        5.57        105,000         --               --
 6 to 8 years                                            --  -   --          --             --       5.10           75,000
 Greater than 8 years                                  4.81  - 5.86        5.30        385,000       5.26          285,000
                                                       ------------                  ---------                  ----------
   Total fixed rate advances                           4.81  - 7.91        5.98      1,380,500       5.90          875,500

Adjustable-rate advances from FHLB due:
 Within 1 year                                           --  -   --          --             --       5.24           50,000
 1 to 2 years                                          6.08  - 6.62        6.35         50,000         --               --
 2 to 3 years                                          6.62  - 6.62        6.62         25,000       5.37           25,000
 Greater than 3 years                                  6.26  - 6.26        6.26         25,000       5.06           25,000
                                                       ------------                  ---------                  ----------
   Total adjustable rate advances                      6.08  - 6.62        6.40        100,000       5.23          100,000
                                                       ------------                  ---------                  ----------
   Total advances from FHLB                            4.81  - 7.91        6.01      1,480,500       5.83          975,500
                                                       ============                  =========                  ==========

Fixed-rate reverse repurchase agreements                                   5.86          9,963       6.35           20,000
Unsecured term bank loan                                                   7.17         29,900       6.28           33,000
Other borrowing                                                            4.20          6,000       3.35            6,000
                                                                                     ---------                  ----------
  Total borrowed funds                                                     6.02%     1,526,363       5.84%       1,034,500
                                                                           ====      =========       ====       ==========
</TABLE>

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, 1999, the Bank's FHLB
of Chicago advances totaled $1.5 billion, representing 31.8% of total assets.

     Included in FHLB of Chicago advances at December 31, 1999 are $485.0
million of fixed-rate advances and $25.0 million of adjustable-rate advances
with original scheduled maturities of 2 to 10 years, which are callable at the
discretion of the FHLB of Chicago at periods from 1 to 7 years from the
origination date. The average term to maturity on these advances is 7.8 years,
while the average term to call is 2.7 years. The Bank receives a lower cost of
borrowing on such advances than on similar non-callable long-term advances in
return for granting the FHLB of Chicago the right to call the advances prior to
their final maturity. If called, the FHLB of Chicago will provide replacement
funding at the then prevailing market rate of interest for the remaining term to
maturity of the advances, subject to standard terms and conditions.

                                       44
<PAGE>

  Unsecured Term Bank Loan

     The Company obtained a $35.0 million unsecured term bank loan in
conjunction with its acquisition of Northwestern. The loan provides for an
interest rate of the prime rate or 1% over one, two or three-month LIBOR at
management's discretion adjustable and payable at the end of the repricing
period. The loan currently carries an interest rate of 1% over three-month
LIBOR. The loan is convertible, in whole or in part, with certain limitations at
the end of any repricing period, at management's election to a fixed rate at
1.25% over the U.S. Treasury rate with a maturity corresponding to the remaining
term of the loan. To date, management has not chosen to fix the rate of interest
on this loan. The loan requires increasing annual principal payments starting in
December 1997 with $9.2 million due at the final maturity of the loan on
December 31, 2003. The Company made its scheduled principal payment on the loan
on December 31, 1999 in the amount of $3.1 million and the remaining principal
amount outstanding at December 31, 1999 was $29.9 million. Prepayments of
principal are allowed, but fixed-rate portions, if any, are subject to a
prepayment penalty. In conjunction with the term bank loan, the Company also
maintains a $20.0 million one year unsecured revolving line of credit that
matures annually on April 30. The interest rate on the line of credit is
currently the prime rate or 1% over one, two, or three-month LIBOR, at
management's discretion with interest payable at the end of the repricing
period. At December 31, 1999, no balance is outstanding on the line of credit.
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 not to pledge any stock of the Bank or MAF
Developments for any purpose. At December 31, 1999, the Company was in
compliance with these covenants.

     Subordinated Capital Notes. In November 1998, the Company called the entire
balance of its Subordinated Capital Notes. Under the terms of the bond
indenture, the call was made at par plus accrued interest, and resulted in an
extraordinary charge to income of $456,000, or $.02 per diluted share,
representing the after-tax impact of the remaining $750,000 of unamortized
transaction costs, net of income tax benefits of $294,000.


Liquidity and Capital Resources

     The Company's principal assets are its investment in the Bank and in MAF
Developments. To the extent that it does not generate significant earnings
outside of these two subsidiaries, the Company's liquidity position is primarily
dependent on dividends from the Bank. To date, excess cash flows at MAF
Developments have primarily been used to fund new real estate projects, and to a
lesser extent the Company's stock buyback program.

     The Bank's ability to pay dividends to the Company is dependent on its
ability to generate earnings, and to meet regulatory restrictions. See
"Regulation and Supervision - 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. The
Company received $35.0 million in dividends from the Bank in 1999, compared to
$50.0 million in 1998, and $34.5 million in 1997.

     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 MAF Developments from time to time,
although none was made in 1999. To the extent the Company has excess cash at any
time, it will invest funds in investment securities, marketable equity
securities or other interest-earning assets.

                                       45
<PAGE>

     During 1999, the Company made total interest payments of $2.4 million on
its unsecured term bank loan (borrowed in conjunction with the acquisition of
Northwestern) and revolving line of credit, as well as a scheduled payment of
principal in the amount of $3.1 million.

     During 1999, the Company repurchased 1,543,762 shares for a total of $35.1
million (average price of $22.77), compared to 973,938 shares for a total of
$22.7 million (average price of $23.32 per share) in 1998. The Company has used
stock repurchase programs as a means of providing for future acquisitions, stock
option exercises, and other general corporate purposes.

     Cash dividends paid to common shareholders totaled $7.6 million ($.34 per
share declared) in 1999, compared to $5.3 million ($.257 per share declared) in
1998. The increase is primarily due to a 32% increase in the cash dividend rate
in 1999 compared to 1998, as well as additional shares outstanding due to the
acquisition of Westco. The most recent quarterly dividend of $.09 per share was
paid on January 4, 2000. 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 for the Bank to
pay dividends.

     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 and funds provided by operations. While
scheduled loan and mortgage-backed securities amortization and maturing
interest-bearing deposits are a relatively predictable source of funds, 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.

     Cash flows from operating activities primarily includes net income for the
year, adjusted for items in net income that did not impact cash, as well as cash
flow activity from mortgage banking activity. The Bank originated and purchased
$252.7 million of loans for sale, and received $402.9 million in proceeds from
sales and swaps during 1999. During the year, the Bank transferred $74.4 million
of fixed rate loans receivable to loans held for sale, recorded a nominal lower
of cost adjustment and subsequently sold the loans. The transfer was made for
interest-rate risk and liquidity management purposes. The Bank had $12.6 million
of loans held for sale at December 31, 1999, down from $89.4 million at December
31, 1998. The decrease in loans held for sale is due to rising interest rates
that have led to an increase in adjustable-rate loan originations. Currently,
the Bank is not selling any of its adjustable-rate loan production into the
secondary market.

     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 business acquisitions. Cash used in investing activities totaled
$653.1 million in 1999, compared to $324.0 million in 1998. During the current
year, the Bank originated and purchased $1.46 billion of loans for investment,
which were offset by $737.0 million of loan amortization and prepayments.
Additionally, the Bank collected $49.1 million in amortization and prepayments
from mortgage-backed securities, which were primarily reinvested into loans held
for investment purposes. Purchases of investment securities declined in 1999
compared to 1998 as a higher portion of available funds were used to fund
continued strong loan demand. Investments securities purchased by the Company
totaled $100.4 million, financed mainly by maturities and sales of investments
of $99.6 million. Cash flow from the Company's land development operations was
positive, as sales of property of $46.4 million was offset by costs of land
acquisition and development of $15.7 million.

     Cash provided from financing activities for Bank operations are primarily
in the form of savings deposits, FHLB of Chicago advances and to a lesser
extent, reverse repurchase agreements. Cash provided from financing activities
totaled $476.1 million in 1999. During the current year, as a means to fund loan
originations held for investment, the Bank borrowed a total of $790.0 million of
FHLB of Chicago advances, which were offset by $285.0 million of maturities.

                                       46
<PAGE>

     At December 31, 1999, the Company believes it has sufficient cash to fund
its outstanding commitments, or will be able to obtain the necessary funds from
outside sources to meet its cash needs.

     The Bank is required by regulation to maintain specific minimum levels of
liquid investments. Regulations currently require the Bank to maintain liquid
assets at least equal to 4.0% of the sum of its average daily balance of net
withdrawable accounts and borrowed funds due in one year or less. This
regulatory requirement may be changed from time to time to reflect current
economic conditions. During the year ended December 31, 1999, the Bank's average
liquidity ratio was 7.4%. At December 31, 1999, total liquidity was $212.8
million, or 8.1%, which was $108.2 million in excess of the 4.0% regulatory
requirement. This excess liquidity has provided the Bank with the flexibility
needed to maintain its short-term gap ratios within strategic limits, as well as
most recently, to fund the increased loan volume.

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 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.

Subsidiary Activities

     MAF Developments and NW Financial. The Company engages in the business of
purchasing unimproved land for development into residential subdivisions of
single family lots through two wholly-owned subsidiaries. MAF Developments is a
wholly-owned subsidiary of the Company, while NW Financial is a wholly-owned
subsidiary of the Bank. The Company has been engaged in this activity since
1974, and since that time has developed and sold over 5,300 lots in 24 different
subdivisions primarily in the western suburbs of Chicago. These subsidiaries act
as sole principal or as a joint venture partner in their developments. The
subsidiaries historically have 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%, 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 the acquisition of Northwestern, the Bank acquired NW Financial, which
is active in the development of unimproved land for development into residential
subdivisions, as well as the construction of single-family homesites on the
improved lots. NW Financial currently has two projects whereby it and a
developer share in the profits of the projects on a 50/50 basis. NW Financial
also provides the funds, via loans, to the projects. The projects are located in
the north and northwest suburbs of Chicago.

     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, MAF Developments, to continue its land development
activities. As a subsidiary of the Company, the activities of MAF Developments
are not restricted by OTS regulations as they are for the Bank. The Bank also
plans to limit the activity of NW Financial to the completion of its existing
projects.

                                       47
<PAGE>

     The following is a summary as of December 31, 1999, of the residential real
estate projects NW Financial and MAF Developments currently has an interest in:


<TABLE>
<CAPTION>
                                                                                     Lots
                                       Date        Number of        Number       Available For
                                       Land          Lots          Sold but       Development        Total        Investment
 Description of Project              Acquired        Sold         Not Closed        or Sale           Lots          Balance
-------------------------            --------      ---------      ----------     -------------       -----        ----------
                                                             (Dollars in thousands)
<S>                                  <C>            <C>           <C>             <C>                <C>           <C>
NW Financial:
 Woodbridge                              2/90          531             --              --             531          $   400
 531 single-family homes
 48-acre commercial parcel

 Reigate Woods                          10/93           75              3               7              85            2,112
 85 single-family homes

MAF Developments:
 Tallgrass of Naperville           11/96-1/99          272            226             428             926           11,720
 926 residential lots

 Creekside of Remington                   N/A           95             75              --             170            1,657
 170 residential lots
                                                                                                                   -------
                                                                                                                   $15,889
                                                                                                                   =======
</TABLE>


     The following table is a summary of the Bank's investment in and advances
to Mid America Investments and NW Financial at the dates indicated:

<TABLE>
<CAPTION>

                                               December 31,
                                          ----------------------
                                           1999    1998    1997
                                          ------  ------  ------
                                              (In thousands)
                 <S>                      <C>     <C>     <C>
                 Common stock             $2,486   2,486   1,657
                 Retained earnings         2,657   8,179  12,285
                 Intercompany advances     2,787   1,853   1,409
                                          ------  ------  ------
                                          $7,930  12,518  15,351
                                          ======  ======  ======
</TABLE>

     During the years ended December 31, 1999, 1998, and 1997, Mid America
Investments and NW Financial paid aggregate dividends of $9.0 million, $5.5
million, and $1.2 million, respectively, to the Bank. The remaining investment
at December 31, 1999 is a deduction for the Bank in computing its regulatory
capital requirements.

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

  Tallgrass of Naperville

     MAF Developments, Inc., with a venture partner who shares in 40% of the
profits, has invested in 447 acres in three separate parcels from 1996 to 1999
for the development of 926 residential lots in Naperville, Illinois. As of
December 31, 1999, the Company's investment was $11.7 million.


  Creekside of Remington

     MAF Developments, Inc. entered into a joint venture agreement to develop
170 lots in Bolingbrook, Illinois. The joint venture partner contributed the
land while MAF Developments contributes development costs. Each joint venture
partner receives 50% of the profit of the project. Development commenced in late
fiscal 1994 in the first unit that consists of 91 lots. At December 31, 1999,
the Company's investment in Creekside of Remington was $1.7 million. The Company
entered into a sale agreement with a third party for the remaining 75 lots. In
April, 1999, 42 lots were sold with a second sale for the remaining lots
scheduled for April 2000.

                                       48
<PAGE>

  Harmony Grove

     MAF Developments, Inc. entered into a joint venture to develop 386 lots in
Naperville, Illinois by purchasing, from its venture partner, 160 acres of land,
which included a 5-acre commercial parcel. The joint venture partner shares in
50% of the profits. Final lot sales closed during 1999.


  Reigate Woods

     Reigate Woods consists of approximately 106 acres of land in Green Oaks,
Illinois. The subdivision was developed into 85 lots for single-family home
construction in conjunction with a developer, who shares in 50% of the profits
of the project. The project is funded solely by funds from NW Financial. The
Company's investment at December 31, 1999 was $2.1 million.


  Woodbridge

     Woodbridge consists of 341 acres of land in Elgin, Illinois. The project is
being developed with a developer who shares in 50% of the project's profits. The
project includes 232 acres for the construction of 531 single-family homes,
which is complete, and 48 acres of commercially-zoned property. At December 31,
1999, the Company has an investment of $400,000, all related to the remaining 7
acres of unsold commercial property. At December 31, 1999, 3.2 acres are under
contract.

     Mid America Finance Corporation. In 1988, the Bank issued CMOs through
MAFC, a wholly-owned special purpose finance subsidiary. The Bank contributed
$149.8 million of mortgage-backed securities to MAFC which, in turn, pledged the
securities to an independent trustee as collateral for the CMOs. The issuance of
the CMOs resulted in net proceeds to the Bank of $130.9 million which were
ultimately used to fund loan originations. Substantially all of the payments of
principal and interest on the underlying collateral are paid through to the
holders of the CMOs.

     The CMOs were issued in four maturity classes. The actual maturity of each
class of CMO varies according to the timing of the cash receipts from the
underlying collateral. The CMOs were accounted for as a financing transaction
and were reflected as borrowed funds in the consolidated financial statements of
the Company.

     In the first quarter of 1998, the Bank entered into a transaction to sell
its 100% beneficial interest in the trust that owned the mortgage-backed
securities and issued the CMOs. Because the mortgage-backed securities
collateralizing the CMO bonds had high coupons relative to the current market,
the Bank felt it could mitigate the potential negative impact of higher
prepayments by selling its residual interest. Because of the sale of 100% of the
residual interest in the trust, the Bank has no more ownership in the trust, and
no longer consolidates the assets and liabilities of MAFC. The loss on the sale
totaled $739,000.

     Northwestern Acceptance Corporation. In 1986, Northwestern issued $300
million of CMOs through NWAC, a special purpose finance subsidiary. The CMOs
were issued in two classes. Class A-1 CMOs, with an original face of $200
million, have an interest rate that is indexed to LIBOR for three-month
eurodollar deposits, with a maximum rate of 13.5% per year. The Class A-2 CMOs,
originally issued for $100 million, have an interest rate that adjusts in
inverse proportion to the LIBOR rate, but in no event may be less than 0% per
year or greater than 23.89% per year. The CMOs have a stated maturity of
February 20, 2018, although actual maturity of each class of CMO will vary due
to prepayments in the underlying mortgage collateral. The CMOs are also subject
to mandatory and optional redemption provisions, depending on the repayment of
the underlying collateral and the amount of CMOs outstanding.

     During 1998, the Bank sold its 100% residual interest in NWAC via the sale
of the optional redemption rights on the CMO bonds issued by NWAC, which gave
the buyer the right to call the bonds prior to maturity, along with ownership of
the mortgage-backed securities collateralizing the CMO bonds. The Bank
recognized a profit on the sale of the optional redemption rights of $815,000.
Upon the calling of the bonds and the release of the mortgage-backed securities,
NWAC was dissolved.

                                       49
<PAGE>

     Mid America Insurance Agency. Mid America Insurance Agency, Inc. ("Mid
America Insurance") is an indirect wholly-owned subsidiary of the Bank which
provides insurance brokerage services, including personal and commercial
insurance products, to the Bank's customers. For the years ended December 31,
1999, 1998 and 1997, Mid America Insurance generated pre-tax income of $75,000,
$60,000, and $77,000, respectively.

     Mid America Investments. The Bank, through Mid America Investments, is a
subscriber to 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 11 brokers are
employed and operate from 16 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, 1999, 1998 and
1997, pre-tax income from INVEST operations was $836,000, $1.0 million, and
$852,000, respectively.

Year 2000 Compliance

     During 1999, management completed its process of preparing for the Year
2000 date change. This process included a plan to identify potential problems
with the Company's mainframe computer, its companywide PC-based network, as well
as other operational issues that may have been hindered by system failures due
to the Year 2000 bug. It also included testing and implementation of internal
software, links with third party vendors in the normal course of business, as
well as the development of a contingency plan to address the potential risks in
the event of Year 2000 failures. To date, the Company has successfully managed
the Year 2000 transition without experiencing any significant operational
issues, nor is the Company aware of any significant Year 2000 issues experienced
by borrowers or significant vendors of the Company.

     Although the Company feels that the Year 2000 problem is solved, unexpected
problems in the Company's internal systems or third party non-compliance or
service disruptions could still occur despite the Company's efforts to date.
Management continues to monitor all of its business processes in order to
address any Year 2000 computer issues that may arise.

     The Company estimates its total cost for Year 2000 compliance was
approximately $500,000, a majority of which was expended in 1999. It currently
expects that the continued cost to address any problems that may arise in 2000
will not be material.

                                       50
<PAGE>

                           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 of the 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 extensive 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 and 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, the effect of the acquisition of the
institution on the risk to the insurance funds, the convenience and needs of the
community and competitive factors.

                                       51
<PAGE>

     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 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 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 $7.9 million investment in Mid
America Investments and NW Financial at December 31, 1999, 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.

     At December 31, 1999 and 1998, the Bank was in compliance with the current
capital requirements as follows:

<TABLE>
<CAPTION>
                                                              December 31, 1999                December 31, 1998
                                                           ------------------------         ------------------------
                                                                         Percent of                       Percent of
                                                             Amount        Assets             Amount        Assets
                                                           ----------    ----------         ----------    ----------
                                                                           (Dollars in thousands)
<S>                                                        <C>           <C>                <C>           <C>
Stockholder's equity of the Bank                           $  354,297        7.64%          $  341,568        8.36%
                                                           ==========       =====           ==========       =====
Tangible capital                                           $  288,177        6.32           $  266,793        6.67
Tangible capital requirement                                   68,391        1.50               60,009        1.50
                                                           ----------       -----           ----------       -----
Excess                                                     $  219,786        4.82           $  206,784        5.17
                                                           ==========       =====           ==========       =====
Core capital                                                  288,177        6.32              266,793        6.67
Core capital requirement                                      136,782        3.00              120,018        3.00
                                                           ----------       -----           ----------       -----
Excess                                                     $  151,395        3.32           $  146,775        3.67
                                                           ==========       =====           ==========       =====
Core and supplementary capital                             $  305,453       12.32           $  283,563       13.42
Risk-based capital requirement                                198,423        8.00              169,051        8.00
                                                           ----------       -----           ----------       -----
Excess                                                     $  107,030        4.32           $  114,512        5.42
                                                           ==========       =====           ==========       =====
Total Bank assets                                          $4,634,591                       $4,084,110
Adjusted total Bank assets                                  4,559,397                        4,000,600
Total risk-weighted assets                                  2,555,481                        2,196,644
Adjusted total risk-weighted assets                         2,480,286                        2,113,134
Investment in Bank's real estate subsidiaries                   7,930                           12,518
Goodwill and core deposit intangibles                          61,200                           62,219
</TABLE>

                                      52
<PAGE>

The following table reflects the Bank's regulatory capital as of December 31,
1999 as it relates to these three capital requirements:
<TABLE>
<CAPTION>
                                                                                                    Risk-
                                                          Tangible             Core                 Based
                                                          --------            -------              -------
                                                                       (Dollars in thousands)
<S>                                                       <C>                 <C>                  <C>
Stockholder's equity of the Bank                          $354,297            354,297              354,297
Goodwill and core deposit intangibles                      (61,200)           (61,200)             (61,200)
Non-permissible subsidiary deduction                        (7,930)            (7,930)              (7,930)
Non-includible purchased mortgage servicing rights            (733)              (733)                (733)
Regulatory capital adjustment for available
 for sale securities                                         3,743               3,743                3,743
General allowance for loan losses                                -                   -               17,276
                                                          --------             -------              -------
 Regulatory capital                                       $288,177             288,177              305,453
                                                          ========             =======              =======
</TABLE>
  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 further raise premiums if deemed
necessary.  If such action is taken, it could have an adverse effect on the
earnings of the Bank.

                                       53
<PAGE>

  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.  Beginning on January 1, 1997, BIF deposits were assessed for a
FICO payment of 1.3 basis points, while SAIF deposits paid 6.48 basis points.
Full pro rata sharing of the FICO payments between BIF and SAIF members will
occur on the earlier of January 1, 2000 or the date the BIF and SAIF are merged.
As of December 31, 1999, the BIF and SAIF have not been merged.

  As a result of the Funds Act and the FDIC 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, 1999 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.

   Impact of the Gramm-Leach-Bliley Act.  On November 12, 1999, President
Clinton signed the Gramm-Leach-Bliley Act (the "GLB Act"), which among other
things, establishes a comprehensive framework to permit affiliations among
commercial banks, insurance companies and securities firms. The GLB Act
restricts the powers of new unitary savings and loan association holding
companies.  Unitary savings and loan holding companies in existence or with
applications filed with the OTS on or before May 4, 1999, such as the Company,
retain their authority under the prior law. All other unitary savings and loan
holding companies are limited to financially related activities permissible for
bank holding companies, as defined under the GLB Act. The GLB Act also prohibits
non-financial companies from acquiring grandfathered unitary savings and loan
association holding companies.

  The GLB Act also requires financial institutions to disclose, on ATM machines,
any non-customer fees and to disclose to their customers upon the issuance of an
ATM card any fees that may be imposed by the institutions on ATM users.  For
older ATMs, financial institutions will have until December 31, 2004 to provide
such notices.

  The OTS has recently proposed regulations implementing the privacy protection
provisions of the GLB Act.  The proposed regulations would require each
financial institution to adopt procedures to protect customers' and consumers'
"nonpublic personal information." The Company would be required to disclose our
privacy policy, including identifying with whom the Company shares "nonpublic
personal information," to customers at the time of establishing the customer
relationship and annually thereafter.  In addition, the Company would be
required to provide our customers with the ability to "opt-out" of having us
share their personal information with unaffiliated third parties.  The GLB Act
also provides for the ability of each state to enact legislation that is more
protective of consumers' personal information.

  The Company does not believe that the GLB Act will have a material adverse
affect upon its operations in the near term.  However, 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.

                                       54
<PAGE>

  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,
1999, the Bank's limit on loans to one borrower was $43.2 million.  At December
31, 1999, the Bank's largest aggregate outstanding balance of loans to any one
borrower was $17.4 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, 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, 1999, the Bank maintained 94.1% 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 savings institutions, 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.  The regulations provide that an institution (i) which is not
eligible for expedited treatment; or (ii) which its total amount of capital
distributions for a calendar year exceeds its net income for that year to date
plus its retained income for the proceeding 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.

  Liquidity.  The Bank is required to maintain an average daily balance of
specified liquid assets equal to a monthly average of not less than a specified
percentage of its net withdrawable deposit accounts plus short-term borrowings.
This liquidity requirement was 4% for 1999 and may be changed from time to time
by the OTS to any amount within the range of 4% to 10% depending upon economic
conditions and the savings flows of member institutions.  The Bank's liquidity
ratio at December 31, 1999 was 8.14% which exceeded the then applicable
requirements.  The Bank has never been subject to monetary penalties for failure
to meet its liquidity requirements.

  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 $577,000 in 1999.

  Branching.  OTS regulations permit nationwide branching by federally
chartered savings institutions to the extent allowed by federal statute.  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

                                       55
<PAGE>

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 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 final rule establishes deadlines for the submission and review of such
safety and soundness compliance plans when such plans are required.

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 that FHLB 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, 1999, the Bank was
in compliance with this requirement, with an investment in FHLB of Chicago stock
of $75.0 million.  FHLB of Chicago advances must be secured by specified types
of collateral and may be obtained primarily for the purpose of providing funds
for residential housing finance.

                                       56
<PAGE>

  The FHLBs are required to provide funds to cover certain obligations on bonds
issued to fund the resolution of insolvent thrifts and to contribute funds for
affordable housing programs.  These requirements could reduce the 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, 1999, 1998, and 1997, dividends from the FHLB of Chicago to
the Bank amounted to $3.9 million, $2.6 million, and $2.0 million, respectively.
If FHLB dividends were reduced, or interest on future FHLB advances increased,
the Bank's net interest income might also be reduced.

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 $44.3 million or less (subject to adjustment
by the Federal Reserve Board) the reserve requirement is 3%; and for accounts
greater than $44.3 million, the reserve requirement is currently $1,179,000 plus
10% (subject to adjustment by the Federal Reserve Board between 8% and 14%)
against that portion of total transaction accounts in excess of $44.3 million,
as the first $5.0 million of otherwise reservable 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.

Impact of New Accounting Standards

  In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities."  This Statement establishes accounting and
reporting standards for derivative instruments and for hedging activities.  It
requires all derivatives to be recognized as either assets or liabilities in the
statement of financial condition and to be measured at fair value.  As issued,
the Statement is effective for all fiscal quarters of fiscal years beginning
after June 15, 1999.  In June 1999, the FASB issued SFAS No. 137, "Accounting
for Derivative Instruments and Hedging Activities - Deferral of the Effective
Date of FASB No. 133."  The Statement is effective upon issuance and it amends
SFAS No. 133 to be effective for all fiscal quarters of fiscal years beginning
after June 30, 2000.  The Company does not believe this statement will have a
material impact on its financial position or results of operations.

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 negative gap, where more interest-bearing liabilities are repricing
or maturing than interest-earning assets, would tend to result in a reduction in
net interest income in a period of rising interest rates.  Conversely, during a
period of falling interest rates, a negative 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.  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

                                       57
<PAGE>

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 fixed-rate loan originations in the secondary
market in order to maintain its interest rate sensitivity levels. During the
eighteen to twenty-four month period ended June 30, 1999, the Bank had been
retaining the majority of the non-conforming, fixed-rate originations and all of
the prepayment protected fixed-rate loan originations in portfolio for
investment purposes to help utilize the Bank's higher capital base resulting
from the merger with Northwestern. These fixed rate loans were funded with
intermediate to longer-term fixed rate FHLB advances, some of which contained
call options at the discretion of the FHLB of Chicago.

  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
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 FNMA
and FHLMC 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 fix the interest rate, or by requiring the interest
rate to float at market rates until shortly before closing.  In its wholesale
lending operation, there is more risk due to the competitive inability to charge
a rate lock fee to the mortgage brokers, which the Bank tries to offset by using
higher assumed fallout rates.  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 table on the next page sets forth the scheduled repricing or maturity of
the Bank's assets and liabilities at December 31, 1999.  The table uses
management's assumptions regarding prepayment percentages on loans and mortgage-
backed securities, based on its current experience in these portfolios.  The
Bank uses the withdrawal assumptions used by the FHLB of Chicago 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.  Investment securities and FHLB advances
that contain call provisions at the option of the issuer or lender are generally
shown in the category relating to their respective final maturities.  Due to
recent increases in market interest rates, $100.0 million of FHLB advances with
final maturities ranging from 16 to 116 months, but callable in calendar 2000
are categorized as $50.0 million due in 6 months or less, and $50.0 million due
between 6 months and 1 year in anticipation of them being called.

  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.

                                       58
<PAGE>

  Although management believes that its asset/liability management strategies
mitigate the potential effects of changes in interest rates on the Bank's
operations, material and prolonged increases in interest rates may adversely
affect the Bank's operations because the Bank's interest-bearing liabilities
which mature or reprice within one year are currently greater than the Bank's
interest-earning assets which mature or reprice within the same period.
<TABLE>
<CAPTION>
                                                                               December 31, 1999
                                                    --------------------------------------------------------------------------
                                                     less than
                                                       1/2 Yr.    1/2 - 1 Yr.   1 - 3 Yrs.   3 - 5 Yrs.    5+ Yrs.     Total
                                                    -----------  ------------  -----------  -----------  ----------  ---------
                                                                                (Dollars in thousands)
<S>                                                 <C>          <C>           <C>          <C>          <C>         <C>
Interest-earning assets:
 Loans receivable                                   $  527,599       400,524    1,448,402      305,909   1,219,411   3,901,845
 Mortgage-backed securities                             73,636        15,664       15,969       12,791      15,894     133,954
 Investment securities (1)                             146,585         6,696        7,332       39,484      81,032     281,129
 Interest-bearing deposits                              51,306             -            -            -           -      51,306
 Federal funds sold                                     35,013             -            -            -           -      35,013
                                                    ----------      --------    ---------     --------   ---------   ---------
   Total interest-earning assets                       834,139       422,884    1,471,703      358,184   1,316,337   4,403,247
 Impact of hedging activities (2)                       12,601             -            -            -     (12,601)          -
                                                    ----------      --------    ---------     --------   ---------   ---------
   Total net interest-earning assets,
    adjusted for impact of hedging activities          846,740       422,884    1,471,703      358,184   1,303,736   4,403,247
Interest-bearing liabilities:
 NOW and checking accounts                              18,916        17,308       63,348       39,350      83,619     222,541
 Money market accounts                                 162,303             -            -            -           -     162,303
 Passbook accounts                                      61,725        56,478      206,711      128,404     272,858     726,176
 Certificate accounts                                  778,161       358,327      277,791       46,096       9,926   1,470,301
 FHLB advances                                         190,000       115,000      615,000      120,500     440,000   1,480,500
 Other borrowings and subordinated debt                 45,863             -            -            -           -      45,863
                                                    ----------      --------    ---------     --------   ---------   ---------
   Total interest-bearing liabilities                1,256,968       547,113    1,162,850      334,350     806,403   4,107,684
                                                    ----------      --------    ---------     --------   ---------   ---------
Interest sensitivity gap                            $ (410,228)     (124,229)     308,853       23,834     497,333     295,563
                                                    ==========      ========    =========     ========   =========   =========
Cumulative gap                                      $ (410,228)     (534,457)    (225,604)    (201,770)    295,563
                                                    ==========      ========    =========     ========   =========
Cumulative gap as a percentage
 of total assets                                         (8.81)%      (11.47)       (4.84)       (4.33)       6.35
Cumulative net interest-earning assets as
 a percentage of interest-bearing liabilities            67.36 %       70.38        92.40        93.89      107.20
</TABLE>
(1)  Includes $75.0 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 Bank's cumulative one-year gap was a negative $534.5 million or (11.47)%,
of total assets, compared with a negative $163.1 million or (4.23)% of total
assets at December 31, 1998.  The increase in negative cumulative one-year gap
is due to the impact of estimated slower loan prepayments on the residential
loan portfolio and the assumed call prior to maturity of the $100.0 million of
FHLB advances callable in 2000 as discussed below.  The increase in the negative
gap makes the Company increasingly susceptible to declines in net interest
income during a period of rising interest rates.  At December 31, 1999, the Bank
has $767.5 million of prepayment protected long-term fixed-rate mortgage loans
in its portfolio, or 19.6% of total loans at an average interest rate of 6.86%.
During a period of rising interest rates, long-term fixed-rate loans (with or
without prepayment penalty clauses) tend to prepay at a slower pace than during
stable or falling interest rates, which does not allow the Bank to reinvest into
higher yielding assets as rates increase.  At December 31, 1999, the Bank had
$1.4 billion of fixed-rate FHLB of Chicago advances at a weighted-average rate
of 5.90%, of which $485.0 million with a weighted-average rate of 5.18% contain
call provisions at the discretion of the issuer.  The portfolio of fixed-rate
FHLB of Chicago advances has a weighted-average term to maturity of 52 months
compared to a weighted-average term to the earlier of maturity or call of 31
months.  At December 31, 1999, the Bank has $100.0 million of fixed-rate FHLB
advances at a weighted average rate of 5.16% callable by the issuer in calendar
2000, $60.0 million of fixed-rate FHLB advances at a weighted average rate of
5.18% callable in calendar 2001 and $75.0 million at a weighted average rate of
4.98% callable in calendar 2002.  Call provisions are more likely to be
exercised at the discretion of the issuer during periods of increasing interest
rates, which could require the Bank to refinance these borrowings at higher
interest rates sooner than their respective maturity dates.

                                       59
<PAGE>

  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.

  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.  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 liabilities, adjusted for the value of off-balance sheet
items. The table below shows the change in NPV applying various rate shocks to
the Bank's interest-earning assets and interest-bearing liabilities as of
December 31, 1999 and 1998.
<TABLE>
<CAPTION>

                                                 Estimated Increase    Percentage Increase
                              Estimated NPV      (Decrease) in NPV      (Decrease) in NPV
   Change in               -------------------  --------------------  ---------------------
 Interest rate              12/31/99  12/31/98  12/31/99   12/31/98    12/31/99   12/31/98
-------------------------  ---------  --------  --------   --------    --------   --------
                                               (Dollars in thousands)
<S>                        <C>        <C>       <C>        <C>        <C>         <C>
200 basis point rise       $ 205,306   272,711  (134,036)   (88,007)      (39)%      (24)
100 basis point rise         278,243   323,955   (61,099)   (36,763)      (15)       (10)
Base scenario                339,342   360,718         -          -         -          -
100 basis point decline      378,980   378,655    39,638     17,936        12          5
200 basis point decline      396,377   382,975    57,035     22,257        17          6
</TABLE>

  Primarily as a result of increased long-term interest rates, the Bank's net
portfolio value ("NPV") at December 31, 1999 decreased $21.4 million to $339.3
million from $360.7 million at December 31, 1998.  Due to a greater percentage
of the Bank's mortgage loan portfolio being long-term and fixed-rate in nature,
during a period of rising interest rates the Bank's interest-earning assets
would decline in value at a faster pace than fixed-rate interest-bearing
liabilities increase in value.  As a result of the rise in rates and change in
market risk during 1999, the Bank discontinued its origination of long-term
prepayment protected fixed-rate mortgage loans for portfolio purposes.  The Bank
is emphasizing the origination of hybrid adjustable-rate mortgage loans for
portfolio, which generally earn a lower interest rate than long-term fixed-rate
mortgage loans.  It is also attempting to extend maturities on certificate of
deposit accounts and borrowings, both of which would have the impact of reducing
the Company's negative cumulative one-year sensitivity gap.

  Interest rate risk is the most significant market risk affecting the Bank.
Other types of market risk, such as foreign currency exchange risk and commodity
price risk, do not arise in the normal course of the Company's business
activities and operations.

                                       60
<PAGE>

Item 8.  Financial Statements and Supplementary Data

                       MAF Bancorp, Inc. and Subsidiaries
                 Consolidated Statements of Financial Condition
<TABLE>
<CAPTION>


                                                                                        December 31,
                                                                               ----------------------------
                                                                                   1999             1998
                                                                               -----------       ----------
                                                                                       (In thousands)
<S>                                                                            <C>               <C>
Assets
Cash and due from banks                                                        $   71,721          53,995
Interest-bearing deposits                                                          51,306          24,564
Federal funds sold                                                                 35,013          79,140
Investment securities, at amortized cost (fair value of $12,321 and $12,360)       11,999          11,107
Investment securities available for sale, at fair value                           194,105         198,960
Stock in Federal Home Loan Bank of Chicago, at cost                                75,025          50,878
Mortgage-backed securities, at amortized cost (fair value of $92,095 and
 $127,570)                                                                         94,251         128,538
Mortgage-backed securities available for sale, at fair value                       39,703          55,065
Loans receivable held for sale                                                     12,601          89,406
Loans receivable, net of allowance for loan losses of $17,276 and $16,770       3,871,968       3,229,670
Accrued interest receivable                                                        23,740          21,545
Foreclosed real estate                                                              7,415           8,357
Real estate held for development or sale                                           15,889          25,134
Premises and equipment, net                                                        42,489          40,724
Other assets                                                                       49,640          41,785
Intangible assets, net of accumulated amortization of $10,555 and $6,671           61,200          62,219
                                                                               ----------       ---------
                                                                               $4,658,065       4,121,087
                                                                               ==========       =========

Liabilities and Stockholders' Equity
Liabilities:
 Deposits                                                                       2,699,242       2,656,872
 Borrowed funds                                                                 1,526,363       1,034,500
 Advances by borrowers for taxes and insurance                                     34,767          30,576
 Accrued expenses and other liabilities                                            44,772          54,143
                                                                               ----------       ---------
   Total liabilities                                                            4,305,144       3,776,091
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; 25,420,650
  shares issued; 23,911,508 and 24,984,398 shares outstanding                         254             254
 Additional paid-in capital                                                       194,874         191,473
 Retained earnings, substantially restricted                                      198,156         159,935
 Stock in Gain Deferral Plan; 223,453 shares                                          511               -
 Accumulated other comprehensive income (loss)                                     (3,675)            425
 Treasury stock, at cost; 1,732,595 and 436,252 shares                            (37,199)         (7,091)
                                                                               ----------       ---------
  Total stockholders' equity                                                      352,921         344,996
Commitments and  contingencies                                                 $4,658,065       4,121,087
                                                                               ==========       =========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.

                                       61

<PAGE>

                       MAF Bancorp, Inc. and Subsidiaries
                     Consolidated Statements of Operations

<TABLE>
<CAPTION>

                                                                                           Year Ended December 31,
                                                                                -------------------------------------------
                                                                                  1999              1998              1997
                                                                                --------           -------          -------
                                                                              (Dollars in thousands, except per share data)
<S>                                                                            <C>                 <C>              <C>
Interest income:
 Loans receivable                                                               $253,499           212,427           198,877
 Mortgage-backed securities                                                        6,625            10,128            16,934
 Mortgage-backed securities available for sale                                     2,808             3,847             5,172
 Investment securities                                                             4,837             3,689             5,213
 Investment securities available for sale                                         11,566             9,763             5,143
 Interest-bearing deposits and federal funds sold                                  5,757             7,409             7,648
                                                                                --------           -------           -------
  Total interest income                                                          285,092           247,263           238,987
Interest expense:
 Deposits                                                                         99,665            95,788            98,581
 Borrowed funds and subordinated capital notes                                    68,736            54,787            46,635
                                                                                --------           -------           -------
  Total interest expense                                                         168,401           150,575           145,216
                                                                                --------           -------           -------
  Net interest income                                                            116,691            96,688            93,771
Provision for loan losses                                                          1,100               800             1,150
                                                                                --------           -------           -------
  Net interest income after provision for loan losses                            115,591            95,888            92,621
Non-interest income:
 Gain (loss) on sale and writedown of:
  Loans receivable                                                                 2,448             3,003               419
  Mortgage-backed securities                                                         135               201                13
  Investment securities                                                            1,776               816               404
  Foreclosed real estate                                                             (57)              212                17
 Income from real estate operations                                                9,630             4,517             6,876
 Deposit account service charges                                                  10,200             8,626             7,217
 Loan servicing fee income                                                         1,761             1,400             2,278
 Impairment recovery (writedown) of mortgage servicing rights                        900            (1,269)                -
 Brokerage commissions                                                             2,566             2,812             2,050
 Other                                                                             5,485             5,232             3,371
                                                                                --------           -------           -------
  Total non-interest income                                                       34,844            25,550            22,645
Non-interest expense:
 Compensation and benefits                                                        37,845            34,494            30,472
 Office occupancy and equipment                                                    7,274             6,645             6,203
 Advertising and promotion                                                         3,149             2,281             2,737
 Data processing                                                                   2,611             2,267             2,098
 Federal deposit insurance premiums                                                1,585             1,438             1,468
 Amortization of intangible assets                                                 3,884             2,411             2,637
 Other                                                                            11,332             9,407             8,996
                                                                                --------           -------           -------
  Total non-interest expense                                                      67,680            58,943            54,611
                                                                                --------           -------           -------
  Income before income taxes and extraordinary item                               82,755            62,495            60,655
Income taxes                                                                      31,210            23,793            22,707
                                                                                --------           -------           -------
  Income before extraordinary item                                                51,545            38,702            37,948
Extraordinary item - loss on early extinguishment of debt, net of
 tax benefit of $294                                                                   -              (456)                -
                                                                                --------           -------           -------
  Net income                                                                    $ 51,545            38,246            37,948
                                                                                ========           =======           =======
Basic earnings per share:
  Income before extraordinary item                                              $   2.13              1.72              1.64
  Extraordinary item, net of tax                                                       -              (.02)                -
                                                                                --------           -------           -------
     Net income                                                                 $   2.13              1.70              1.64
                                                                                ========           =======           =======
Diluted earnings per share:
  Income before extraordinary item                                              $   2.07              1.67              1.59
   Extraordinary item, net of tax                                                      -              (.02)                -
                                                                                --------           -------           -------
   Net income                                                                   $   2.07              1.65              1.59
                                                                                ========           =======           =======
</TABLE>
See accompanying Notes to Consolidated Financial Statements.

                                       62
<PAGE>

                       MAF Bancorp, Inc. and Subsidiaries
           Consolidated Statements of Changes in Stockholders' Equity
<TABLE>
<CAPTION>

                                                                                             Accumulated
                                                                                                other
                                                            Additional               Gain      compre-
                                                    Common   paid-in    Retained   Deferral    hensive     Treasury
                                                    stock    capital    earnings     Plan    income(loss)    stock     Total
                                                    ------  ----------  ---------  --------  ------------  ---------  --------
                                                                            (Dollars in thousands)
<S>                                                 <C>     <C>         <C>        <C>       <C>           <C>        <C>

Balance at December 31, 1996                          112     171,732     95,412         -          138     (16,769)  250,625
Comprehensive income:
 Net income                                             -           -     37,948         -            -           -    37,948
 Other comprehensive income, net of tax:
  Unrealized holding gain during the year               -           -          -         -        1,660           -     1,660
  Less: reclassification  adjustment of
   gains included in net income                         -           -          -         -         (246)          -      (246)
                                                     ----     -------    -------       ---       ------     -------   -------
 Total comprehensive income                             -           -     37,948         -        1,414           -    39,362
                                                     ----     -------    -------       ---       ------     -------   -------
Exercise of 116,791 stock options, and
 reissuance of treasury stock                           1         409       (146)        -            -         (86)      178
Tax benefits from stock-related compensation            -          60          -         -            -           -        60
Purchase of 1,184,780 shares of treasury stock          -           -          -         -            -     (22,658)  (22,658)
Cash dividends declared, $0.18 per share                -           -     (4,143)        -            -           -    (4,143)
50% stock dividend, including impact of
 fractional shares                                     56           -        (69)        -            -           -       (13)
                                                     ----     -------    -------       ---       ------     -------   -------
Balance at December 31, 1997                         $169     172,201    129,002         -        1,552     (39,513)  263,411
                                                     ----     -------    -------       ---       ------     -------   -------
Comprehensive income:
 Net income                                             -           -     38,246         -            -           -    38,246
 Other comprehensive income, net of tax:
  Unrealized holding loss during the year               -           -          -         -         (668)          -      (668)
  Less: reclassification  adjustment of
   gains included in net income                         -           -          -         -         (459)          -      (459)
                                                     ----     -------    -------       ---       ------     -------   -------
 Total comprehensive income                             -           -     38,246         -       (1,127)          -    37,119
                                                     ----     -------    -------      ----       ------     -------   -------
Issuance of 3,305,129 shares, including value
 of stock option carryovers, for acquisition
 of  Westco Bancorp                                     -      19,120          -         -            -      53,244    72,364
Exercise of 163,470 stock options, and
 reissuance of treasury stock                           -           -     (1,462)        -            -       1,786       324
Tax benefits from stock-related compensation            -         152          -         -            -           -       152
Purchase of 973,938 shares of treasury stock            -           -          -         -            -     (22,608)  (22,608)
Cash dividends declared, $0.257 per share               -           -     (5,750)        -            -           -    (5,750)
50% stock dividend, including impact of
 fractional shares                                     85           -       (101)        -            -           -       (16)
                                                     ----     -------    -------       ---       ------     -------   -------
Balance at December 31, 1998                         $254     191,473    159,935         -          425      (7,091)  344,996
                                                     ----     -------    -------       ---       ------     -------   -------

                                                                                                                   (Continued)
</TABLE>

                                       63
<PAGE>

                       MAF Bancorp, Inc. and Subsidiaries
           Consolidated Statements of Changes in Stockholders' Equity
                                  (Continued)
<TABLE>
<CAPTION>

                                                                                            Accumulated
                                                                                               other
                                                           Additional               Gain      compre-
                                                   Common   paid-in    Retained   Deferral    hensive     Treasury
                                                   stock    capital    earnings     Plan    income(loss)    stock     Total
                                                   ------  ----------  ---------  --------  ------------  ---------  --------
                                                                           (Dollars in thousands)
<S>                                                <C>     <C>         <C>        <C>       <C>           <C>        <C>
Balance at December 31, 1998                         $254     191,473    159,935         -          425      (7,091)  344,996
Comprehensive income:
 Net income                                             -           -     51,545         -           -            -    51,545
 Other comprehensive income, net of tax:
  Unrealized holding loss during the year               -           -         -          -       (2,994)          -    (2,994)
  Less: reclassification  adjustment of
   included in net income                               -           -         -          -       (1,106)          -    (1,106)
                                                     ----     -------   -------        ---       ------     -------   -------
 Total comprehensive income                             -           -    51,545          -       (4,100)          -    47,445
                                                     ----     -------   -------        ---       ------     -------   -------
Exercise of 525,801 stock options, and
 reissuance of treasury stock                           -           -    (5,143)       511            -       5,525       893
Tax benefits from stock-related compensation            -       1,008         -          -            -           -     1,008
Impact of exercise of acquisition carry-over
 options                                                -       2,393         -          -            -           -     2,393
Purchase of 1,565,591 shares of treasury stock          -           -         -          -            -     (35,633)  (35,633)
Cash dividends declared, $0.34 per share                -           -    (8,221)         -            -           -    (8,221)
Dividends paid to Gain Deferral Plan                    -           -        40          -            -           -        40
                                                     ----     -------   -------        ---        ------    -------   -------
Balance at December 31, 1999                         $254     194,874   198,156        511        (3,675)   (37,199)  352,921
                                                     ====     =======   =======        ===        ======    =======   =======
</TABLE>
See accompanying Notes to Consolidated Financial Statements.

                                       64
<PAGE>

                       MAF Bancorp, Inc. and Subsidiaries
                     Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>

                                                                              Year Ended December 31,
                                                                        ----------------------------------
                                                                             1999        1998       1997
                                                                        ------------  ---------  ---------
                                                                                    (In thousands)
<S>                                                                     <C>           <C>        <C>
Operating activities:
 Net income                                                             $    51,545     38,246     37,948
 Adjustments to reconcile net income to net cash
  provided by operating activities:
  Amortization of premiums, discounts and deferred
   loan fees                                                                  1,107      2,850        (30)
  Provision for loan losses                                                   1,100        800      1,150
  Net gain on sale of loans, mortgage-backed
   securities, and real estate held for development
   or sale                                                                  (12,213)    (7,721)    (7,308)
  Gain on sale of investment securities, net                                 (1,776)      (816)      (404)
  Impairment (recovery) of mortgage servicing rights                           (900)     1,269          -
  Depreciation and amortization                                               3,982      3,542      3,117
  Amortization of intangible assets                                           3,884      2,411      2,637
  Deferred income tax expense (benefit)                                       1,505       (318)     2,258
  Extraordinary item, net of tax benefit                                          -        456          -
  Decrease (increase) in accrued interest receivable                         (2,195)       296       (513)
  Net (increase) decrease in other assets and
   liabilities, net of effects from acquisitions                            (18,841)     8,674     (7,165)
 Loans originated for sale                                                 (229,424)  (432,345)   (32,467)
 Loans purchased for sale                                                   (23,306)   (89,238)   (74,746)
 Sale of mortgage-backed securities available for sale                       62,474     26,627      3,371
 Sale of loans originated and purchased for sale                            340,416    411,826    102,718
                                                                        -----------   --------   --------
   Net cash provided by (used in) operating activities                      177,358    (33,441)    30,566
                                                                        -----------   --------   --------
Investing activities:
 Loans originated for investment                                         (1,138,206)  (973,030)  (808,759)
 Principal repayments on loans receivable                                   736,956    942,101    706,608
 Principal repayments on mortgage-backed securities                          49,142     84,956     76,750
 Proceeds from maturities of investment securities available
  for sale                                                                   54,499    138,309     59,070
 Proceeds from maturities of investment securities held to
  maturity                                                                   10,251     15,000     54,518
 Proceeds from sale of:
  Loans receivable                                                            1,023      1,164      1,354
  Investment securities held to maturity                                          -        912          -
  Investment securities available for sale                                   34,825     22,139      8,073
  Stock in Federal Home Loan Bank of Chicago                                      -        500      6,299
  Real estate held for development or sale                                   46,352     32,106     47,339
  Premises and equipment                                                          -          1        174
 Purchases of:
  Loans receivable held for investment                                     (320,782)  (255,789)  (178,781)
  Investment securities available for sale                                  (89,289)  (206,498)  (115,175)
  Investment securities held to maturity                                    (11,066)    (1,717)    (6,866)
  Mortgage-backed securities available for sale                                   -    (12,499)         -
  Mortgage-backed securities held to maturity                                     -     (3,769)         -
  Stock in Federal Home Loan Bank of Chicago                                (24,147)   (16,250)    (8,595)
  Real estate held for development or sale                                  (15,724)   (13,891)   (33,966)
  Bank owned life insurance                                                       -    (20,000)         -
  Premises and equipment                                                     (5,652)    (5,947)    (6,832)
Proceeds (payment) for acquisitions, net of cash acquired                    18,734    (51,883)         -
                                                                        -----------   --------   --------
   Net cash used in investing activities                                   (653,084)  (324,035)  (198,789)
                                                                        -----------   --------   --------
                                                                                               (Continued)
</TABLE>

                                       65
<PAGE>

                       MAF Bancorp, Inc. and Subsidiaries
                     Consolidated Statements of Cash Flows
                                  (Continued)
<TABLE>
<CAPTION>

                                                                              Year Ended December 31,
                                                                         -------------------------------
                                                                            1999       1998       1997
                                                                         ----------  ---------  --------
                                                                                   (In thousands)
<S>                                                                      <C>         <C>        <C>
Financing activities:
 Proceeds from:
  FHLB of Chicago advances                                               $ 790,000    420,000   275,000
  Unsecured line of credit                                                  21,000          -         -
 Repayments of:
  FHLB of Chicago advances                                                (285,000)  (105,000)  (95,000)
  Unsecured term bank loan                                                  (3,100)    (1,500)     (500)
  Subordinated capital notes                                                     -    (27,600)        -
  Unsecured line of credit                                                 (21,000)         -         -
  Collateralized mortgage obligations                                            -          -    (7,700)
 Net decrease in reverse repurchase agreements                             (10,037)   (24,804)  (35,000)
 Net increase in deposits                                                   21,877     57,715    74,915
 Increase in advances by borrowers for taxes and insurance                   4,191      4,608     4,237
 Issuance of common stock in conjunction with acquisitions                       -     72,713         -
 Proceeds from exercise of stock options                                       893        324       178
 Purchase of treasury stock                                                (35,147)   (22,924)  (22,658)
 Cash dividends paid                                                        (7,610)    (5,275)   (4,048)
                                                                         ---------   --------   -------
  Net cash provided by financing activities                                476,067    368,257   189,424
                                                                         ---------   --------   -------
Increase in cash and cash equivalents                                          341     10,781    21,201
Cash and cash equivalents at beginning of year                             157,699    146,918   125,717
                                                                         ---------   --------   -------
Cash and cash equivalents at end of year                                 $ 158,040    157,699   146,918
                                                                         =========   ========   =======
Supplemental disclosure of cash flow information:
 Cash paid during the year for:
  Interest on deposits and borrowed funds                                $ 165,509    149,868   146,102
  Income taxes                                                              27,801     21,901    23,535
 Summary of non-cash transactions:
  Transfer of loans receivable to foreclosed real estate                     5,945      3,511     2,937
  Loans receivable swapped into mortgage-backed securities                  62,583     26,605     3,358
  Loans receivable transferred to held for sale                             74,379          -         -
  Stock of acquiree transferred to treasury stock (14,935 shares)                -        349         -
  Mortgage-backed securities unconsolidated due to sale of
   beneficial interests in special purpose finance subsidiaries                  -     30,904         -
  CMO bonds payable unconsolidated due to sale of beneficial
   interests in special purpose finance subsidiaries                             -     31,781         -
  Other borrowing assumed in foreclosure                                         -      6,000         -
  Treasury stock received for withholding tax liability related to
   stock option exercises (21,829 shares)                                      486          -         -
  Treasury stock received for stock option exercises (33,100,
   19,123 and 14,823 shares)                                                   718        471       262
                                                                         =========   ========   =======
</TABLE>

See accompanying Notes to Consolidated Financial Statements

                                       66
<PAGE>

                       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 two wholly-owned
subsidiaries, Mid America Bank, fsb ("Bank") and MAF Developments, Inc., as well
as the Bank's wholly-owned subsidiaries, Mid America Investment Services, Inc.
("Mid America Investments"), Mid America Finance Corporation ("MAFC"), Mid
America Insurance Agency, Inc., Mid America Mortgage Securities, Inc., NW
Financial, Inc. ("NW Financial"), Northwestern Acceptance Corporation ("NWAC"),
Centre Point Title Services, Inc., MAF Realty III, LLC, and MAF Realty IV, LLC.
All significant intercompany balances and transactions have been eliminated in
consolidation.  Certain reclassifications of prior year amounts have been made
to conform with the current year presentation.

  Use of Estimates.  The preparation of the consolidated financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the amounts reported in the
consolidated financial statements and accompanying notes.  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, 1999
and 1998, the Bank's reserve requirements were met with vault cash.

  Investment and Mortgage-Backed Securities.  All investment securities and
mortgage-backed securities are classified in one of three categories: trading,
held to maturity, or available for sale. Trading securities include investment
and mortgage-backed securities that the Company has purchased and holds for the
purpose of selling in the future.  These investments are carried at fair value,
with unrealized gains and losses reflected in income in the current period. Held
to maturity securities include investment and mortgage-backed securities which
the Company has the positive intent and ability to hold to maturity. These
investments are carried at amortized cost, with no recognition of unrealized
gains or losses in the financial statements.  All other 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.  Securities that have losses deemed other than
temporary are recognized as losses in the statement of operations and a new cost
basis is determined.

  Amortization of premiums, accretion of discounts, and the amortization of
purchase accounting adjustments for investment and mortgage-backed securities
acquired are recognized in interest income over the period to maturity for
investment securities, or the estimated life of mortgage-backed securities 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 ("FNMA") and the Federal Home Loan Mortgage Corporation ("FHLMC")
which involve the exchange of whole mortgage loans originated by the Bank for
mortgage-backed securities.

                                       67
<PAGE>

                      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.
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
FNMA 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 (loss) 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, loans in process and
allowance for loan losses.

  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.

  Loan fees and certain direct loan origination costs are deferred, 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.

  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 level 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 and commercial real estate 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.
There were no impaired loans as of December 31, 1999 or 1998.  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.

  A loan (whether considered impaired or not) is classified as non-accrual when
collectibility is in doubt, and is normally analyzed upon the borrower becoming
90 days past due on contractual principal or interest payments.  When a loan is
placed on non-accrual status, or in the process of 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.

  Allowance for Loan Losses.  The allowance for loan losses is increased by
charges to operations and decreased by charge-offs, net of recoveries.  The
allowance for loan losses reflects management's estimate of the reserves needed
to cover the risks inherent in the Bank's loan portfolio.  In determining a
proper level of loss reserves, management periodically evaluates the adequacy of
the allowance based on the Bank's past loan loss experience, known and inherent
risks in the loan portfolio, adverse situations that may affect the borrower's
ability to repay, estimated value of any underlying collateral, and current
economic conditions.  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

                                       68
<PAGE>

                      MAF Bancorp, Inc. and Subsidiaries
           Notes to Consolidated Financial Statements - (Continued)

the opinion of management, the allowance, when taken as a whole, is adequate to
absorb 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 cost to sell at the date of foreclosure, establishing a new cost
basis. Valuations are periodically performed by management 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.

  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 is calculated as the current investment in the
particular development plus anticipated costs to complete the development, which
includes interest capitalized, divided by the remaining number of lots to be
sold.  Periodic estimates are made as to a development's cost to complete.  Per
unit cost of sales estimates are adjusted on a prospective basis when, and if,
estimated costs to complete change.

  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. Useful lives are 20 to 50 years for office
buildings, 10 to 15 years for parking lot improvements, and 2 to 10 years for
furniture, fixtures, and equipment. 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.

  Intangibles.  Goodwill represents the excess of the purchase price over the
fair value of the net identifiable assets acquired in business combinations.
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.  Goodwill is generally amortized over a period not to
exceed 25 years, while core deposit intangibles are amortized on an accelerated
method over a period not to exceed 10 years. Adjustments to goodwill after
acquisition are generally made within one year of acquisition date and are
primarily related to tax adjustments on assets and liabilities assumed in the
acquisition.

  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
present value of 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.

  Mortgage Servicing Rights. SFAS No. 125, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities." provides
guidance for the recognition of mortgage servicing rights as a separate asset,
regardless of how these rights are acquired.  SFAS No. 125 also requires the
measurement of impairment of servicing rights based on the difference between
carrying value and fair value.  Previous to July 1, 1996, the Company recognized
mortgage servicing rights for only those rights which it purchased.

  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 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, 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

                                       69
<PAGE>

                      MAF Bancorp, Inc. and Subsidiaries
           Notes to Consolidated Financial Statements - (Continued)

interest rate, maturity, and whether the loans are fixed or adjustable rate. An
impairment is recognized in the amount by which the capitalized servicing rights
for a specific stratum exceeds its fair value.

  Income Taxes.  The Company and its direct subsidiaries file a consolidated
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
balance sheet. 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 utilizes forward commitments to
sell mortgage loans and interest rate futures contracts, primarily U.S. Treasury
bond futures, as part of its mortgage loan origination hedging strategy.  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.

  Stock Splits.  On April 29, 1998, the Board of Directors of the Company
declared a 3-for-2 stock split in the form of a 50% stock dividend to be
distributed on July 10, 1998 to shareholders of record on June 18, 1998.  Shares
distributed totaled 7,525,121 shares.  Additionally, on April 30, 1997, the
Board of Directors declared a 3-for-2 stock split in the form a 50% stock
dividend to be distributed on July 9, 1997 to shareholders of record on June 17,
1997.  Shares distributed totaled 7,695,605.  All per share information has been
adjusted on a retroactive basis to reflect the impact of these stock splits.

  Comprehensive Income.  Comprehensive income includes net income plus other
comprehensive income. Other comprehensive income includes revenues, expenses,
gains and losses that under generally accepted accounting principles are
included in comprehensive income but excluded from net income.  The Company
reports comprehensive income in its 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.

  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 regarded as future common stock and are considered in the earnings
per share calculations, and are the only adjustments made to average shares
outstanding in computing diluted earnings per share.  Future common stock is
computed using the treasury stock method.

                                       70
<PAGE>

                      MAF Bancorp, Inc. and Subsidiaries
           Notes to Consolidated Financial Statements - (Continued)

  Weighted average shares used in calculating earnings per share are summarized
below.
<TABLE>
<CAPTION>

                                               Year Ended December 31, 1999                     Year Ended December 31, 1998
                                      ---------------------------------------------        --------------------------------------
                                        Income           Shares           Per Share          Income        Shares       Per Share
                                      (Numerator)     (Denominator)        Amount          (Numerator)  (Denominator)     Amount
                                      -----------     -------------       ---------        -----------  -------------   ---------
                                                                             (Dollars in thousands)
<S>                                   <C>             <C>                 <C>              <C>          <C>             <C>
Income before extraordinary item        $51,545                                             $38,702
Extraordinary item, net of tax                -                                                (456)
                                        -------                                             -------
Basic earnings per share:
 Income available to common
  shareholders                           51,545         24,253,946          $2.13            38,246      22,433,184        $1.70
                                                                            =====                                          =====
Effect of dilutive securities-
 Stock options                                             676,667                                          764,978
                                                        ----------                                       ----------
Diluted earnings per share:
 Income available to common
  shareholders plus assumed
  conversions                           $51,545         24,930,613          $2.07           $38,246      23,198,162        $1.65
                                        =======         ==========          =====           =======      ==========        =====

                                               Year Ended December 31, 1997
                                      ---------------------------------------------
                                         Income          Shares           Per Share
                                      (Numerator)     (Denominator)         Amount
                                      -----------     -------------       ---------
                                                  (Dollars in thousands)
Income before extraordinary item        $37,948
Extraordinary item, net of tax                -
                                        -------
Basic earnings per share:
 Income available to
  common shareholders                   37,948          23,131,729          $1.64
                                                                            =====
Effect of dilutive securities-
 Stock options                                             766,525
                                                        ----------
Diluted earnings per share:
 Income available to common
  shareholders plus assumed
  conversions                           $37,948         23,898,254          $1.59
                                        =======         ==========          =====
</TABLE>
2.  Acquisitions

  On September 10, 1999, the Bank purchased a branch office from the Northern
Trust Company, with approximately $22.2 million of deposits.  The Company
received primarily cash for the deposits in the transaction.  The transaction
was recorded as a purchase, and generated goodwill and a core deposit premium of
$3.1 million.

  On December 31, 1998, the Company acquired Westco Bancorp, Inc. ("Westco"),
and its wholly owned subsidiary First Federal Savings and Loan of Westchester
("Westchester").  Under the terms of the merger agreement, all of the
outstanding shares of Westco were exchanged for 1.395 shares of MAF Bancorp
common stock, or a total of 3,305,129 shares.  As of December 31, 1998, Westco
and Westchester were merged into the Company and Bank, respectively.

                                       71
<PAGE>

                      MAF Bancorp, Inc. and Subsidiaries
           Notes to Consolidated Financial Statements - (Continued)

  As of the date of acquisition, Westco had total assets of $312.3 million,
loans receivable of $245.2 million, deposits of $259.5 million, and
stockholders' equity of $46.7 million. The transaction was accounted for as a
purchase, and created goodwill of $31.6 million, and a core deposit intangible
of $1.7 million.  Premiums and discounts on the fair value adjustments amounted
to $3.7 million and $2.6 million, respectively.  Acquisition expenses incurred
in the transaction include professional fees as well as $4.2 million of
severance costs, net of applicable tax benefits.  Westco operated one branch in
Westchester, Illinois, along with a drive-up facility.

  On May 30, 1996, the Company acquired N.S. Bancorp, Inc. ("Northwestern"), and
its wholly-owned subsidiary Northwestern Savings Bank, through the issuance of
 .8529 shares of MAF Bancorp common stock plus $20.1799 of cash for each share of
Northwestern common stock.  The Company issued 11,687,474 shares of its common
stock in the acquisition.  The funds used for the purchase were obtained
primarily from cash acquired, and an unsecured long-term bank borrowing for
$35.0 million (See note 13).  At May 31, 1996, Northwestern had total assets of
$1.2 billion, loans receivable of $749.7 million, deposits of $872.0 million,
and stockholders' equity of $231.6 million. The transaction was accounted for as
a purchase.  The transaction created goodwill of $26.7 million and a core
deposit intangible of $8.8 million.  Northwestern operated six branches,
primarily in Chicago, Illinois.

3.  Investment Securities

  Investment securities available for sale and held to maturity are summarized
below:

<TABLE>
<CAPTION>
                                               December 31, 1999                            December 31, 1998
                                  -------------------------------------------  ------------------------------------------
                                               Gross        Gross                           Gross        Gross
                                  Amortized  Unrealized  Unrealized    Fair    Amortized  Unrealized  Unrealized    Fair
                                    Cost       Gains       Losses      Value     Cost       Gains       Losses      Value
                                  ---------  ----------  -----------  -------  ---------  ----------  -----------  -------
                                                                   (Dollars in thousands)
<S>                               <C>        <C>         <C>          <C>      <C>        <C>         <C>          <C>
Held to maturity:
United States government
and agency obligations due:
 After one year to five years      $  9,983         322           -    10,305          -           -           -         -
 After five years to ten years            -           -           -         -      9,980       1,253           -    11,233
Other investment securities           2,016           -           -     2,016      1,127           -           -     1,127
                                   --------         ---      ------   -------    -------       -----      ------   -------
                                   $ 11,999         322           -    12,321     11,107       1,253           -    12,360
                                   ========         ===      ======   =======    =======       =====      ======   =======
Available for sale:
United States government
and agency obligations due:
 Within one year                   $ 15,004           5          (3)   15,006     43,178           -          (4)   43,174
 After one year to five years        32,000          16        (858)   31,158     28,682         121         (22)   28,781
 After five to ten years             30,000           -      (2,371)   27,629     30,000           -        (105)   29,895
 After ten or more years              5,000           -        (175)    4,825     17,315         384        (288)   17,411
Marketable equity securities         10,576         500        (830)   10,246     13,746       1,340         (44)   15,042
Asset-backed securities             107,047           2      (1,808)  105,241     65,127         127        (597)   64,657
                                   --------         ---      ------   -------    -------       -----      ------   -------
                                   $199,627         523      (6,045)  194,105    198,048       1,972      (1,060)  198,960
                                   ========         ===      ======   =======    =======       =====      ======   =======
</TABLE>

  The table above classifies investment securities by contractual maturities.
Expected maturities may differ from contractual maturities because certain
borrowers have the right to call obligations without penalty.

                                       72
<PAGE>

                      MAF Bancorp, Inc. and Subsidiaries
           Notes to Consolidated Financial Statements - (Continued)

  As of December 31, 1999 and 1998, the Company recorded unrealized gains
(losses) on investment securities available for sale as increases (decreases) to
stockholders' equity of $(3.3) million and $548,000, respectively, net of
deferred income tax expense (benefit) of $(2.2) million and $364,000.
Additionally, during the year ended December 31, 1998, the Company recognized
losses deemed other than temporary in marketable equity securities available for
sale totaling $375,000.

  Activity in the sales of investment securities available for sale is as
follows:
<TABLE>
<CAPTION>

                                                          Year Ended December 31,
                                                  --------------------------------------
                                                    1999            1998           1997
                                                  --------       -----------     -------
                                                               (In thousands)
<S>                                               <C>            <C>             <C>
Total proceeds on sale                             $34,825         22,139         8,073
                                                   =======         ======         =====
Gross realized gains                                 1,789          1,447           404
Gross realized losses                                  (13)          (332)            -
                                                   -------         ------         -----
                                                     1,776          1,115           404
Losses deemed other than temporary                       -           (375)            -
                                                   -------         ------         -----
Net gain                                           $ 1,776            740           404
                                                   =======         ======         =====
</TABLE>

4.  Mortgage-Backed Securities

  Mortgage-backed securities available for sale and held to maturity are
summarized below:
<TABLE>
<CAPTION>
                                                          December 31, 1999                            December 31, 1998
                                               -----------------------------------------  ------------------------------------------
                                                          Gross       Gross                           Gross        Gross
                                                Book    Unrealized  Unrealized    Fair     Book     Unrealized   Unrealized    Fair
                                                Value     Gains       Losses      Value    Value      Gains        Losses      Value
                                               -------  ----------  ----------   -------  -------   ----------   ----------   ------
                                                                               (Dollars in thousands)
<S>                                            <C>      <C>         <C>          <C>      <C>       <C>          <C>          <C>
Held to maturity:
GNMA pass-through certificates                 $ 1,115        50         (10)     1,155    1,782          105            -     1,887
FHLMC pass-through certificates                 37,804       486        (888)    37,402   53,750          843          (80)   54,513
FNMA pass-through certificates                  13,385       158        (362)    13,181   17,421          227         (245)   17,403
Collateralized mortgage obligations             41,947         -      (1,590)    40,357   55,585           21       (1,839)   53,767
                                               -------       ---      ------    -------  -------       ------       ------   -------
                                               $94,251       694      (2,850)    92,095  128,538        1,196       (2,164)  127,570
                                               =======       ===      ======    =======  =======       ======       ======   =======
Available for sale:
FHLMC pass-through certificates                $ 2,717        28         (29)     2,716    3,927           50           (1)    3,976
FNMA pass-through certificates                   3,640        83         (12)     3,711    5,919          214            -     6,133
Collateralized mortgage obligations             33,896         5        (625)    33,276   45,424          176         (644)   44,956
                                               -------       ---      ------    -------  -------       ------       ------   -------
                                               $40,253       116        (666)    39,703   55,270          440         (645)   55,065
                                               =======       ===      ======    =======  =======       ======       ======   =======
</TABLE>

  As of December 31, 1999 and 1998, the Company recorded unrealized losses on
mortgage-backed securities available for sale as decreases to stockholders'
equity of $333,000, and $124,000, respectively, net of deferred income tax
benefit of $217,000 and $81,000, respectively.

  During the years ended December 31, 1999, 1998, and 1997, the Bank swapped
$62.6 million, $26.6 million, and $3.4 million, respectively, of loans it
originated into mortgage-backed securities, all of which were sold in the same
period swapped.  Included in mortgage-backed securities at December 31, 1999 and
December 31, 1998, are $1.9 million, and $2.9 million, respectively, of loans
originated by the Bank that were swapped into mortgage-backed securities.

  The book value and fair value of mortgage-backed securities held to maturity
by contractual maturity term is shown in the table on the following page.
Expected maturities may differ from contractual maturities because of
prepayments on underlying mortgage loans.

                                       73
<PAGE>

                      MAF Bancorp, Inc. and Subsidiaries
           Notes to Consolidated Financial Statements - (Continued)

<TABLE>
<CAPTION>
                                            December 31, 1999              December 31, 1998
                                       ---------------------------    ----------------------------
                                                         Weighted                        Weighted
                                        Book     Fair     Average      Book      Fair     Average
                                        Value    Value     Yield       Value     Value     Yield
                                       -------  -------  ---------    -------  --------- ---------
                                                         (Dollars in thousands)
<S>                                    <C>      <C>      <C>          <C>      <C>       <C>
Adjustable rate                        $24,940   25,249     7.01%     $ 36,566   36,756      7.18%
Fixed rate, 15-year                     17,225   16,347     6.17        21,689   21,795      6.12
Fixed rate, 30-year                     10,139   10,142     8.16        14,698   15,252      8.31
Collateralized mortgage obligations     41,947   40,357     5.70        55,585   53,767      5.34
                                       -------   ------               --------  -------
                                       $94,251   92,095     6.40%     $128,538  127,570      6.34%
                                       =======   ======     ====      ========  =======      ====
</TABLE>

  In 1998, the Bank sold its 100% beneficial interest in its two special-purpose
finance subsidiaries, MAFC and NWAC for net proceeds of $912,000, and recorded a
gain on sale of investment securities of $76,000. The Company no longer
consolidates MAFC and NWAC in its consolidated financial statements, reducing
mortgage-backed securities held to maturity by $30.9 million in 1998. The
Company considered this transaction a permissible sale of held to maturity
securities.

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, 1999 and
1998, the Bank had $12.6 million and $89.4 million of fixed-rate loans
classified as held for sale with weighted average rates of 7.65% and 6.79%,
respectively.

6.  Loans Receivable

   Loans receivable are summarized as follows:

<TABLE>
<CAPTION>
                                                                             December 31,
                                                                       ----------------------
                                                                          1999         1998
                                                                       ----------   ---------
                                                                       (Dollars in thousands)
<S>                                                                    <C>          <C>
Real estate loans:
 One-to-four family residential                                        $3,479,425   2,877,482
 Multi-family                                                             164,878     137,254
 Commercial                                                                38,817      43,069
 Construction                                                              27,707      28,429
 Land                                                                      28,602      24,765
                                                                       ----------   ---------
    Total real estate loans                                             3,739,429   3,110,999
Other loans:
 Consumer loans:
  Equity lines of credit                                                   98,483      91,915
  Home equity loans                                                        48,397      42,398
  Other                                                                     5,373       6,015
                                                                       ----------   ---------
    Total consumer loans                                                  152,253     140,328
 Commercial business loans                                                  3,132       2,356
                                                                       ----------   ---------
    Total other loans                                                     155,385     142,684
                                                                       ----------   ---------
                                                                        3,894,814   3,253,683
Unearned discounts, premiums, and deferred loan expenses, net               6,323       3,455
Loans in process                                                          (11,893)    (10,698)
Allowance for loan losses                                                 (17,276)    (16,770)
                                                                       ----------   ---------
                                                                       $3,871,968   3,229,670
                                                                       ==========   =========
</TABLE>

  Adjustable-rate loans included in loans receivable totaled $1.9 billion, and
$1.5 billion at December 31, 1999 and 1998, respectively.

                                       74
<PAGE>

                      MAF Bancorp, Inc. and Subsidiaries
           Notes to Consolidated Financial Statements - (Continued)

  Allowance for loan losses.  Activity in the allowance for loan losses is
summarized as follows for the periods indicated:
 <TABLE>
 <CAPTION>
                                       Year Ended December 31,
                                     -------------------------
                                       1999     1998     1997
                                     -------  -------  -------
                                          (In thousands)
<S>                                  <C>      <C>      <C>
Balance at beginning of year         $16,770   15,475   17,914
Provision for loan losses              1,100      800    1,150
Balance acquired in acquisition            -      846        -
Charge-offs                             (711)    (402)  (3,712)
Recoveries                               117       51      123
                                     -------   ------   ------
Balance at end of year               $17,276   16,770   15,475
                                     =======   ======   ======
</TABLE>

  At December 31, 1999, 1998 and 1997, the Bank had $14.8 million, $12.6
million, and $8.5 million respectively, of loans that were on non-accrual
status.  Interest income that would have been recorded on non-accrual loans
amounted to $457,000, $421,000, and $663,000 for the years ended December 31,
1999, 1998 and 1997, respectively, had these loans been accruing under their
contractual terms.  Interest income that was included in net income was
$387,000, $229,000, and $120,000, for the years ended December 31, 1999, 1998
and 1997, respectively.  There were no loans outstanding as of December 31,
1999 and 1998 that the Bank considered impaired.

  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 $1.23 billion, $1.07 billion, and $997.2
million, at December 31, 1999, 1998, and 1997, respectively. Non-interest
bearing custodial balances maintained in connection with mortgage loans serviced
for others (included in deposits) were $20.0 million, and $22.8 million at
December 31, 1999 and 1998, respectively.

  Mortgage servicing rights are included in the statements of financial
condition in other assets.  The company capitalizes servicing rights on loan
originations it identifies for sale at the time of origination. During 1998,
steadily declining long-term interest rates had a negative effect on the value
of the Bank's mortgage servicing rights.  Actual prepayments in the Bank's loans
serviced for others portfolio were greater than management's initial estimate at
the time of capitalization, requiring the impairment writedown of $1.3 million.
During 1999, prepayments slowed due to rising interest rates and the Bank
recovered $900,000 of the impairment valuation writedown.

  Activity in mortgage servicing rights is as follows for the periods indicated:

<TABLE>
<CAPTION>
                                    Year Ended December 31,
                                  --------------------------
                                     1999     1998     1997
                                   -------  -------  -------
                                       (In thousands)
<S>                               <C>       <C>       <C>
Balance at beginning of period     $ 4,208    2,494    2,028
Additions                            3,497    4,291      904
Amortization                        (1,271)  (1,308)    (438)
Impairment writedown                         (1,269)
Impairment recovery                    900        -        -
                                   -------   ------    ------
Balance at end of period           $ 7,334    4,208    2,494
                                   =======   ======    =====
</TABLE>

                                       75
<PAGE>

                      MAF Bancorp, Inc. and Subsidiaries
           Notes to Consolidated Financial Statements - (Continued)

7.  Accrued Interest Receivable

  Accrued interest receivable is summarized as follows:

                                                December 31,
                                             ------------------
                                               1999      1998
                                             --------  --------
                                               (In thousands)
Investment securities                         $ 3,289    2,695
Mortgage-backed securities                        745    1,075
Loans receivable                               20,768   18,815
Reserve for uncollected interest               (1,062)  (1,040)
                                              -------   ------
                                              $23,740   21,545
                                              =======   ======

8.  Foreclosed Real Estate

 Foreclosed real estate is summarized as follows:

                                                 December 31,
                                              ----------------
                                                1999     1998
                                              -------   ------
                                               (In thousands)
Residential real estate                        $1,220    1,736
Commercial real estate                          6,195    6,621
                                               ------   ------
                                               $7,415    8,357
                                               ======   ======

  At December 31, 1999, and 1998, foreclosed commercial real estate primarily
consists of a three building commercial office complex.  Included in borrowed
funds is a $6.0 million industrial revenue bond obligation that is
collateralized by the office complex, and is assumable by any buyer.  In
addition, the Bank maintains a standby letter of credit collateralizing the
industrial revenue bond obligation in the amount of $6.5 million.

9.  Real Estate Held for Development or Sale

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

                                                 December 31,
                                              ----------------
                                                1999     1998
                                              -------   ------
                                               (In thousands)

Tallgrass of Naperville                       $11,720   17,817
Reigate Woods                                   2,112    3,419
Creekside of Remington                          1,657    1,456
Woodbridge                                        400    2,436
Harmony Grove                                       -        6
                                              -------   ------
                                              $15,889   25,134
                                              =======   ======


                                       76
<PAGE>

                      MAF Bancorp, Inc. and Subsidiaries
           Notes to Consolidated Financial Statements - (Continued)

  Income (loss) from real estate operations is summarized by project for the
periods indicated:

                                       Year Ended December 31,
                                      -------------------------
                                        1999     1998     1997
                                      --------  -------  ------
                                            (In thousands)

Tallgrass of Naperville                $3,457     114        -
Woodbridge                              5,163     153    3,452
Harmony Grove                             479   2,851    1,588
Reigate Woods                             509     930      610
Ashbury                                  (150)    297      290
Clow Creek Farm                             -     260      700
Creekside of Remington                    172      29       16
Woods of Rivermist                          -       5      220
Fields of Ambria                            -    (122)       -
                                       ------   -----    -----
                                       $9,630   4,517    6,876
                                       ======   =====    =====

   Interest capitalized to real estate held for development or sale amounted to
$536,000, $267,000, and $308,000 for the years ended December 31, 1999, 1998 and
1997, respectively.

10.  Premises and Equipment

  Premises and equipment are summarized as follows:

                                                      December 31,
                                                   -------------------
                                                     1999       1998
                                                   ---------  --------
                                                     (In thousands)
Land                                               $  7,865     7,448
Office buildings                                     32,284    30,300
Furniture, fixtures and equipment                    26,912    23,985
Leasehold improvements                                1,389     1,382
                                                   --------   -------
 Total office properties and equipment, at cost      68,450    63,115
Less: accumulated depreciation and amortization     (25,961)  (22,391)
                                                   --------   -------
                                                   $ 42,489    40,724
                                                   ========   =======

  Depreciation and amortization of premises and equipment, included in data
processing expense and office occupancy and equipment expense was $4.0 million,
$3.7 million, and $3.1 million, for the years ended December 31, 1999, 1998 and
1997, respectively.

  The Bank is obligated under non-cancelable leases primarily for office space.
Rent expense under these leases for the years ended December 31, 1999, 1998 and
1997, was $1.1 million, $1.2 million, and $1.1 million, respectively. The
projected minimum rentals under existing leases (excluding lease escalations) as
of December 31, 1999, are as follows: 2000 - $1.2 million; 2001 - $1.1 million;
2002 - $1.1 million; 2003 - $1.0 million; 2004 - $630,000; 2005 and thereafter
$1.7 million.

                                       77
<PAGE>

                      MAF Bancorp, Inc. and Subsidiaries
           Notes to Consolidated Financial Statements - (Continued)

11.  Intangible Assets

  Intangible assets are summarized as follows:
<TABLE>
<CAPTION>

                                                                                           Core deposit
                                                                          Goodwill          Intangible          Total
                                                                          --------          ----------         --------
                                                                                          (In thousands)
<S>                                                                       <C>               <C>                <C>
Balance at December 31, 1996                                               $26,347              8,020           34,367
Adjustment related to Northwestern acquisition                                (400)                 -             (400)
Amortization expense                                                        (1,341)            (1,296)          (2,637)
                                                                           -------             ------           ------
Balance at December 31, 1997                                                24,606              6,724           31,330
Addition related to Westco acquisition                                      31,598              1,702           33,300
Amortization expense                                                        (1,336)            (1,075)          (2,411)
                                                                           -------             ------           ------
Balance at December 31, 1998                                                54,868              7,351           62,219
Adjustment related to Westco acquisition                                      (192)                 -             (192)
Addition related to branch acquisition                                       2,911                146            3,057
Amortization expense                                                        (2,648)            (1,236)          (3,884)
                                                                           -------             ------           ------
Balance at December 31, 1999                                               $54,939              6,261           61,200
                                                                           =======             ======           ======

12.  Deposits

  Deposit account balances by interest rate are summarized as follows:

                                                         December 31, 1999                  December 31, 1998
                                                  --------------------------------    ---------------------------------
                                                                          Weighted                             Weighted
                                                                 % of      Average                    % of      Average
                                                   Amount       Total       Rate       Amount        Total       Rate
                                                  ---------     -----     --------    ---------      -----     --------
                                                                           (Dollars in thousands)
<S>                                               <C>           <C>       <C>         <C>            <C>       <C>
Commercial checking accounts                    $   49,076        1.8%          -%      46,118          1.7%          -%
Non-interest bearing checking                       68,845        2.6           -       60,215          2.3           -
Interest bearing NOW accounts                      222,541        8.2        1.27      213,315          8.0        1.34
Money market accounts                              162,303        6.0        3.36      155,500          5.9        3.32
Passbook accounts                                  726,176       26.9        2.49      724,401         27.2        2.51
                                                ----------       ----                ---------         ----        ----
                                                 1,228,941       45.5        2.14    1,199,549         45.1        2.19
                                                ----------       ----                ---------         ----
Certificate accounts:
 Less than 5.00%                                   525,916       19.5        4.69      425,242         16.1        4.65
 5.00% to 5.99%                                    774,505       28.7        5.46      823,619         31.0        5.45
 6.00% to 6.99%                                    130,976        4.9        6.29      167,371          6.3        6.32
 7.00% to 7.99%                                     28,614        1.1        7.30       24,391          0.9        7.27
 8.00% and greater                                   9,331        0.3        8.25       14,080          0.5        8.33
                                                ----------       ----                ---------         ----
                                                 1,469,342       54.5        5.31    1,454,703         54.8        5.38
                                                ----------       ----                ---------         ----
Unamortized premium                                    959          -                    2,620          0.1
                                                ----------       ----                ---------         ----
   Total deposits                               $2,699,242      100.0%       3.87%   2,656,872        100.0%       3.93%
                                                ==========      =====        ====    =========        =====        ====
</TABLE>

  Scheduled maturities of certificate accounts at December 31, 1999 are as
follows (in thousands):

12 months or less                     $1,134,764
13 to 24 months                          194,007
25 to 36 months                           84,653
Over 36 months                            55,918
                                      ----------
                                      $1,469,342
                                      ==========

                                       78
<PAGE>

                      MAF Bancorp, Inc. and Subsidiaries
           Notes to Consolidated Financial Statements - (Continued)

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

                                                    Year Ended December 31,
                                                ------------------------------
                                                  1999       1998       1997
                                                --------   --------   --------
                                                        (In thousands)
 NOW and money market accounts                  $ 8,042      6,851      6,834
 Passbook accounts                               18,268     17,132     18,765
 Certificate accounts                            73,355     71,805     72,982
                                                -------     ------     ------
                                                $99,665     95,788     98,581
                                                =======     ======     ======

  The aggregate amount of certificates of deposit with a minimum denomination of
$100,000 was $224.8 million, $195.6 million, and $159.8 million at December 31,
1999, 1998 and 1997, respectively.

  At December 31, 1999, U.S. Treasury Notes, FHLMC and FNMA mortgage-backed
securities, as well as mortgage loans with an aggregate carrying value and
market value of $17.2 million, were pledged as collateral for certain jumbo
certificates.

13.  Borrowed Funds

  Borrowed funds are summarized as follows:
<TABLE>
<CAPTION>
                                                               December 31, 1999                  December 31, 1998
                                                  -------------------------------------------   ---------------------
                                                                         Weighted               Weighted
                                                     Interest Rate        Average                Average
                                                         Range             Rate      Amount       Rate       Amount
                                                  -------------------    --------  ----------   --------   ----------
                                                                           (Dollars in thousands)
<S>                                               <C>                    <C>       <C>          <C>        <C>
Fixed-rate advances from FHLB due:
 Within 1 year                                        5.63% - 7.91%        6.63%   $  105,000      6.31%   $  190,000
 1 to 2 years                                         5.07  - 6.84         6.28       390,000      6.63       105,000
 2 to 3 years                                         5.75  - 6.43         6.21       275,000      6.41       165,000
 3 to 4 years                                         5.84  - 6.78         6.35        55,500      5.97        55,000
 4 to 5 years                                         6.48  - 6.61         6.54        65,000      6.39           500
 5 to 6 years                                         4.87  - 6.73         5.57       105,000         -             -
 6 to 8 years                                            -  -    -            -             -      5.10        75,000
 Greater than 8 years                                 4.81  - 5.86         5.30       385,000      5.26       285,000
                                                      ------------         ----    ----------    ------    ----------
    Total fixed rate advances                         4.81  - 7.91         5.98     1,380,500      5.90       875,500

Adjustable-rate advances from FHLB due:
 Within 1 year                                           -  -    -            -             -      5.24        50,000
 1 to 2 years                                         6.08  - 6.62         6.35        50,000         -             -
 2 to 3 years                                         6.62  - 6.62         6.62        25,000      5.37        25,000
 Greater than 3 years                                 6.26  - 6.26         6.26        25,000      5.06        25,000
                                                      ------------         ----    ----------    ------    ----------
    Total adjustable rate advances                    6.08  - 6.62         6.40       100,000      5.23       100,000
                                                      ------------         ----    ----------    ------    ----------
    Total advances from FHLB                          4.81  - 7.91         6.01     1,480,500      5.83       975,500
                                                      ------------                 ----------    ------    ----------
Fixed-rate reverse repurchase agreements                                   5.86         9,963      6.35        20,000
Unsecured term bank loan                                                   7.17        29,900      6.28        33,000
Other borrowing                                                            4.20         6,000      3.35         6,000
                                                                                   ----------              ----------
   Total borrowed funds                                                    6.02    $1,526,363      5.84%    1,034,500
                                                                           ====    ==========    ======    ==========
</TABLE>

                                       79
<PAGE>

                      MAF Bancorp, Inc. and Subsidiaries
           Notes to Consolidated Financial Statements - (Continued)

  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. At
December 31, 1999, adjustable-rate advances adjust as follows: $25.0 million at
the three month London interbank offering rate ("LIBOR") less .14%; $25.0
million at 1 month LIBOR less .29%; and $50.0 million at 1 month LIBOR plus
 .07%.

  Included in FHLB of Chicago advances at December 31, 1999 are $485.0 million
of fixed-rate advances and $25.0 million of adjustable-rate advances with
original scheduled maturities of 2 to 10 years, which are callable at the
discretion of the FHLB of Chicago at periods from 1 to 7 years from the
origination date.  The Bank receives a lower cost of borrowing on such advances
than on similar non-callable long-term advances in return for granting the FHLB
of Chicago the right to call the advances prior to their final maturity.

  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
following table presents certain information regarding reverse repurchase
agreements as of and for the periods indicated:

                                              Year Ended December 31,
                                             ------------------------
                                               1999     1998    1997
                                             -------   ------  ------
                                                   (In thousands)

 Balance at end of period                    $ 9,963   20,000  44,804
 Maximum month-end balance                    29,700   44,804  79,804
 Average balance                              17,155   30,750  72,571
 Weighted average rate at end of period         5.86%    6.35    6.31
 Weighted average rate on average balance       6.20     6.33    6.43
                                             =======   ======  ======

  At December 31, 1999 and 1998, reverse repurchase agreements were
collateralized by investment and mortgage-backed securities with a carrying
value of $10.0 million and $20.7 million and a market value of $10.0 million and
$20.7 million, respectively.  At December 31, 1999, the bank has one reverse
repurchase agreement with a remaining term to maturity of two months.

  Unsecured Term Bank Loan.  The Company obtained a $35.0 million unsecured term
bank loan in conjunction with its acquisition of Northwestern.  The loan
provides for an interest rate of the prime rate or 1% over one, two or three-
month LIBOR at management's discretion adjustable and payable at the end of the
repricing period.  The loan currently carries an interest rate of 1% over three-
month LIBOR. The loan is convertible all or in part, with certain limitations at
the end of any repricing period, at management's election to a fixed rate at
1.25% over the U.S. Treasury rate with a maturity corresponding to the remaining
term of the loan.  At December 31, 1999, the balance of the unsecured term loan
is $29.9 million.  Prepayments of principal are allowed, but fixed-rate portions
are subject to penalty.  In conjunction with the term bank loan, the Company
also maintains a $20.0 million one year unsecured revolving line of credit which
is renewable annually on April 30.  The interest rate on the line of credit is
the prime rate or 1% over one, two, or three-month LIBOR, at management's
discretion with interest payable at the end of the repricing period.  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 not to pledge any stock of the Bank or MAF
Developments for any purpose. At December 31, 1999, the Company was in
compliance with these covenants.

                                       80
<PAGE>

                      MAF Bancorp, Inc. and Subsidiaries
           Notes to Consolidated Financial Statements - (Continued)

  Scheduled principal repayments of the unsecured term bank loan are as follows
as of December 31, 1999  (in thousands):

        December 31, 2000                          $ 4,500
        December 31, 2001                            7,000
        December 31, 2002                            9,200
        December 31, 2003                            9,200
                                                   -------
                                                   $29,900
                                                   =======

  Other Borrowing.  The other borrowing of $6.0 million is an industrial revenue
bond obligation collateralizing a commercial office complex that the Bank
foreclosed on in 1998.  The borrowing is remarketed periodically by an
independent broker for a term determined by the owner of the property.  In  1999
and 1998, the borrowing was remarketed on a quarterly basis.  The borrowing is
assumable by any purchaser of the property.


  Interest expense on borrowed funds and subordinated capital notes is
summarized as follows for the periods indicated:

                                         Year Ended December 31,
                                         -----------------------
                                          1999     1998    1997
                                         -------  ------  ------
                                             (In thousands)

 FHLB of Chicago advances                $65,060  47,936  34,086
 Collateralized mortgage obligations           -     216   3,163
 Reverse repurchase agreements             1,055   1,936   4,642
 Unsecured term bank loan                  2,086   2,306   2,370
 Unsecured revolving line of credit          331       -      17
 Subordinated capital notes                    -   2,165   2,357
 Other borrowing                             204     228       -
                                         -------  ------  ------
                                         $68,736  54,787  46,635
                                         =======  ======  ======

14.  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, where
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:
<TABLE>
<CAPTION>
                                                          Year Ended December 31,
                                                     --------------------------------
                                                        1999       1998       1997
                                                     ----------  ---------  ---------
                                                            (In thousands)
<S>                                                  <C>         <C>        <C>
Balance at beginning of year                         $ 112,346      7,088      8,676
New forward commitments to deliver loans               310,634    542,807    104,229
Loans delivered to satisfy forward commitments        (402,891)  (437,549)  (105,817)
                                                     ---------   --------   --------
Balance at end of year                               $  20,089    112,346      7,088
                                                     =========   ========   ========
</TABLE>

                                       81
<PAGE>

                      MAF Bancorp, Inc. and Subsidiaries
           Notes to Consolidated Financial Statements - (Continued)

  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, 1999, 1998 and 1997, are $159,000, $(110,000), and $-0- of net
futures gains (losses), respectively, from hedging activities.  At December 31,
1999, the Bank had $12,000 of net deferred gains on futures contracts.  At
December 31, 1998, the Bank had $17,000 of net deferred gains on futures
contracts.

  The following is a summary of the notional amount of interest rate futures
contract activity for the periods indicated:
<TABLE>
<CAPTION>
                                                                        Year Ended December 31,
                                                                  ------------------------------------
                                                                     1999          1998         1997
                                                                  ----------     ---------    --------
                                                                               (In thousands)
<S>                                                               <C>            <C>          <C>
Balance at beginning of year                                       $  1,000             -        1,500
Interest rate futures contracts sold                                 73,700        59,700       33,700
Interest rate futures contracts closed                              (74,700)      (58,700)     (35,200)
                                                                   --------       -------      -------
Balance at end of year                                             $      -         1,000            -
                                                                   ========       =======      =======
</TABLE>

15.  Income Taxes

  Total income tax expense was allocated as follows for the periods indicated:
<TABLE>
<CAPTION>
                                                                        Year Ended December 31,
                                                                  ------------------------------------
                                                                     1999          1998         1997
                                                                  ----------     ---------    --------
                                                                               (In thousands)
<S>                                                               <C>            <C>          <C>
 Income from continuing operations                                  $31,210        23,793      22,707
 Extraordinary item                                                       -          (294)          -
 Stockholders' equity, for compensation
  expense recognized for tax purposes in excess
  of amounts for financial reporting purposes                        (1,008)         (152)        (60)
 Stockholders' equity, for change in unrealized
  gain (loss) on available for sale securities                       (2,680)         (734)        916
                                                                   --------        ------      ------
                                                                   $ 27,522        22,613      23,563
                                                                   ========        ======      ======
</TABLE>

  Retained earnings at December 31, 1999 include $59.4 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 $23.5 million.

  Income tax expense (benefit) attributable to income from continuing operations
is summarized below:

<TABLE>
<CAPTION>
                                                                        Year Ended December 31,
                                                                  ------------------------------------
                                                                     1999          1998         1997
                                                                  ----------     ---------    --------
                                                                               (In thousands)
<S>                                                               <C>            <C>          <C>
     Current:
       Federal                                                       $26,598       21,057      18,805
       State                                                           3,107        3,054       1,644
                                                                     -------       ------      ------
                                                                      29,705       24,111      20,449
     Deferred:
       Federal                                                         1,235         (222)      1,979
       State                                                             270          (96)        279
                                                                     -------       ------      ------
                                                                       1,505         (318)      2,258
                                                                     -------       ------      ------
     Total income tax expense attributed to
      income from continuing operations                              $31,210       23,793      22,707
                                                                     =======       ======      ======
</TABLE>

                                       82
<PAGE>

                      MAF Bancorp, Inc. and Subsidiaries
           Notes to Consolidated Financial Statements - (Continued)

  The reasons for the differences between the effective income tax rate
attributable to income from continuing operations and the corporate federal
income tax rate are summarized in the following table:
<TABLE>
<CAPTION>
                                                      Percentage of
                                              Income Before Income Taxes
                                              ---------------------------
                                                Year Ended December 31,
                                              ---------------------------
                                               1999       1998       1997
                                               ----       ----       ----
<S>                                            <C>        <C>        <C>
Federal income tax rate                        35.0%      35.0       35.0
Items affecting effective income tax rate:
 State income taxes, net of federal benefit     2.6        2.9        2.0
 Other items, net                               0.1        0.2        0.4
                                               ----       ----       ----
Effective income tax rate                      37.7%      38.1       37.4
                                               ====       ====       ====
</TABLE>

  The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at December 31,
1999 and 1998 are presented below:

<TABLE>
<CAPTION>
                                                                December 31,
                                                            -------------------
                                                              1999       1998
                                                            ---------  --------
                                                              (In thousands)
<S>                                                         <C>        <C>
Deferred tax assets:
 Loan origination fees                                      $    511       949
 Deferred compensation                                         4,511     4,887
 Book general loan loss reserves                               6,881     6,402
 Book versus tax basis of real estate held for sale              526       219
 Book versus tax basis of loans receivable                       186       892
 Book versus tax basis of securities                           2,459       192
 Book versus tax basis of deposits                               367     1,048
 Other                                                           786       605
                                                            --------   -------
  Total deferred tax assets                                   16,227    15,194
Deferred tax liabilities:
 Loan origination fees                                        (3,204)   (2,446)
 Excess of tax bad debt reserve over base year amount         (1,981)   (2,293)
 Book versus tax basis of real estate held for sale              (15)     (584)
 Book versus tax basis of land and fixed assets               (2,050)   (2,044)
 Book versus tax basis of capitalized servicing               (2,825)   (1,534)
 Book versus tax basis of intangible assets                   (2,453)   (2,940)
 Book versus tax basis of securities                          (1,018)   (1,374)
 Other                                                          (405)     (286)
                                                            --------   -------
  Total deferred tax liabilities                             (13,951)  (13,501)
                                                            --------   -------
  Net deferred tax asset                                    $  2,276     1,693
                                                            ========   =======
</TABLE>

  The Company believes that it is more likely than not that the net deferred tax
asset will be realized, based on historical taxable income levels and
anticipated future earnings and taxable income levels. The Company has reported
federal taxable income and pre-tax book income amounts totaling approximately
$132 million and $145 million over the past two years, respectively.

                                       83
<PAGE>

                      MAF Bancorp, Inc. and Subsidiaries
           Notes to Consolidated Financial Statements - (Continued)

16.  Extraordinary item

  During the year ended December 31, 1998, the Company called its $27.6
million of 8.32% Subordinated Capital Notes due September 30, 2005.  Under the
terms of the bond indenture, the call was made at par plus accrued interest, and
resulted in an extraordinary charge to income of $456,000, or $.02 per diluted
share, representing the after-tax impact of the remaining $750,000 of
unamortized transaction costs, net of income tax benefits of $294,000.

17.  Regulatory Capital

  The Bank is subject to regulatory capital requirements under the 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. Management believes, as of December 31, 1999, that
the Bank meets all capital adequacy requirements to which it is subject.

  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:
<TABLE>
<CAPTION>



                                    Actual                        For Capital Adequacy Purposes
                               ----------------  --------------------------------------------------------------------
                                Amount   Ratio               Amount                                 Ratio
                               --------  ------  ---------------------------------     ------------------------------
                                                          (Dollars in thousands)
<S>                            <C>       <C>     <C>                                   <C>
As of December 31, 1999:
 Tangible capital
  (to total assets)            $288,177   6.32%  greater than or equal to $ 68,391     greater than or equal to 1.50%
 Core capital
  (to total assets)            $288,177   6.32%  greater than or equal to $136,782     greater than or equal to 3.00%
 Total capital
  (to risk-weighted assets)    $305,453  12.32%  greater than or equal to $198,423     greater than or equal to 8.00%
 Core capital
  (to risk-weighted assets)    $288,177  11.62%      N/A

As of December 31, 1998:
 Tangible capital
  (to total assets)            $266,793   6.67%  greater than or equal to $ 60,009     greater than or equal to 1.50%
 Core capital
  (to total assets)            $266,793   6.67%  greater than or equal to $120,018     greater than or equal to 3.00%
 Total capital
  (to risk-weighted assets)    $283,563  13.42%  greater than or equal to $169,051     greater than or equal to 8.00%
 Core capital
  (to risk-weighted assets)    $266,793  12.63%      N/A
</TABLE>

<TABLE>
<CAPTION>
                                    To Be Well Capitalized Under Prompt Corrective Action Provisions
                                  --------------------------------------------------------------------
                                                Amount                              Ratio
                                  ---------------------------------     ------------------------------
                                                           (Dollars in thousands)
<S>                               <C>                                   <C>
As of December 31, 1999:
 Tangible capital
  (to total assets)                    N/A
 Core capital
  (to total assets)               greater than or equal to $227,970     greater than or equal to  5.00%
 Total capital
  (to risk-weighted assets)       greater than or equal to $248,029     greater than or equal to 10.00%
 Core capital
  (to risk-weighted assets)       greater than or equal to $148,817     greater than or equal to  6.00%

As of December 31, 1998:
 Tangible capital
  (to total assets)                   N/A
 Core capital
  (to total assets)               greater than or equal to $200,030     greater than or equal to  5.00%
 Total capital
  (to risk-weighted assets)       greater than or equal to $211,313     greater than or equal to 10.00%
 Core capital
  (to risk-weighted assets)       greater than or equal to $126,788     greater than or equal to  6.00%
</TABLE>

                                       84
<PAGE>

                      MAF Bancorp, Inc. and Subsidiaries
           Notes to Consolidated Financial Statements - (Continued)

  OTS regulations require that in meeting the tangible, core and risk-based
capital standards, institutions must generally deduct investments in and loans
to subsidiaries engaged in activities not permissible for a national bank.  For
the Bank, this includes its $7.9 million investment in Mid America Investments
and NW Financial at December 31, 1999.   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, 1999, $4.2 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, 1999 and 1998, 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.

18.  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, 1999, 1998 and 1997, total contributions to the ESOP were
$960,000, $800,000, and $750,000, respectively.  The ESOP purchased 42,308,
34,314, and 35,250 of the Company's shares for the years ended December 31,
1999, 1998 and 1997, respectively.

  Profit Sharing Plan/401(k) Plan. The Mid America Bank, fsb Profit
Sharing/401(k) Plan allows employees to make pre-tax contributions of up to 15%
of their compensation and after-tax contributions of up to 10% of compensation,
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 $960,000, $800,000, and $700,000 for the years
ended December 31, 1999, 1998 and 1997, respectively.

  Stock Option Plans.  The Company and its shareholders have adopted an
incentive stock option plan ("Incentive Plan") and a premium price stock option
plan ("Premium Plan") for the benefit of employees and directors of the Bank.

                                       85
<PAGE>

                      MAF Bancorp, Inc. and Subsidiaries
           Notes to Consolidated Financial Statements - (Continued)

  The number of shares of common stock authorized under the Incentive Plan is
2,227,791.  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.  A summary of the stock option activity and related information
in the Incentive Plan follows:
<TABLE>
<CAPTION>
                                              Year Ended December 31,
                          ----------------------------------------------------------------
                                   1999                  1998                 1997
                          --------------------  --------------------  --------------------
                                      Average               Average               Average
                                      Exercise              Exercise              Exercise
                            Shares     Price      Shares     Price      Shares     Price
                          ----------  --------  ----------  --------  ----------  --------
<S>                       <C>         <C>       <C>         <C>       <C>         <C>
Beginning of period       1,293,676     $ 7.72  1,195,402     $ 4.15  1,199,770     $ 3.24
Granted                     679,325      24.20    232,450      23.65     92,250      15.22
Exercised                  (384,264)      2.32   (131,176)      3.07    (96,618)      3.42
Cancelled                   (10,060)     25.11     (3,000)     23.46          -          -
                          ---------             ---------             ---------
End of period             1,578,677     $16.02  1,293,676     $ 7.72  1,195,402     $ 4.15
                          =========     ======  =========     ======  =========     ======
Options exercisable         878,889     $ 9.94  1,093,172     $ 4.95  1,132,670     $ 3.65
                          =========     ======  =========     ======  =========     ======
Fair value of options
 granted during period                  $ 9.88                $ 9.92                $ 6.33
                                        ======                ======                ======
</TABLE>

  At December 31, 1999, options for 23,368 shares were available for grant under
the Incentive Plan, which includes additions to the available shares of 53,030,
representing shares surrendered in connection with stock option exercises.
Cancelled shares also increase the number of shares available for grant under
the Incentive Plan.

  The number of shares of common stock authorized under the Premium Plan is
556,875. The option exercise price equals 133% of the fair market value of the
common stock on the date of grant with respect to executive officers, 110% with
respect to directors and 100% with respect to non-executive employees.  The
option term cannot exceed 10 years. A summary of the stock option activity and
related information in the Premium Plan follows:

<TABLE>
<CAPTION>
                                           Year Ended December 31,
                          ---------------------------------------------------------
                                1999                1998               1997
                          -----------------  ------------------  ------------------
                                   Average             Average             Average
                                   Exercise            Exercise            Exercise
                          Shares    Price     Shares    Price     Shares    Price
                          -------  --------  --------  --------  --------  --------
<S>                       <C>      <C>       <C>       <C>       <C>       <C>
Beginning of period       416,612    $16.54  383,536     $13.85  338,810     $12.87
Granted                   102,747     31.71   63,870      30.81   51,448      20.05
Exercised                       -         -  (30,794)     12.62   (6,722)     11.90
                          -------            -------             -------
End of period             519,359    $19.54  416,612     $16.54  383,536     $13.85
                          =======    ======  =======     ======  =======     ======
Options exercisable       519,359    $19.54  409,112     $16.58  332,459     $13.80
                          =======    ======  =======     ======  =======     ======
Fair value of options
 granted during period               $ 7.96              $ 8.07              $ 5.40
                                     ======              ======              ======
</TABLE>
  At December 31, 1999, no options were available for grant under the Premium
Plan.

  In conjunction with the Company's acquisitions, certain stock options owned by
individuals of the acquired institutions were carried over into stock options of
the Company based on the transactions' exchange ratios.  The values of these
stock options were included in the purchase price of the transactions as well as
in additional paid-in capital in the consolidated statements of financial
condition.

                                       86
<PAGE>

                      MAF Bancorp, Inc. and Subsidiaries
           Notes to Consolidated Financial Statements - (Continued)

  A summary of the activity in these carryover stock options is as follows:
<TABLE>
<CAPTION>

                                                          Year Ended December 31,
                               ---------------------------------------------------------------------------
                                       1999                       1998                       1997
                               ---------------------      ---------------------      ---------------------
                                            Average                     Average                   Average
                                            Exercise                    Exercise                  Exercise
                                Shares       Price         Shares        Price        Shares       Price
                               --------     --------      --------      --------     --------     --------
<S>                            <C>          <C>           <C>           <C>          <C>          <C>
Beginning of period             282,603      $ 4.80         15,802      $ 2.13         29,253     $   2.13
Carryover options issued              -           -        268,301        4.94              -            -
Exercised                      (141,537)       5.09         (1,500)       2.13        (13,451)        2.13
                              ---------                    -------                   --------
End of period                   141,066      $ 4.51        282,603      $ 4.80         15,802     $   2.13
                              =========      ======        =======      ======       ========     ========
Options exercisable             141,066      $ 4.51        282,603      $ 4.80         15,802     $   2.13
                              =========      ======        =======      ======       ========     ========

  The following table summarizes information about stock options outstanding at
December 31, 1999:

                                 Options Outstanding                        Options Exercisable
                   -------------------------------------------------   -----------------------------
                                 Weighted-Average   Weighted-Average                Weighted-Average
   Range of          Options        Remaining           Exercise         Options        Exercise
Exercise Prices    Outstanding     Life (yrs.)           Price         Exercisable       Price
---------------    -----------   ----------------   ----------------   -----------  ----------------
$ 2.13 to $ 4.78      634,235          1.07              $ 3.10          634,235         $ 3.10
  6.13 to  19.68      506,088          5.91               13.01          499,124          12.98
 20.24 to  35.99    1,098,779          9.07               25.05          405,955          27.27
                    ---------                                          ---------
                    2,239,102          6.09              $16.11        1,539,314         $12.68
                    =========          ====              ======        =========         ======
</TABLE>

  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 its Incentive
and Premium stock option plans. Had compensation cost for the Company's stock
option plans been determined based on the fair value at the grant dates for
awards under those plans consistent with the method of SFAS No. 123, "Accounting
for Stock-Based Compensation," the Company's net income and earnings per share
would have been reduced to the pro forma amounts indicated in the table below:
<TABLE>
<CAPTION>
                                                                      Year Ended December 31,
                                                                -----------------------------------
                                                                  1999          1998          1997
                                                                --------      ---------     --------
                                                            (Dollars in thousands, except per share data)
<S>                                 <C>                         <C>           <C>           <C>
Net income                          As reported                 $51,545        38,246         37,948
                                    Pro-forma                    48,881        36,627         37,041

Basic earnings per share            As reported                    2.13          1.70           1.64
                                    Pro-forma                      2.02          1.63           1.60

Diluted earnings per share          As reported                    2.07          1.65           1.59
                                    Pro-forma                      1.97          1.58           1.55
                                                                =======        ======          ======
</TABLE>

  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, 1999, 1998, and 1997, respectively:
dividend yield of 1.37%, .84%, and 1.05%; expected volatility of 26.7%, 21.1%,
and 17.9%; risk-free interest rates of 5.51%, 5.80% and 6.72%; expected life of
10 years for each period.

                                       87
<PAGE>

                      MAF Bancorp, Inc. and Subsidiaries
           Notes to Consolidated Financial Statements - (Continued)

  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.  The Company's obligation to
issue the deferred MAF Bancorp shares in the future is recorded in stockholders'
equity as the product of the number of shares to be issued multiplied by the
exercise price of the related stock options.  Dividends paid on MAF Bancorp
shares deferred through the Gain Deferral Plan are recorded as compensation
expense.

  Supplemental Executive Retirement Plan. 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 service after
1994.  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
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 following table sets forth the change in benefit obligations and the
related assumptions for the SERP for the periods indicated:
<TABLE>
<CAPTION>
                                                         Year Ended December 31,
                                                        --------------------------
                                                         1999       1998     1997
                                                        ------    -------  -------
                                                              (In thousands)
<S>                                                     <C>       <C>      <C>
Projected benefit obligation - beginning of period      $ 1,298      850      499
Service cost                                                386      283      241
Interest cost                                                96       63       40
Actuarial (gains) losses                                   (223)     107       75
Benefits paid                                                (5)      (5)      (5)
                                                        -------   ------     ----
Projected benefit obligation - end of period            $ 1,552    1,298      850
                                                        =======   ======     ====
Funded status                                            (1,552)  (1,298)    (850)
Unrecognized (gain) loss                                    (42)     191       84
                                                        -------   ------     ----
Prepaid (accrued) benefit cost                          $(1,594)  (1,107)    (766)
                                                        =======   ======     ====

Weighted average assumptions at period end:
Discount rate                                              8.00%    7.00     7.50
Rate of compensation increase                              5.00     5.00     5.00
                                                        =======   ======     ====
</TABLE>

                                       88
<PAGE>

                      MAF Bancorp, Inc. and Subsidiaries
           Notes to Consolidated Financial Statements - (Continued)

  The following sets forth the components of the net periodic benefit cost
related to the SERP for the period indicated:
 <TABLE>
 <CAPTION>

                                      Year Ended December 31,
                                      -----------------------
                                      1999      1998     1997
                                      ----      ----     ----
                                           (In thousands)
<S>                                   <C>       <C>      <C>
Service cost                          $386       283      241
Interest cost                           96        63       40
Unrecognized net  (gain) loss           10         -        -
                                      ----       ---      ---
Net periodic benefit cost             $492       346      281
                                      ====       ===      ===
</TABLE>

19.  Financial Instruments with Off-Balance Sheet Risk and Concentrations of
     Credit Risk

  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.

  Commitments to originate and purchase loans of $318.3 million at December 31,
1999, represent amounts which the Bank plans to fund within the normal
commitment period of 30 to 90 days of which $115.6 million were fixed-rate, with
rates ranging from 6.75% to 8.50%, and $202.7 million were adjustable-rate
loans. 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, at the time of application, a fee to fix the
interest rate, or by requiring the interest rate to float at market rates until
shortly before closing.  At December 31, 1999, forward commitments to sell
mortgage loans for future delivery were $20.1 million, of which $12.6 million
are related to loans held for sale, and $7.5 million are unfunded as of December
31, 1999.

  Additionally, the Bank has approved, but unused, home equity lines of credit
of $108.4 million at December 31, 1999. Approval of equity lines is based on
underwriting standards that generally do not allow total borrowings, including
the equity line of credit to exceed 80% 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
homes current appraised value, less existing liens, at a commensurate higher
interest rate.

  At December 31, 1999, the Bank had standby letters of credit totaling $15.7
million.  Two of these standby letters of credit total $13.3 million, and
enhance a developer's industrial revenue bond financings of commercial real
estate in the Bank's market. One of these, in the amount of $6.5 million, is
related to a foreclosed real estate parcel.  At December 31, 1999, the Bank had
pledged mortgage-backed securities and investment securities with an aggregate
carrying value and market value of $21.5 million and $23.2 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, as performance under the letters of credit creates a first position
lien in favor of the Bank.  Additionally, at

                                       89
<PAGE>

                      MAF Bancorp, Inc. and Subsidiaries
           Notes to Consolidated Financial Statements - (Continued)

December 31, 1999, the Company had standby letters of credit totaling $10.5
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 accounting loss should the contract be fully drawn upon, the customer
default, and the value of any existing collateral become worthless.

  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, 1999 and
1998, loans representing 94.6% and 92.6%, respectively, of the Bank's total
loans receivable were located in the State of Illinois.

20.  Parent Company Only Financial Information

  The information as of December 31, 1999, and 1998, and for the years ended
December 31, 1999, 1998, and 1997, presented below should be read in conjunction
with the other Notes to Consolidated Financial Statements.

                                                      December 31,
                                                   ------------------
Condensed Statements of Financial Condition          1999      1998
                                                   --------   -------
                                                     (In thousands)
Assets:
  Cash and cash equivalents                        $  4,137    13,762
  Investment securities                               8,205    12,462
  Equity in net assets of subsidiaries              365,056   350,056
  Other assets                                       11,180    16,876
                                                   --------   -------
                                                   $388,578   393,156
                                                   ========   =======
Liabilities and Stockholders' Equity:
 Liabilities:
  Unsecured term bank loan                           29,900    33,000
  Accrued expenses                                    5,757    15,160
                                                   --------   -------
  Total liabilities                                  35,657    48,160
                                                   --------   -------
 Stockholders' equity:
  Common stock                                          254       254
  Additional paid-in capital                        194,874   191,473
  Retained earnings, substantially restricted       198,156   159,935
  Stock in Gain Deferral Plan                           511         -
  Accumulated other comprehensive income (loss)      (3,675)      425
  Treasury stock                                    (37,199)   (7,091)
                                                   --------   -------
  Total stockholders' equity                        352,921   344,996
                                                   --------   -------
                                                   $388,578   393,156
                                                   ========   =======

                                       90
<PAGE>

                      MAF Bancorp, Inc. and Subsidiaries
           Notes to Consolidated Financial Statements - (Continued)


                                                Year Ended December 31,
                                           -----------------------------------
Condensed Statements of Operations           1999          1998          1997
                                           --------      --------      -------
                                                       (In thousands)

Dividend income from the Bank              $ 35,000        50,000       34,500
Interest income                               1,360         1,874        1,795
Interest expense                              2,436         4,493        4,766
                                           --------       -------      -------
 Net interest and dividend income            33,924        47,381       31,529
Gain on sale of investments, net              1,330           740          404
Non-interest expense                          1,872         1,917        1,931
Extraordinary item, net of tax benefit            -          (456)           -
                                           --------       -------      -------
 Net income before income tax benefit
  and other adjustments                      33,382        45,748       30,002
Income tax benefit                             (743)       (1,615)      (1,872)
                                           --------       -------      -------
 Net income before other adjustments         34,125        47,363       31,874
Dividend income in excess of equity in
 subsidiaries                                     -       (10,865)           -
Equity in undistributed earnings of
 subsidiaries                                17,420         1,748        6,074
                                           --------       -------      -------
 Net income                                $ 51,545        38,246       37,948
                                           ========       =======      =======



                                                Year Ended December 31,
                                           -----------------------------------
Condensed Statements of Cash Flows           1999          1998          1997
                                           --------      --------      -------
                                                       (In thousands)
Operating activities:
 Net income                                $ 51,545       38,246        37,948
 Equity in undistributed earnings of
  subsidiaries                              (17,420)      (1,748)       (6,074)
 Dividend income in excess of equity
  in subsidiaries                                 -       10,865             -
 Extraordinary item, net of tax benefit           -          456             -
 Gain on sale of investment securities       (1,330)        (740)         (404)
 Amortization of premiums and discounts           -           71            78
 Net decrease (increase) in other
  assets and liabilities, net of effects
  from acquisitions                          (1,816)      13,946        (6,052)
                                           --------      -------       -------
  Net cash provided by operating
   activities                                30,979       61,096        25,496
Investing activities:
 Proceeds from sale of investment
  securities                                  7,036       12,146         3,073
 Proceeds from maturity of investment
  securities                                      -          500           559
 Purchases of investment securities          (2,676)     (13,769)       (6,157)
 Payment for acquisitions, net of cash
  acquired                                        -      (76,959)            -
                                           --------      -------       -------
  Net cash provided by (used in)
   investing activities                       4,360      (78,082)       (2,525)
Financing activities:
 Proceeds from issuance of common stock           -       72,713             -
 Proceeds from exercise of stock options        893          324           178
 Proceeds from borrowings                    21,000            -             -
 Repayment of borrowings                    (24,100)     (29,100)         (500)
 Purchases of treasury stock                (35,147)     (22,924)      (22,658)
 Cash dividends paid                         (7,610)      (5,275)       (4,048)
                                           --------      -------       -------
  Net cash provided by (used in)
   financing activities                     (44,964)      15,738       (27,028)
                                           --------      -------       -------
  Decrease in cash and cash equivalents      (9,625)      (1,248)       (4,057)
Cash and cash equivalents at beginning
 of year                                     13,762       15,010        19,067
                                           --------      -------       -------
Cash and cash equivalents at end of
 year                                      $  4,137       13,762        15,010
                                           ========      =======       =======

                                       91
<PAGE>

                      MAF Bancorp, Inc. and Subsidiaries
           Notes to Consolidated Financial Statements - (Continued)

21. 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 developing raw land for
residential use and sale to builders.  Selected segment information is included
in the table below:
<TABLE>
<CAPTION>

                                                         Year Ended December 31, 1999
                                            ----------------------------------------------------------
                                              Retail          Land                       Consolidated
                                              Banking      Development    Eliminations       Total
                                            -----------  ---------------  -------------  -------------
                                                                  (In thousands)
<S>                                         <C>          <C>              <C>            <C>
Interest income                             $  286,457                -         (1,365)       285,092
Interest expense                               168,401            1,365         (1,365)       168,401
                                            ----------           ------         ------   ------------
  Net interest income                          118,056           (1,365)             -        116,691
Provision for loan losses                        1,100                -              -          1,100
                                            ----------           ------         ------   ------------
  Net interest income after provision          116,956           (1,365)             -        115,591
Non-interest income                             25,214            9,630              -         34,844
Non-interest expense                            66,885              795              -         67,680
                                            ----------           ------         ------   ------------
Income before income taxes                      75,285            7,470              -         82,755
Income tax expense                              28,247            2,963              -         31,210
                                            ----------           ------         ------   ------------
Net income                                  $   47,038            4,507              -         51,545
                                            ==========           ======         ======   ============
Average assets                              $4,259,190           24,501              -      4,283,691
                                            ==========           ======         ======   ============
</TABLE>

<TABLE>
<CAPTION>

                                                         Year Ended December 31, 1998
                                            ----------------------------------------------------------
                                              Retail          Land                       Consolidated
                                              Banking      Development    Eliminations       Total
                                            -----------  ---------------  -------------  -------------
                                                                  (In thousands)
<S>                                         <C>          <C>              <C>            <C>

Interest income                             $  249,142                -         (2,046)       247,096
Interest expense                               150,575            2,046         (2,046)       150,575
                                            ----------           ------         ------   ------------
  Net interest income                           98,567           (2,046)             -         96,521
Provision for loan losses                          800                -              -            800
                                            ----------           ------         ------   ------------
  Net interest income after provision           97,767           (2,046)             -         95,721
Non-interest income                             21,200            4,517              -         25,717
Non-interest expense                            58,386              557              -         58,943
                                            ----------           ------         ------   ------------
Income before income taxes                      60,581            1,914              -         62,495
Income tax expense                              23,034              759              -         23,793
Extraordinary item, net of tax                    (456)               -              -           (456)
                                            ----------           ------         ------   ------------
Net income                                  $   37,091            1,155              -         38,246
                                            ==========           ======         ======   ============
Average assets                              $3,541,341           28,174              -      3,569,515
                                            ==========           ======         ======   ============
</TABLE>

                                       92
<PAGE>

                      MAF Bancorp, Inc. and Subsidiaries
           Notes to Consolidated Financial Statements - (Continued)

<TABLE>
<CAPTION>
                                                       Year Ended December 31, 1997
                                            -----------------------------------------------------
                                              Retail        Land                     Consolidated
                                             Banking    Development   Eliminations      Total
                                            ----------  ------------  -------------  ------------
                                                              (In thousands)
<S>                                         <C>         <C>           <C>            <C>
Interest income                             $  242,013            -         (3,098)       238,915
Interest expense                               145,216        3,098         (3,098)       145,216
                                            ----------       ------         ------   ------------
  Net interest income                           96,797       (3,098)             -         93,699
Provision for loan losses                        1,150            -              -          1,150
                                            ----------       ------         ------   ------------
  Net interest income after provision           95,647       (3,098)             -         92,549
Non-interest income                             15,841        6,876              -         22,717
Non-interest expense                            54,106          505              -         54,611
                                            ----------       ------         ------   ------------
Income before income taxes                      57,382        3,273              -         60,655
Income tax expense                              21,409        1,298              -         22,707
                                            ----------       ------         ------   ------------
Net income                                  $   35,973        1,975              -         37,948
                                            ==========       ======         ======   ============
Average assets                              $3,281,685       34,979              -      3,316,664
                                            ==========       ======         ======   ============
</TABLE>

22.  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 fair values.

  The estimated fair values of the Company's financial instruments as of
December 31, 1999 and 1998 are set forth in the following table below.
<TABLE>
<CAPTION>

                                               December 31, 1999            December 31, 1998
                                            -----------------------       ----------------------
                                             Carrying        Fair          Carrying       Fair
                                              Amount         Value          Amount        Value
                                            ----------      -------       --------     ---------
                                                                (In thousands)
<S>                                         <C>             <C>            <C>         <C>
Financial assets:
  Cash and cash equivalents                $  158,040       158,040        157,699       157,699
  Investment securities                       281,129       281,451        260,945       262,198
  Mortgage-backed securities                  133,954       131,798        183,603       182,635
  Loans receivable                          3,884,569     3,821,782      3,319,076     3,392,834
  Interest receivable                          23,740        23,740         21,545        21,545
                                           ----------     ---------      ---------     ---------
    Total financial assets                 $4,481,432     4,416,811      3,942,868     4,016,911
                                           ==========     =========      =========     =========
Financial liabilities:
  Non-maturity deposits                    $1,228,941     1,228,941      1,199,549     1,199,549
  Deposits with stated maturities           1,470,301     1,470,134      1,457,323     1,465,778
  Borrowed funds                            1,526,363     1,500,602      1,034,500     1,063,521
  Interest payable                              7,653         7,653          4,792         4,792
                                           ----------     ---------      ---------     ---------
   Total financial liabilities             $4,233,258     4,207,330      3,696,164     3,733,640
                                           ==========     =========      =========     =========
</TABLE>

                                       93
<PAGE>

                      MAF Bancorp, Inc. and Subsidiaries
           Notes to Consolidated Financial Statements - (Continued)

  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 the committed rates. As of December 31, 1999 and 1998, the fair
value of the Bank's mortgage loan commitments of $318.3 million and $332.0
million, respectively, was $(2.3) million and $471,000, 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, 1999 and 1998.

  Mortgage servicing rights.  The fair value of mortgage servicing rights is
estimated based on the contractual terms of the servicing agreements and the
underlying mortgage loans, the current levels of interest rates, and assumed
prepayment rates on the underlying mortgage loans.  As of December 31, 1999 and
1998, the estimated fair value of the Bank's purchased mortgage servicing rights
of $7.3 million and $4.2 million, was $7.3 million, and $4.2 million,
respectively.  In addition, the estimated value of the mortgage servicing rights
related to the remaining loans serviced for others totaling $380.5 million and
$546.0 million as of December 31, 1999 and 1998, respectively, for which there
is no recorded balance, was $3.7 million and $4.7 million, respectively.

                                       94
<PAGE>

                      MAF Bancorp, Inc. and Subsidiaries
              Notes to Consolidated Financial Statements - (End)

23.  Selected Quarterly Financial Data (Unaudited)

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

<TABLE>
<CAPTION>
                                                                      Year Ended December 31, 1999
                                                          ----------------------------------------------------
                                                           First         Second          Third         Fourth
                                                          Quarter        Quarter        Quarter        Quarter
                                                          -------        -------        -------        -------
                                                            (Dollars in thousands, except per share amounts)
<S>                                                       <C>            <C>            <C>            <C>
Interest income                                           $67,398         68,811         72,243         76,640
Interest expense                                           39,035         39,852         42,798         46,716
                                                          -------         ------         ------         ------
 Net interest income                                       28,363         28,959         29,445         29,924
Provision for loan losses                                     250            250            300            300
                                                          -------         ------         ------         ------
 Net interest income after provision for loan losses       28,113         28,709         29,145         29,624
Net gain on sale of assets                                  2,010            522            717          1,053
Income from real estate operations                            621          3,917          2,478          2,614
Other income                                                4,725          5,282          5,424          5,481
Non-interest expense                                       16,180         16,524         17,217         17,759
                                                          -------         ------         ------         ------
 Income before income taxes                                19,289         21,906         20,547         21,013
Income tax expense                                          7,610          8,667          7,671          7,262
                                                          -------         ------         ------         ------
 Net income                                               $11,679         13,239         12,876         13,751
                                                          =======         ======         ======         ======
Diluted earnings per share                                $   .46            .53            .52            .56
                                                          =======         ======         ======         ======
Cash dividends declared per share                         $   .07            .09            .09            .09
                                                          =======         ======         ======         ======
Stock price information:
 High                                                     $ 27.50          25.13          24.31          23.69
 Low                                                        21.75          21.50          18.88          19.88
 Close                                                      22.25          24.25          19.88          20.94
</TABLE>

<TABLE>
<CAPTION>
                                                                      Year Ended December 31, 1998
                                                          ----------------------------------------------------
                                                           First         Second          Third         Fourth
                                                          Quarter        Quarter        Quarter        Quarter
                                                          -------        -------        -------        -------
                                                            (Dollars in thousands, except per share amounts)
<S>                                                       <C>            <C>            <C>            <C>
Interest income                                           $61,288         61,813         62,114         61,881
Interest expense                                           37,295         37,605         37,968         37,707
                                                          -------         ------         ------         ------
 Net interest income                                       23,993         24,208         24,146         24,174
Provision for loan losses                                     200            200            200            200
                                                          -------         ------         ------         ------
 Net interest income after provision for loan losses       23,793         24,008         23,946         23,974
Net gain on sale of assets                                    839          1,021          1,167          1,224
Income from real estate operations                            801          1,298          1,755            663
Other income                                                3,806          4,538          4,073          4,532
Non-interest expense                                       14,417         14,886         14,952         14,688
                                                          -------         ------         ------         ------
 Income before income taxes                                14,822         15,979         15,989         15,705
Income tax expense                                          5,655          6,199          6,128          5,811
Extraordinary item, net of tax                                  -              -              -           (456)
                                                          -------         ------         ------         ------
 Net income                                               $ 9,167          9,780          9,861          9,438
                                                          =======         ======         ======         ======
Diluted earnings per share before extraordinary item      $   .39            .42            .42            .43
Extraordinary item, net of tax                                  -              -              -           (.02)
                                                          -------         ------         ------         ------
Diluted earnings per share                                    .39            .42            .42            .41
                                                          =======         ======         ======         ======
Cash dividends declared per share                         $  .047            .07            .07            .07
                                                          =======         ======         ======         ======
Stock price information:
 High                                                     $ 26.33          29.25          25.00          26.94
 Low                                                        21.67          23.88          18.75          19.13
 Close                                                      25.38          24.25          23.50          26.50
                                                          =======         ======         ======         ======
</TABLE>

                                       95
<PAGE>

                                                                    EXHIBIT 23.1

                          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, 1999 and
1998, 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, 1999.  These consolidated financial statements are the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.

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

  In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of MAF Bancorp,
Inc. and subsidiaries as of December 31, 1999 and 1998, and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 1999, in conformity with generally accepted accounting
principles.



                                                   KPMG LLP


Chicago, Illinois
January 26, 2000

<PAGE>

Item 9.  Changes in and Disagreements With Accountants on Accounting and
         Financial Disclosures

  None.


                                   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 heading "Election of Directors" and the
information included therein is incorporated herein by reference. Information
regarding the executive officers of the registrant and the Bank is included in
"Part I.  Business."

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," "Executive Compensation - Summary Compensation Table,"
"Employment and Special Termination Agreements," "Supplemental Executive
Retirement Plan," "Option Plans," and "Long Term Incentive Plan," 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 registrant'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.

Item 13.  Certain Relationships and Related Transactions

  Information regarding certain relationships and related transactions is
included in the registrant's proxy statement under the heading "Transactions
with Certain Related Persons," and the information included therein is
incorporated herein by reference.

                                    PART IV

Item 14.  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, 1999
          and 1998.

          Consolidated Statements of Operations for the years ended December 31,
          1999, 1998 and 1997.

          Consolidated Statements of Changes in Stockholders' Equity for the
          years ended December 31, 1999, 1998 and 1997.

          Consolidated Statements of Cash Flows for the years ended December 31,
          1999, 1998 and 1997.

<PAGE>

          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. 3.  Certificate of Incorporation and By-laws.

          (i)   Certificate of Incorporation, as amended.

          (ii)  By-laws of Registrant, as amended. (Incorporated herein by
                reference to Exhibit No. 3 to Registrant's June 30, 1990
                Form 10-K).

          Exhibit No. 10.  Material Contracts


          (i)     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).*

          (ii)    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).*

          (iii)   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).*

          (iv)    Credit Agreement dated as of May 22, 1996, as amended through
                  April 3, 1998, between MAF Bancorp, Inc. and Harris Trust and
                  Savings Bank. (Incorporated herein by reference to Exhibit No.
                  10 to Registrant's December 31, 1998 Form 10-K).

          (v)     Amendment dated April 19, 1999, of the Credit Agreement dated
                  as of May 22, 1996, as amended, between MAF Bancorp, Inc. and
                  Harris Trust and Savings Bank.

          (vi)    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).*

          (vii)   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).*

          (viii)  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).*

<PAGE>

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

          (x)     MAF Bancorp, Inc. Shareholder Value Long-Term Incentive Plan,
                  as amended.*

          (xi)    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).*

          (xii)   Form of Employment Agreement, as amended, between MAF Bancorp,
                  Inc. and Allen Koranda, Kenneth Koranda and Jerry Weberling.*

          (xiii)  Form of Employment Agreement, as amended, between Mid America
                  Bank, fsb and Allen Koranda, Kenneth Koranda and Jerry
                  Weberling.*

          (xiv)   Employment Agreement, as amended, between David C. Burba and
                  MAF Bancorp, Inc.*

          (xv)    Form of Special Termination Agreement, as amended, between MAF
                  Bancorp, Inc., and Kenneth Rusdal and various officers.*

          (xvi)   Form of Special Termination Agreement, as amended, between Mid
                  America Bank, fsb, and Kenneth Rusdal and various officers.*

          (xvii)  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). *

          (xviii) Form of Agreement Regarding Post-Employment Restrictive
                  Covenants between MAF Bancorp, Inc., Mid America Bank, fsb and
                  Richard A. Brechlin and Gregg P. Goossens. (Incorporated
                  herein by reference to Exhibit No. 10 to Registrant's
                  December 31, 1998 Form 10-K).

          (xix)   N.S. Bancorp, Inc. 1990 Incentive Stock Option Plan, as
                  amended (Incorporated by reference to Registrant's Form S-8
                  Registration Statement No. 333-06593).*

          (xx)    Westco Bancorp, Inc. 1992 Incentive Stock Option Plan, as
                  amended (Incorporated by reference to the Post-Effective
                  Amendment No. 1 to Form S-8 Registration Statement filed by
                  Westco Bancorp, Inc. with the Commission on March 17, 1995,
                  Registration Statement No. 33-54764 and to Exhibit 99.2 to the
                  Registrant's Post-Effective Amendment No. 1 on Form S-8 to
                  Form S-4, Registration Statement No. 333-66693).*

          (xxi)   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).*

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

<PAGE>

          Exhibit No. 11.  Statement re: Computation of Per Share Earnings for
                           the periods indicated:
<TABLE>
<CAPTION>


                                                               Year Ended December 31,
                                                        -----------------------------------
                                                           1999         1998        1997
                                                        -----------  ----------  ----------
          <S>                                           <C>          <C>         <C>

          Net income                                    $51,545,000  38,246,000  37,948,000
                                                        ===========  ==========  ==========

          Weighted average common shares outstanding     24,253,946  22,433,184  23,131,729
                                                        ===========  ==========  ==========

          Basic earnings per share                      $      2.13        1.70        1.64
                                                        ===========  ==========  ==========


          Weighted average common shares outstanding     24,253,946  22,433,184  23,131,729

          Common stock equivalents due to dilutive
          effect on stock options                           676,667     764,978     766,525
                                                        -----------  ----------  ----------

          Total weighted average common shares
          and equivalents outstanding for
          diluted computation                            24,930,613  23,198,162  23,898,254
                                                        ===========  ==========  ==========

          Diluted earnings per share                    $      2.07        1.65        1.59
                                                        ===========  ==========  ==========
</TABLE>
          Exhibit No. 12.  Statements re: Computation of ratio of earnings to
                           fixed charges.

          Exhibit No. 21.  Subsidiaries of the Registrant

            A list of the Company's and Mid America Bank's subsidiaries is
            included as an exhibit to this report.


          Exhibit No. 23.  Consent of KPMG LLP

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

          Exhibit No. 27.  Financial Data Schedule

     (b)  Reports on Form 8-K

          On October 27, 1999, MAF Bancorp, Inc. filed the announcement of its
          1999 third quarter earnings results.

<PAGE>

                                   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. Koranda
                                           -------------------------
                                               Allen H. Koranda
                                           Chairman of the Board and
                                            Chief Executive Officer

                                                 March 1, 2000
                                           -------------------------
                                                     (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 1, 2000
   ------------------------------                      -----------------
         Allen H. Koranda                                    (Date)
     Chairman of the Board and
      Chief Executive Officer
    (Principal Executive Officer)


By:   /s/ Jerry A. Weberling                             March 1, 2000
   ------------------------------                      ------------------
        Jerry A. Weberling                                   (Date)
    Executive Vice President and
 Chief Financial Officer and Director
   (Principal Financial Officer)


By:    /s/ Gerard J. Buccino                             March 1, 2000
   ------------------------------                      ------------------
         Gerard J. Buccino                                   (Date)
      Senior Vice President
         and Controller
   (Principal Accounting Officer)

<PAGE>

By:    /s/ Robert Bowles, M.D.                           March 1, 2000
   ------------------------------                      ------------------
        Robert Bowles, M.D.                                  (Date)
            Director


By:     /s/ David C. Burba                               March 1, 2000
   ------------------------------                      ------------------
         David C. Burba                                      (Date)
            Director


By:       /s/ Terry Ekl                                  March 1, 2000
   ------------------------------                      ------------------
            Terry Ekl                                        (Date)
            Director


By:     /s/ Joe F. Hanauer                               March 1, 2000
   ------------------------------                      ------------------
          Joe F. Hanauer                                     (Date)
             Director


By:    /s/ Kenneth Koranda                               March 1, 2000
   ------------------------------                      ------------------
         Kenneth Koranda                                     (Date)
            Director


By:    /s/ Henry Smogolski                               March 1, 2000
   ------------------------------                      -------------------
         Henry Smogolski                                     (Date)
            Director


By:    /s/ F. William Trescott                           March 1, 2000
   ------------------------------                      -------------------
        F. William Trescott                                  (Date)
             Director


By:      /s/ Lois B. Vasto                               March 1, 2000
   ------------------------------                      -------------------
           Lois B. Vasto                                     (Date)
             Director


By:     /s/ Andrew J. Zych                               March 1, 2000
   ------------------------------                      -------------------
         Andrew J. Zych                                      (Date)
            Director

<PAGE>

                                 EXHIBIT INDEX

Exhibit 3 (i)    Certificate of Incorporation, as amended.

Exhibit 10(v)    Amendment dated April 19, 1999, of the Credit Agreement dated
                 as of May 22, 1996, as amended, between MAF Bancorp, Inc. and
                 Harris Trust and Savings Bank.

Exhibit 10(x)    MAF Bancorp, Inc. Shareholder Value Long-Term Incentive Plan,
                 as amended.

Exhibit 10(xii)  Form of Employment Agreement, as amended, between MAF Bancorp,
                 Inc. and Allen Koranda, Kenneth Koranda and Jerry Weberling.

Exhibit 10(xiii) Form of Employment Agreement, as amended, between Mid America
                 Bank, fsb and Allen Koranda, Kenneth Koranda and Jerry
                 Weberling.

Exhibit 10(xiv)  Employment Agreement, as amended, between David C. Burba and
                 MAF Bancorp, Inc.

Exhibit 10(xv)   Form of Special Termination Agreement, as amended, between MAF
                 Bancorp, Inc., and Kenneth Rusdal and various officers.

Exhibit 10(xvi)  Form of Special Termination Agreement, as amended, between Mid
                 America Bank, fsb, and Kenneth Rusdal and various officers.

Exhibit No. 11   Statement re: Computation of Per Share Earnings for the years
                 ended December 31, 1999, 1998 and 1997.

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. 27   Financial Data Schedule