<PAGE>
 
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20552
                                  FORM 10-KSB

                ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF
                      THE SECURITIES EXCHANGE ACT OF 1934
MARK ONE

[X]    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE 
       ACT OF 1934
       For the Fiscal Year Ended June 30, 1997
                                         

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

For the transition period from            to          .
                               -----------  -----------

                        Commission File Number: 0-21347

                       ILLINOIS COMMUNITY BANCORP, INC.
            ------------------------------------------------------
            (Exact name of registrant as specified in its charter)

                 Illinois                                   37-1361560
      --------------------------------                  -------------------
      (State or other jurisdiction of                   (I.R.S. Employer
      incorporation or organization)                    Identification No.)

    210 E. Fayette Avenue, Effingham, Illinois               62401-3613
    ------------------------------------------               ----------  
     (Address of principal executive offices)                 Zip Code

              Registrant's telephone number, including area code:
                                (217) 347-7127
                                --------------

          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 $1.00 per share
                    ---------------------------------------
                                (Title of Class)

      Indicate by check mark whether the registrant (l) 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
          -----    -----      

      Transitional small business disclosure format (check one): YES  X   NO
                                                                    ----    ----

      Indicate by check mark if disclosure of delinquent filers pursuant to Item
      405 of Regulation S-B is not contained herein.  [X]

      State issuer's revenues for its most recent fiscal year (year ended June
      30, 1997): $3.8 million.

The registrant's voting stock is listed on the National Daily Quotation System
"Pink Sheets" published by the National Quotation Bureau, Inc.  The aggregate
market value of the voting stock held by nonaffiliates of the registrant, based
on the $13.75 per share closing sales price of the registrant's common stock as
quoted on the "Pink Sheets" on September 15, 1997, was $5,579,654.  For purposes
of this calculation, it is assumed that directors and officers of the registrant
are affiliates.  As of September 15, 1997, the registrant had 502,550 shares of
common stock outstanding, of which 96,757 were held by affiliates.

                      DOCUMENTS INCORPORATED BY REFERENCE

      1.  Portions of Annual Report to Stockholders for the Fiscal Year Ended
          June 30, 1997.  (Parts I, II and IV)

      2.  Portions of Proxy Statement for the 1997 Annual Meeting of
          Stockholders.  (Part III)
 
<PAGE>
 
                                    PART I

ITEM 1.  DESCRIPTION OF BUSINESS
--------------------------------

GENERAL

        The Company. Illinois Community Bancorp, Inc. (the "Company"), an
Illinois corporation, was organized by Illinois Guarantee Savings Bank, FSB
("Illinois Guarantee") to be a savings institution holding company. The Company
was organized at the direction of the Bank in June 1996 to acquire all of the
capital stock of the Bank upon the consummation of the reorganization of the
Bank into the holding company form of ownership, (the "Reorganization") which
was completed on September 27, 1996, and the Company's Common Stock became
registered under the Securities Exchange Act of 1934 on September 27, 1996.
After the reorganization the Company invested in two newly formed corporations.
These corporations are Illinois Leasing Corporation (ILC) and Illinois Financial
Corporation (IFC). Illinois Leasing Corporation was formed to provide leasing
services to the Bank's market area and Illinois Financial Corporation will
provide financial services in the future. The Company has no significant assets
other than the corporate stock of the Bank, ILC, IFC and $100,000 retained by
the Company after the Reorganization. For that reason, substantially all of the
discussion in this Form 10-KSB relates to the operations of the Bank and its
subsidiary.

        The executive offices of the Company are located at 210 E. Fayette
Avenue, Effingham, Illinois 62401-3613 and the telephone number is (217) 347-
7127.

        The Bank. Illinois Community Bank (" Illinois Community" or the " Bank")
is a state chartered commercial bank with two offices in Effingham, Illinois.
The predecessor to the Bank, Illinois Guarantee, was founded on April 7, 1893 as
an Illinois state-chartered savings and loan association, and its deposits have
been federally insured since 1959. The institution has been a member of the
Federal Home Loan Bank ("FHLB") of Chicago since 1949. In February 1990,
Illinois Guarantee converted from a state-chartered savings and loan association
to a federally chartered savings bank under its current name. The Bank completed
its conversion from a federally chartered mutual savings bank to a federally
chartered capital stock savings bank (the "Conversion") on September 28, 1995
(the "Conversion Date") through the sale and issuance of 502,550 shares of Bank
Common Stock at a price of $10.00 per share for gross proceeds of $5,025,500 and
proceeds, net of Conversion expenses, of $4,563,000. Illinois Guarantee then
converted to Illinois Community Bank, an Illinois state-chartered commercial
bank on April 21, 1997.

        The Bank's main office is located at 210 E. Fayette Avenue, Effingham,
Illinois 62401-3613, and its telephone number is (217) 347-7127. The Bank
considers its primary market area to be its home county of Effingham. The Bank
serves its market area through its main office and the Mid-America branch
office, both in Effingham, Illinois.

        The Bank emphasizes the origination of adjustable rate loans and short
term (5 year or less) fixed rate loans, in order to manage interest rate
sensitivity of its interest earning assets. The principal lending activity of
the Bank is the origination of single-family residential mortgage loans. This
includes financing for the construction and acquisition of residential property
as well as home improvement and home equity loans. Fixed rate residential real
estate loans are qualified and generally sold in the secondary mortgage market
to avoid exposure to interest rate fluctuations. Other types of lending that
have contributed significantly to loan portfolio growth are small business and
commercial real estate loans, automobile loans, and consumer loans. At June 30,
1997, loans with adjustable rates or terms of five years or less totaled an
estimated $33.2 million, or 72.8% of the Bank's total loans.

        The Bank's deposits are insured by the Federal Deposit Insurance
Corporation ("FDIC") up to applicable limits for each depositor. The FHLB of
Chicago, of which the Bank is a member, is one of the 12 district banks
comprising the FHLB System. The Bank is subject to comprehensive examination,
supervision and regulation by the Illinois Office of Banks and Real Estate
("OBRE") and the Federal Deposit Insurance Corporation ("FDIC"). Such regulation
is intended primarily for the protection of depositors.

                                       1
<PAGE>
 
CHANGES IN KEY MANAGEMENT PERSONNEL

        Effective April 18, 1995, President and Chief Executive Officer Donald
J. Wente resigned from his positions of employment with the Bank, and was
replaced by Chairman of the Board Gerald E. Ludwig, who was also appointed to
serve as Chief Executive Officer of the Bank. On June 20, 1995, the Board
promoted Vice President of Lending Douglas A. Pike to the positions of President
and Chief Operating Officer of the Bank. On June 12, 1995, the Bank hired Ronald
R. Schettler as Senior Vice President in charge of administration and
investments. In May 1996, the Bank hired John H. Leonard as Senior Vice
President and Chief Credit Officer to assist in expanding and managing the
Bank's lending activities. Mr. Leonard has been involved in commercial and
consumer lending since 1975, and was previously employed with a commercial bank
located in Effingham, Illinois. Mr. Leonard's activities have resulted in
increased loan originations for the Bank, particularly the origination of
commercial real estate and small business operating loans. Other segments of the
Bank's loan portfolio, including residential real estate and consumer loans,
continue to experience steady growth.

NEW BUSINESS STRATEGIES

        New management joined the Bank in 1995 and the managerial structure has
developed in accordance with new business strategies intended to increase
presence, new market segment penetration, and overall market share in its
primary market area of Effingham County, Illinois ("Primary Market Area"). These
new strategies, under the guidance and implementation of the newly formed
management team, have increased lending activities, non-traditional banking
service activities, and sources of fee income. New business development
strategies include (i) hiring experienced commercial banking personnel including
a new Chief Credit Officer, Chief Administrative Officer, Controller, and a
Trust and Investment Management Officer; (ii) instituting a manager call program
encouraging direct contact with local businesses, property developers, realtors,
home builders, auto dealers and others; (iii) improving customer service,
educating staff, and developing a sales culture bankwide. Illinois Leasing
Corporation, Inc., a subsidiary of the holding company, provides enhanced
services in the form of commercial equipment leasing and alternatives to
traditional commercial lending. The Bank's Trust and Investment Management
Center began operations in April, 1997. Full service brokerage and investment
management services, offered at the bank through PRIMEVEST Financial Services,
allows the Bank to serve customers' investment and financial planning needs.

MARKET AREA

        The Bank's offices are located in the city of Effingham, Effingham
County, Illinois. The Bank considers its Primary Market Area to be its home
county of Effingham. The population of Effingham County is 31,704 (based on the
1990 Census). Effingham is located in central Illinois, at the "crossroads" of 
I-57 (major North-South interstate) and I-70 (major East-West interstate), being
97 miles east from St. Louis, Missouri, 141 miles west of Indianapolis, Indiana,
and 211 miles south of Chicago, Illinois. Employment in Effingham County is
reliant on the local manufacturing and distribution industries, with agriculture
and agribusiness serving as important elements of the economy. The major
employers in the Effingham area are Fedders USA, with approximately 1,200
employees, Crossroads Press, with 919 employees, Petty Company, with 690
employees and St. Anthony's Memorial Hospital, with 679 employees. Other major
employers include Three Z Printing, Consolidated Communications and Stevens
Industries, Inc.

LENDING ACTIVITIES

        GENERAL. The Bank emphasizes the origination of adjustable rate loans
and short term (15 years or less) fixed rate loans, in order to manage the
interest rate sensitivity of its interest-earning assets. The principal lending
activity of the Bank is the origination of adjustable rate mortgage loans for
the purpose of financing the construction and acquisition of single-family
residential properties. The Bank also originates construction and permanent
loans on multi-family and commercial real estate, as well as automobile loans,
home improvement loans and other consumer loans.

                                       2
<PAGE>
 
At June 30, 1997, loans with adjustable rates or terms of five years or less
totaled $33.2 million, or 72.8% of the Bank's total loans.

        In May 1996, the Bank hired new Senior Vice President and Chief Credit
Officer, John H. Leonard to assist in expanding and managing the Bank's lending
activities. Mr. Leonard has been involved in commercial and consumer lending
since 1975 and was previously employed with a commercial bank located in
Effingham, Illinois. He is actively engaged in calling on business and
professional clients while being affiliated with a number of local small
business organizations. These activities have resulted in increased loan
originations for the Bank, particularly the origination of commercial real
estate and small business operating loans. Other segments of the Bank's loan
portfolio, including residential real estate and consumer loans, continue to
experience steady growth.

        The Bank's five largest loans to one borrower, outstanding as of June
30, 1997, ranged from $462,000 to $1.0 million. See "Regulation --Limits on
Loans to One Borrower ."

        LOAN PORTFOLIO. Set forth below is selected data relating to the
composition of the Bank's loan portfolio by type of loan on the dates indicated.

<TABLE>
<CAPTION>
                                                At June 30,
                                    -----------------------------------
                                           1997              1996
                                    -----------------  ----------------
                                    Amount      %      Amount      %
                                    -------  --------  -------  -------
<S>                                 <C>      <C>       <C>      <C>
                                            (Dollars in thousands)
 
Real estate loans --
 One- to four-family residential..  $25,984     56.98% $22,952    63.18%
 Multi-family residential.........    1,293      2.84    1,036     2.85
 Agricultural.....................      338      0.74    1,839     5.06
 Commercial.......................    8,542     18.73    3,604     9.92
 Construction                                                    
  One to four residential.........      152      0.33    1,015     2.79
  Multi-family....................       --        --      292     0.80
                                    -------    ------  -------   ------
                                     36,309     79.62   30,738    84.60
                                    -------    ------  -------   ------
                                                                 
Commercial business...............    2,403      5.27    1,181     3.26
Commercial leasing................      498      1.09       --       --
Consumer loans --                                                
 Automobiles......................    4,509      9.89    3,800    10.46
 Other............................    1,882      4.13      610     1.68
                                    -------    ------  -------   ------
                                      9,292     20.38    5,591    15.40
                                    -------    ------  -------   ------
                                                                 
Total.............................   45,601    100.00%  36,329   100.00%
                                    -------    ======  -------   ======
                                                       
Less:                                                  
 Loans in process.................       --                  6
 Deferred loan fees...............       31                 27
 Allowance for loan losses........      351                227
                                    -------            -------
   Total, net.....................  $45,219            $36,069
                                    =======            =======
 
</TABLE>

        During the year ended June 30, 1997, the Bank made nine loans in excess
of $250,000 for a total of $4.1 million. Four of these loans have adjustable
rates ranging from 7.25% to 9.00% with outstanding balances of $423,000 for one-
to four-family dwelling, $190,000 commercial operating line of credit, and
$727,000 commercial real estate at June 30, 1997. The remaining five loans are
fixed rate with terms from six months to five years with interest rates ranging
from 8.25% to 9.25% with outstanding balances of $862,000 for multi-family
dwellings and $665,000 for commercial real estate at June 30, 1997.

                                       3
<PAGE>
 
        ONE- TO FOUR-FAMILY RESIDENTIAL REAL ESTATE LENDING. The primary
emphasis of the Bank's lending activity is the origination of conventional
mortgage loans on one- to four-family residential dwellings. Most loans are
originated in amounts up to $100,000 on single-family properties located in the
Bank's primary market area of Effingham County. As of June 30, 1997, loans on
one- to four-family residential properties accounted for 56.98% of the Bank's
loan portfolio. The Bank's mortgage loan originations are for terms of from 10
years to up to 30 years, amortized on a monthly basis with interest and
principal due each month. Residential real estate loans often remain outstanding
for significantly shorter periods than their contractual terms as borrowers may
refinance or prepay loans at their option, without penalty. Conventional
residential mortgage loans granted by the Bank customarily contain "due-on-sale"
clauses which permit the Bank to accelerate the indebtedness of the loan upon
transfer of ownership of the mortgaged property.

        The Bank uses standard Federal Home Loan Mortgage Corporation ("FHLMC")
documents, to allow for the sale of loans in the secondary mortgage market. The
Bank's lending policies generally limit the maximum loan-to-value ratio on
mortgage loans secured by owner-occupied properties to 95% of the lesser of the
appraised value or purchase price of the property, with the condition that
private mortgage insurance is required on loans with a loan-to-value ratio in
excess of 80%. The majority of loans in the Bank's loan portfolio have loan-to-
value ratios of 80% or less.

        The Bank offers adjustable-rate mortgage loans with terms of up to 30
years. Adjustable rate loans offered by the Bank include loans which reprice
annually or provide for an initial three year term, and then reprice annually.
Adjustable rate loans provide for an interest rate which is 2.5% above the
interest rate paid on U.S. Treasury securities of a corresponding term. The Bank
offers initial discounted interest rates, but borrowers are qualified based on
the loan status following the first interest rate adjustment.

        At the present time, the Bank retains all adjustable rate mortgages it
originates, which helps reduce the Bank's exposure to changes in interest rates.
The Bank's adjustable rate mortgages include caps on increases or decreases of
2.50% per year, and 6% over the life of the loan. The Bank also originates
second mortgage loans on owner-occupied, single family and one- to four- family
residential real estate. Such loans are generally subject to the same loan-to-
value ratios (when combined with existing loans), as any other residential real
estate loan, at adjustable rates, and over a term generally not to exceed 20
years.

        The primary purpose for offering adjustable rate loans is to increase
the interest rate sensitivity of the Bank's loan portfolio. However, because the
interest income earned on adjustable rate loans varies with prevailing interest
rates, cash flows from such loans are not as predictable as cash flows from
fixed-rate loans. Further, the annual and lifetime adjustment limits on the
Bank's adjustable rate mortgage loans have the effect of limiting the
sensitivity of those loans to changes in market interest rates and this is
particularly true with respect to loans with initially discounted interest rates
in the event of increases in market rates. The Bank's policy of offering
initially discounted interest rates results in the Bank initially earning
reduced income from such loans. Additionally, there are unquantifiable credit
risks resulting from potential increased costs to the borrower as a result of
repricing of adjustable rate mortgage loans. It is possible that during periods
of rising interest rates, the risk of default on adjustable rate mortgage loans
may increase due to the upward adjustment of interest cost to the borrower.

        During the year ended June 30, 1997, the Bank originated $5.4 million,
in adjustable rate mortgage loans and $6.0 million in fixed-rate mortgage loans.
Approximately 27.4% of all loan originations during the year ended June 30, 1997
were refinancings of loans already in the Bank's loan portfolio. At June 30,
1997, the Bank's loan portfolio included $13.4 million in adjustable rate one-to
four-family residential mortgage loans or 29.4% of the Bank's loan portfolio,
and $12.6 million in fixed-rate one-to four-family residential mortgage loans,
or 27.6% of the Bank's loan portfolio.

        MULTI-FAMILY AND COMMERCIAL REAL ESTATE LOANS. At June 30, 1997, the
Bank's multi-family and commercial real estate loan portfolio consisted of $10.2
million, or 22.3% of total loans. The Bank originated $5.2

                                       4
<PAGE>
 
million in such loans during the year ended June 30, 1997 and $3.9 million in
such loans during the year ended June 30, 1996. The Bank's commercial real
estate loans are secured by office buildings, small retail establishments, small
apartment buildings, raw land and farm land, all located in Effingham County,
Illinois. The Bank's largest loan had an outstanding balance of $723,000 at June
30, 1997 and was secured by land.

        Multi-family and commercial real estate loans generally are originated
in amounts up to 80% of the appraised value of the property for terms of 10 to
20 years. Appraisals are performed by independent fee appraisers. The interest
rate on these loans generally is subject to adjustment on an annual bases and is
calculated by adding a margin to the appropriate index (usually the weekly
average one-year U.S. Treasury Bill index or a prime lending rate index).

        Commercial and agricultural real estate lending, as well as multi-family
residential real estate lending entails significant additional risks compared
with one- to four-family residential lending. For example, commercial real
estate loans and multi-family residential real estate loans typically involve
large loan balances to single borrowers or groups of related borrowers, the
payment experience on such loans typically is dependent on the successful
operation of the real estate project, and these risks can be significantly
impacted by supply and demand conditions in the market for commercial office,
retail and warehouse space or multi-family residential units. Agricultural real
estate loans involve a greater degree of risk as payments on such loans depend,
to a larger degree, on the results of operations of the related farm. Consistent
with these increased risks, during the economic slowdown in the late 1980s and
early 1990s the Bank experienced increases in its non-performing commercial real
estate loans and real estate acquired in settlement of such loans. As of June
30, 1997, two of the Bank's commercial real estate loans were not performing.
These loans were for $119,000 with management anticipating no loss on this loan.

        CONSTRUCTION LOANS. The Bank, from time to time has engaged in
construction lending to qualified borrowers for construction of one- to four-
family residential, multi-family residential, and commercial properties. Such
loans have converted to permanent financing upon completion of construction.
These properties are located in the Bank's Primary Market Area. At June 30,
1997, the Bank had three construction loans outstanding with balances ranging
from $33,000 to $69,000 at that date. Borrowers seeking construction loans must
satisfy all credit requirements which would apply to the Bank's permanent
mortgage loan financing for the subject property.

        As part of the Bank's new business strategies, the Bank expects to be
active in the origination of both construction loans and the succeeding
permanent loans on single-family and multi-family residential real estate and
commercial real estate in the Bank's primary market area. The Bank's new
management has contacted various builders who have experience in constructing
and developing single-family and multi-family residential real estate (four to
eight unit apartment buildings) and commercial real estate in the Bank's Primary
Market Area.

        Construction financing generally is considered to involve a higher
degree of risk of loss than long-term financing on improved, occupied real
estate. Risk of loss on a construction loan is dependent largely upon the
accuracy of the initial estimate of the property's value at completion of
construction or development and the estimated cost (including interest) of
construction. During the construction phase, a number of factors could result in
delays and cost overruns. If the estimate of construction costs proves to be
inaccurate, the Bank may be required to advance funds beyond the amount
originally committed to permit completion of the development. If the estimate of
value proves to be inaccurate, the Bank may be confronted, at or prior to the
maturity of the loan, with collateral having a value which is insufficient to
assure full repayment. The Bank has sought to minimize this risk by limiting
construction lending to qualified borrowers (i.e., borrowers who satisfy all
credit requirements and whose loans satisfy all other underwriting standards
which would apply to the Bank's permanent mortgage loan financing for the
subject property) in the Bank's Primary Market Area. In engaging in lending for
the construction of multi-family residential properties, the Bank would be
subject to each of these risks, as well as the risks noted above for multi-
family real estate lending.

        COMMERCIAL BUSINESS LOANS. The Bank originates commercial business loans
to local retail establishments and other businesses. These loans are generally
secured by equipment. Such loans totaled $2.9 million, or 6.4% of total loans,
at June 30, 1997 and were all performing at that date.

                                       5
<PAGE>
 
        Commercial business loans involve a greater degree of risk than other
types of lending as payments on such loans are often dependent on successful
operation of the business involved which may be subject to a greater extent to
adverse conditions in the economy. The Bank seeks to minimize this risk through
its underwriting guidelines, which require that the loan be supported by
adequate cash flow of the borrower, profitability of the business and
collateral. The maximum loan to value ratio on a commercial business loan is
75%.

        CONSUMER LENDING. The Bank's consumer loans consist of savings account
loans, home improvement loans, automobile loans and other consumer loans,
including (from time to time) unsecured lines of credit. At June 30, 1997, the
consumer loan portfolio totaled $6.4 million, or 14.0%, of total loans. Consumer
loans are generally offered for terms of up to five years at fixed interest
rates. Management expects to continue to promote consumer loans as part of its
strategy to provide a wide range of personal financial services to its customers
and as a means to increase the yield on the Bank's loan portfolio.

        The Bank makes loans for automobiles, both new and used, directly to the
borrowers. The loans are generally limited to 80% of the purchase price or the
wholesale value listed by the National Automobile Dealers Association. The terms
of the loans are determined by the age and condition of the collateral.
Collision insurance policies are required on all these loans. At June 30, 1997,
the total amount of automobile loans was $4.5 million. As of June 30, 1997, five
of the Bank's consumer loans were not performing. The total outstanding balance
of these loans was $84,000, with management currently anticipating losses in the
amount of $6,000.

        As part of the Bank's business strategies, the Bank may engage in
indirect lending on automobiles through arrangements with automobile dealers in
Effingham, Illinois and surrounding area. Such loans would be for the purchase
of used automobiles, would have loan to value ratios of up to 100%, and would
provide for terms of up to five years. During the year ended June 30, 1997, the
Bank originated $1.8 million in indirect loans on automobiles.

        The Bank also makes loans secured by deposits up to 90% of the amount of
the depositor's savings or certificate of deposit accounts balance. The Bank
makes other consumer loans, which may or may not be secured. The term of the
loans usually depends on the collateral. Unsecured loans usually do not exceed
$20,000, and have a term not to exceed one year.

        The Bank intends to continue the origination of consumer loans, and as
indicated above, may increase its origination of such loans. Consumer loans tend
to be originated at higher interest rates than mortgage loans and for shorter
terms. However, consumer loans generally involve more risk than one- to four-
family residential real estate loans. Repossessed collateral for a defaulted
loan (especially for automobile loans) may not provide an adequate source of
repayment of the outstanding loan balance as a result of damage, loss or
depreciation (especially for automobiles), and the remaining deficiency often
does not warrant further substantial collection efforts against the borrower. In
addition, loan collections are dependent on the borrower's continuing financial
stability, and thus are more likely to be adversely affected by job loss,
divorce, illness or personal bankruptcy. Further, the application of various
state and federal laws, including federal and state bankruptcy and insolvency
law, may limit the amount which may be recovered. In underwriting consumer
loans, the Bank considers the borrower's credit history, an analysis of the
borrower's income and ability to repay the loan, and the value of the
collateral. The Bank's risks associated with consumer loans have been further
limited by the modest amount of consumer loans made by the Bank. Despite the
risks noted above, the Bank's level of consumer loan delinquencies generally has
been low. No assurance can be given, however, that the Bank's delinquency rate
on consumer loans will continue to remain low in the future, or that the Bank
will not incur future losses on these activities.

        LOAN COMMITMENTS. The Bank makes a 30-day loan commitment to borrowers.
At June 30, 1997, the Bank had four fixed rate loan commitments for $2.6 million
outstanding for the origination of commercial and residential real estate loans.

                                       6
<PAGE>
 
        LOAN SOLICITATION AND PROCESSING. Loan originations are derived from a
number of sources, including the Bank's existing customers, referrals, realtors,
advertising and "walk-in" customers at the Bank's office. The Bank does not use
loan brokers.

        Upon receipt of a loan application from a prospective borrower, a credit
report and verifications are ordered to verify specific information relating to
the loan applicant's employment, income and credit standing. For all mortgage
loans, an appraisal of real estate intended to secure the proposed loan is
obtained from an independent fee appraiser who has been approved by the Bank's
Board of Directors. Fire and casualty and earthquake insurance are required on
all loans secured by improved real estate. Insurance on other collateral is
required unless waived by the loan committee. The Board of Directors of the Bank
has the responsibility and authority for the general supervision over the loan
policies of the Bank. The Board has established written lending policies for the
Bank.

        Loan applications are accepted at the Bank's office. The Bank's
President may approve secured loans up to $150,000 and unsecured loans up to
$50,000. The Bank's Loan Committee, which is composed of two non-employee
directors and the Bank's President, may approve all types of loans up to 5% of
withdrawable capital for secured loans and 2% of withdrawable capital for
unsecured loans, provided such loans conform to the Bank's lending policies. All
other loans must be approved by the full Board of Directors. In addition, the
full Board of Directors reviews on a monthly basis, all loans originated by the
Bank.

        INTEREST RATES AND LOAN FEES. In addition to earning interest on loans,
the Bank also receives income from, among other sources, loan origination fees,
charges on certain deposits and fees related to late payments, loan
modifications and miscellaneous services related to loans. These fees do not
constitute a significant portion of the Bank's income from operations. Interest
rates charged by the Bank on all loans are primarily determined by competitive
loan rates offered in its market area. The Bank charges a 1% loan origination
fee on new fixed-rate mortgage loans, and a fee of $250 for adjustable rate
loans. The origination fees, net of direct origination costs, are deferred and
amortized into income over the life of the loan. At June 30, 1997, the amount of
deferred loan origination fees was $31,000.

        LOAN MATURITY SCHEDULE. The following table sets forth certain
information at June 30, 1997 regarding the dollar amount of loans maturing in
the Bank's portfolio based on their contractual terms to maturity. Demand loans,
loans having no stated schedule of repayments and no stated maturity, and
overdrafts are reported as due in one year or less.
<TABLE>
<CAPTION>
                                                     Due After       Due after                
                                   Due During the    1 through        5 years                 
                                    Year Ending    5 years after       after                  
                                   June 30, 1998   June 30, 1997   June 30, 1997       Total                         
                                   --------------  -------------   -------------     ---------
                                                          (In thousands)
<S>                                <C>             <C>             <C>               <C>

One- to four-family residential..         $ 9,088        $ 7,474         $ 9,574       $26,136
Multi-family, commercial real                                                    
  estate and agricultural........           4,078          5,466             629        10,173
Commercial.......................           1,646          1,255              --         2,901
Consumer and other...............           1,523          4,854              14         6,391
                                          -------        -------         -------       -------
    Total........................         $16,335        $19,049         $10,217       $45,601
                                          =======        =======         =======       =======
</TABLE>

                                       7
<PAGE>
 
        The next table sets forth at June 30, 1997, the dollar amount of all
loans due one year or more after June 30, 1997 which have predetermined interest
rates and have floating or adjustable interest rates.
<TABLE>
<CAPTION>
                                                     Predetermined      Floating or
                                                        Rate          Adjustable Rates
                                                     -------------    ----------------                                              
                                                             (In thousands)
          <S>                                        <C>              <C>
                                                 
          One-to four-family residential........        $   12,648          $    4,400
          Multi-family, commercial real estate   
           and agricultural.....................             4,156               1,939
          Commercial............................             1,255                  --
          Consumer and other....................             4,868                  --
                                                        ----------          ----------
             Total..............................        $   22,927          $    6,339
                                                        ==========          ========== 
</TABLE>

        ORIGINATIONS, PURCHASES AND SALES OF LOANS.  The following table sets
forth information with respect to originations and sales of loans during
the periods indicated.
<TABLE>
<CAPTION>
                              Year Ended June 30,
                              -------------------
                                1997       1996
                              ---------  --------
<S>                           <C>        <C>
                                 (In thousands)
Loans originated:
  Real estate loans:
    One- to four-family.....    $11,444   $10,985
    Multi-family............         --       285
    Commercial..............      5,153     3,629
  Commercial business.......      3,246     1,874
  Commercial leasing........        568        --
  Consumer loans and other..      5,546     3,948
                                -------   -------
    Total loans originated..    $25,957   $20,721
                                =======   =======

Loans purchased:
  Participation loan........    $    --   $    --
  Whole loans...............         --       500
                                -------   -------
     Total loans purchased..    $    --   $   500
                                =======   =======

Loans sold:
  Whole loans...............    $ 1,768   $    --
  Participation loans.......        100        --
                                -------   -------
     Total loans sold.......    $ 1,868   $    --
                                =======   =======
</TABLE>

        Historically, the Bank has sold less than 10% of the loans it has
originated. In January 1995, the Bank sold $51,000 in education loans to the
Student Loan Marketing Association. The Bank may sell loans in whole or a
portion of the loan if it exceeds its legal lending limit. In recent years, the
Bank has not purchased any whole loans and has no plans to do so in the future.
The Bank sold $1.8 million in fixed-rate residential mortgage loans in the
secondary mortgage market to FHLMC and participated to another Bank $100,000 in
loans, for the year ended June 30, 1997.

        NON-PERFORMING ASSETS, ASSET CLASSIFICATION AND ALLOWANCES FOR LOSSES.
Loans are reviewed on a regular basis and are placed on a non-accrual status
when, in the opinion of management, the collection of principal and interest are
doubtful.


                                       8
<PAGE>
 
        Real estate acquired by the Bank as a result of foreclosure is
classified as real estate owned until such time as it is sold. When such
property is acquired, it is recorded at the lower of the unpaid principal
balance or its fair value. Any required write-down of the loan to its fair value
is charged to the allowance for loan losses.

 
        The following table sets forth information with respect to the Bank's
non-performing assets at the dates indicated.
<TABLE> 
<CAPTION> 
                                                                             At June 30,
                                                                      ------------------------
                                                                        1997            1996   
                                                                      --------        --------
                                                                          (In thousands)
     <S>                                                              <C>             <C> 
     Loans accounted for on a non-accrual basis:(1)                   
       Real Estate:                                                   
         Residential........................................          $     53        $     23
         Commercial.........................................                19              19
       Consumer and other...................................                 6              --
                                                                      --------        --------
          Total.............................................          $     78        $     42
                                                                      ========        ========
     Accruing loans which are contractually past                      
       due 90 days or more: (1)                                        
       Real estate:                                                    
         Residential........................................          $     23        $    262
         Commercial.........................................                72              45
       Consumer and other...................................                 3               2
                                                                      --------        --------
          Total.............................................          $     98        $    309
                                                                      ========        ========
                                                                       
          Total of non-accrual and 90 days past due loans...          $    176        $    351
                                                                      ========        ========
                                                                       
         Percentage of total loans..........................              0.39%           0.96%
                                                                      ========        ========
                                                                       
         Other non-performing assets (2)....................          $     45        $     49
                                                                      ========        ========
</TABLE>
----------------------
        (1)   Non-accrual status denotes loans on which, in the opinion of
              management, the collection of additional interest is unlikely.
              Payments received on a non-accrual loan are applied to the
              outstanding principal balance. The Bank reserves interest on all
              loans 90 days past due, for which, in the opinion of management,
              the collection of this interest is questionable. When payments are
              received on these loans, the payments are applied to reserved
              interest first with any excess applied to principal.

        (2)   Other non-performing assets represents property acquired by the
              Bank through foreclosure or repossession or accounted for as a
              foreclosure in substance. This property is carried at the lower of
              its fair market value or the principal balances of the related
              loan, is classified as real estate held for sale and is not
              included in the Bank's capital calculations.

        At June 30, 1997, the Bank had $78,000 in non-accrual loans, and $98,000
in accruing loans 90 days or more past due. Other non-performing assets at June
30, 1997 represents undeveloped lots held for sale, valued at a total of
$45,000, which the Bank held, pending improvement in the local real estate
market. One lot was sold in 1997.

        During the year ended June 30, 1997, gross interest income of $9,000
would have been recorded on loans accounted for on a non-accrual basis if the
loans had been current throughout these periods.


                                       9
<PAGE>
 
        At June 30, 1997, loans which were not classified as non-accrual, 90
days past due or restructured but where known information about possible credit
problems of borrowers caused management to have serious concerns as to the
ability of the borrowers to comply with present loan repayment terms and may
result in disclosure as non-accrual, 90 days past due or restructured amounted
to $195,000.

        Included in these totals at June 30, 1997 and classified as
"substandard," all in the Bank's market area, were no loans on single-family
residences, two loans on commercial properties totaling $109,000 classified due
to delinquency or past credit history, and eight consumer and commercial
business loans totaling $76,000. Also included in this total and classified as
"substandard," were the lots held by the Bank as real estate held for sale at
June 30, 1997 in the amount of $45,000. The Bank determined to hold this
property as "real estate owned", pending improvement in the local real estate
market. Management considered all of the above items in calculating the Bank's
allowance for loan losses. Assets classified as "loss" consisted of one consumer
loan.

        In originating loans, the Bank recognizes that credit losses will occur
and that the risk of loss will vary with, among other things, the type of loan
being made, the creditworthiness of the borrower over the term of the loan,
general economic conditions and, in the case of a secured loan, the quality of
the security for the loan. It is management's policy to maintain an adequate
general allowance for loan losses based on, among other things, the Bank's and
the industry's historical loan loss experience, evaluation of economic
conditions and regular reviews of delinquencies and loan portfolio quality.
Further, after properties are acquired following loan defaults, additional
losses may occur with respect to such properties while the Bank is holding them
for sale. The Bank increases its allowances for loan losses and losses on real
estate owned by charging provisions for possible losses against the Bank's
income. Specific reserves also are recognized against specific assets when
warranted. The Bank added additional provisions for loan losses of $141,000 and
$81,000, respectively, during the years ended June 30, 1997 and 1996, due to the
new business strategies of multi-family, commercial real estate and consumer
lending being pursued by the Bank, which types of lending carry increased risks
for the Bank in comparison to one- to four-family residential lending.

        As a result of the declines in regional real estate market values and
the significant losses experienced by many financial institutions, there has
been a greater level of scrutiny by regulatory authorities of the loan
portfolios of financial institutions undertaken as part of the examination of
the institution by federal or state regulators. Results of recent examinations
indicate that these regulators may be applying more conservative criteria in
evaluating real estate market values, requiring significantly increased
provisions for potential loan losses. While the Bank believes it has established
its existing allowances for loan losses in accordance with generally accepted
accounting principles, there can be no assurance that regulators, in reviewing
the Bank's loan portfolio, will not request the Bank to significantly increase
its allowance for loan losses, thereby negatively affecting the Bank's financial
condition and earnings.

        The following table analyzes activity in the Bank's allowance for loan
losses for the periods indicated.
<TABLE>
<CAPTION>
                                                        At June 30,
                                                    -------------------
                                                      1997       1996
                                                    --------   --------   
                                                       (In thousands)
         <S>                                        <C>        <C>
 
         Balance at beginning of period..........   $    227   $    175
                                                    --------   --------   
         Loans charged-off:
          Commercial - unsecured.................         --         19
           Consumer..............................         17         10
 
         Total loans charged-off.................         17         29
                                                    --------   --------   

         Provision for loan losses...............        141         81
                                                    --------   --------   
                                                
         Balance at end of period................   $    351   $    227
                                                    ========   ======== 
         Ratio of net charge-offs to average
          loans outstanding during the period....       0.04%      0.10%
                                                    ========   ======== 

</TABLE>


                                       10
<PAGE>
 
        The Bank evaluates the allowance for loan losses on a regular basis. At
June 30, 1997, the allowance was 0.77% of total loans, compared to 0.63% of
total loans at June 30, 1996. In lieu of the Bank's increased originations of
multi-family and commercial real estate loans, and consumer loans, the Bank
expects that its provisions for loan losses will increase in future periods to
account for the additional risks inherent in these types of lending.

        The following table sets forth a breakdown of the allowance for loan
losses by loan category at the dates indicated. Management believes that the
allowance can be allocated by category only on an approximate basis. These
allocations are not necessarily indicative of future losses and do not restrict
the use of the allowance to absorb losses in any loan category.

<TABLE>
<CAPTION>
                                                               June 30,
                                       -------------------------------------------------------
                                                 1997                          1996
                                       -------------------------     -------------------------
                                                      Percent                        Percent
                                                      of Loans                       of Loans
                                                     in Category                   in Category
                                                      to Total                       to Total
                                         Amount        Loans           Amount         Loans
                                       -----------   -----------     -----------   -----------
     <S>                               <C>           <C>             <C>           <C>
     Real estate - mortgage:                                                    
       Residential.................    $        66         59.82%    $        44         66.00%
       Commercial..................            136         19.47              22         15.00
       Construction................             --          0.33              --          3.60
     Commercial business...........             37          5.27              10          3.25
     Commercial leasing............              4          1.09              --            --
     Consumer......................             83         14.02              20         12.15
     Unallocated...................             25            --             131            --
                                       -----------   -----------     -----------   -----------
         Total allowance for loan                                                  
           losses..................    $       351        100.00%    $       227        100.00%
                                       ===========   ===========     ===========   ===========
</TABLE>

INVESTMENT ACTIVITIES

        GENERAL. The general objectives of the Bank's investment policy are to
assure the safe and sound investment of the assets of the Bank, to provide
sufficient liquidity to meet operating and funding needs, and to comply with
regulatory liquidity requirements. All securities and investments are recorded
on the books of the Bank in accordance with generally accepted accounting
principles. All purchases of securities and investments conform to the Bank's
interest rate risk policy. The type of investments allowed under the investment
policy are only those which qualify as liquid investments under current
regulations. The Bank's mutual fund investment represents an interest in a money
market fund and an adjustable rate mortgage loan fund, neither of which are
insured. Bank investments also include the demand, overnight and certificate of
deposit accounts at the FHLB of Chicago. Investments may be made in certificates
of deposit and savings accounts in other financial institutions insured by the
FDIC so long as the total investment with accrued interest does not exceed the
$100,000 insurance limit per each institution. Other investments allowed consist
of direct U.S. Government obligations and other government agencies that have
the full faith and credit backing of the U.S. Government.



                                       11
<PAGE>
 
        INVESTMENTS. The following table sets forth the carrying value of the
Bank's investment securities portfolio, short-term investments, and FHLB of
Chicago stock at the dates indicated.
<TABLE>
<CAPTION>
 
                                                    At June 30,
                                                -------------------
                                                   1997      1996
                                                --------   --------   
                                                   (In thousands)
<S>                                             <C>          <C> 
AVAILABLE FOR SALE
Investment securities:
 U.S. Government and Agency securities........    $3,801     $2,956
 State and municipal obligations..............       388        204
 Mutual funds.................................     1,497      1,488
 Equities.....................................       419        257
FHLB stock....................................       398        214
                                                  ------     ------
   Total available for sale investments.......    $6,503     $5,119
                                                  ======     ======
                                                       
HELD TO MATURITY                                       
Investment securities:                                 
 U.S. Government and Agency securities........    $   --     $   --
 State and municipal obligations..............        --         --
 Other........................................       633        299
Interest-bearing deposits and mutual fund.....       767      1,129
                                                  ------     ------
   Total held to maturity investments.........    $1,400     $1,428
                                                  ======     ======
</TABLE>

                                       12
<PAGE>
 
        The following table sets forth the scheduled maturities, carrying
values, market values and average yields for the Bank's investment securities at
June 30, 1997.
<TABLE>
<CAPTION>
 
 
                          One Year or Less   One to Five Years   Five to Ten Years   More than Ten Years  Total Investment Portfolio
                          -----------------  -----------------   -----------------   -------------------  --------------------------
                          Carrying  Average  Carrying  Average   Carrying  Average   Carrying   Average    Carrying  Market  Average
                           Value     Yield     Value    Yield     Value     Yield      Value     Yield      Value     Value   Yield
                          --------  -------  --------  -------   --------  -------   --------  ---------  ---------  ------  -------
<S>                       <C>       <C>      <C>       <C>       <C>       <C>       <C>       <C>        <C>        <C>     <C>
                                                                  (Dollars in thousands)
Available for Sale (1, 2)
Investment securities:
 U.S. Government and
   Agency securities.....   $400     6.15%    $2,905    6.71%      $500      8.00%    $   --        --%     $3,805   $3,801   6.82%
 State and municipal
   obligations (2).......     78     4.52        197    4.74        110      5.25         --        --         385      388   4.84%
 Mutual funds............     --       --         --      --         --        --      1,500      6.05       1,500    1,497   6.05%
 Equities................     --       --         --      --         --        --        410      8.02         410      817   8.02%
                            ----              ------               ----               ------                ------   ------
   Total.................   $478     5.88%    $3,102    6.58%      $610      7.50%    $1,910      6.47%     $6,100   $6,503   6.57%
                            ====              ======               ====               ======                ======   ======
</TABLE> 
--------------------
(1)  This schedule uses contractual maturity dates.  Some of the securities
     have call date options.
(2)  For financial reporting these securities are valued at estimated fair
     market value.

                                      13
<PAGE>
 
        The only investment classified as held to maturity as of June 30, 1997
is an interest in a limited partnership, Boston Capital Corporation Tax Credit
Fund V of $633,000. The Bank purchased a one unit investment in this Fund of
Class A limited partnership interests. The one unit cost was $788,000 with the
first installment paid with the purchase. The April 1, 1997 payment was
partially requested by the partnership. The balance is due as follows:
<TABLE>
<CAPTION>
 
                              Amount
                             (1,000's)
                             ---------
<S>                          <C>
 
          April 1, 1997          $ 44
          October 1, 1997          95
                                 ----
                                 $139
                                 ====
</TABLE>

        It is the intent of the partnership to invest in qualified affordable
housing programs to generate Federal Housing Tax Credits. The Bank intends to
account for this investment using the amortized cost method. This method
requires amortizing the excess of the carrying value over its estimated residual
value at the close of the tax credit realization. Annual amortization is
proportional to the realization of the tax credits. The limited partnership
files a tax return on a calendar basis. Based on the limited partnership 1996
tax year, the Bank was entitled to $25,000 of tax credits and record
amortization of the investment carrying value of $16,000

        The Bank had $568,000 in interest bearing deposits and $199,000 in money
market mutual funds at June 30, 1997 at rates of 5.98% and 5.16%, respectively.

        MORTGAGE-BACKED SECURITIES. The Bank invests excess funds in mortgage-
backed securities, as well as other investments and may increase its investment
in this type of security in the future. At June 30, 1997, the total investment
in mortgage-backed securities was $1.4 million, with $363,000 in adjustable rate
securities, $1.0 million in fixed-rate securities and an average yield of 7.76%.
The Bank invests in mortgage-backed securities originated by the Government
National Mortgage Association ("GNMA"), the Federal National Mortgage
Association ("FNMA") and the FHLMC.

        Prepayments in the Bank's mortgage-backed securities portfolio may be
affected by declining and rising interest rate environments. In a low and
falling interest rate environment, prepayments would be expected to increase. In
such an event, the Bank's fixed-rate securities subscribed for at a premium
price could result in actual yields to the Bank that are lower than anticipated
yields. The Bank's floating rate securities would be expected to generate lower
yields as a result of the effect of falling interest rates on the indexes for
determining payment of interest. Additionally, the increased principal payments
received may be subject to reinvestment at lower rates. Conversely, in a period
of rising rates, prepayments would be expected to decrease, which would make
less principal available for reinvestment at higher rates. In a rising rate
environment, floating rate instruments would generate higher yields to the
extent that the indexes for determining payment of interest did not exceed the
life-time interest rate caps on the Bank's mortgage-backed securities.

        The Bank has historically invested in mortgage-backed securities as an
alternative investment to supplement its lending efforts. Mortgage-backed
securities may also be used as collateral for borrowings and through repayments,
as a source of liquidity. The Bank transferred all the mortgage-backed
securities from held to maturity to available for sale in December 1995.

        The Bank purchases securities through any registered broker or dealer
and requires that the securities be delivered to the safekeeping agent of the
Savings & Community Bankers Trust Company before the funds are transferred to
the broker or dealer. Illinois Guarantee purchases investment securities
pursuant to an investment policy established by the Board of Directors.

                                      14
<PAGE>
 
        The following table sets forth the carrying value of the Bank's 
mortgage-backed securities at the dates indicated.
<TABLE>
<CAPTION>
 
 
                          At June 30,
                     -------------------
                      1997         1996
                     ------       ------
                        (In thousands)
<S>                  <C>     <C>
 
GNMA................ $  776       $  945
FNMA................    241          252
FHLMC...............    405          576
                     ------       ------
                     $1,422       $1,773
                     ======       ======
</TABLE>

                                       15
<PAGE>
 
        The following table sets forth the scheduled maturities, carrying
values, market values and average yields for the Bank's mortgage-backed
securities at June 30, 1997.
<TABLE>
<CAPTION>
 
 
                       One Year or Less    One to Five Years   Five to Ten Years   More than Ten Years   Total Investment Portfolio
                       ----------------    -----------------   -----------------   -------------------   --------------------------
                       Cost     Average    Cost      Average   Cost      Average   Cost        Average   Cost     Market    Average
                       Value     Yield     Value      Yield    Value      Yield    Value        Yield    Value     Value     Yield
                       ------   -------    ------    -------   ------    -------   ------      -------   ------  -------    -------
                                                                   (Dollars in thousands)
<S>                    <C>      <C>        <C>       <C>       <C>       <C>       <C>         <C>       <C>     <C>        <C> 
GNMA..................  $ --       -- %     $753       8.31%    $ --        -- %    $ --          -- %   $  753   $  776      8.31%
FNMA..................    --       --         --         --      238      7.42        --          --        238      241      7.42
FHLMC.................   335     6.62         71       8.40       --        --        --          --        406      405      6.93
                        ----                ----                ----                ----                 ------   ------
  Total.............    $335     6.62%      $824       8.32%    $238      7.42%     $ --          -- %   $1,397   $1,422      7.76
                        ====                ====                ====                ====                 ======   ====== 
</TABLE>

                                       16
<PAGE>
 
DEPOSIT ACTIVITY AND OTHER SOURCES OF FUNDS

        GENERAL. Deposits are the primary source of the Bank's funds for lending
and other investment purposes. In addition to deposits, the Bank derives funds
from principal repayments and interest payments on loans and investments as well
as other sources arising from operations in the production of net earnings. Loan
prepayments and interest payments are a relatively stable source of funds, while
deposit inflows and outflows are significantly influenced by general interest
rates and money market conditions. Borrowings may be used on a short-term basis
to compensate for reductions in the availability of funds from other sources, or
on a longer term basis for general business purposes.

        DEPOSITS. Deposits are attracted principally from within the Bank's
primary market area through the offering of a broad selection of deposit
instruments, including passbook savings, NOW accounts, money market accounts and
certificates of deposit. Deposit account terms vary, with the principal
differences being the minimum balance required, the time periods the funds must
remain on deposit and the interest rate.

        The Bank's policies are designed primarily to attract deposits from
local residents rather than to solicit deposits from areas outside of its
primary market. The Bank generally does not accept deposits from brokers due to
the volatility and rate sensitivity of such deposits. Interest rates paid,
maturity terms, service fees and withdrawal penalties are established by the
Bank on a periodic basis. Determination of rates and terms are predicated upon
funds acquisition and liquidity requirements, rates paid by competitors, growth
goals and federal regulations.

        For more information on the Bank's deposit accounts, see Note F of Notes
to Consolidated Financial Statements.

        The following table sets forth the Bank's certificates of deposit
accounts classified by actual rates at the dates indicated.
<TABLE>
<CAPTION>
 
                         At June 30,
                    --------------------
                     1997          1996
                    -------      -------
<S>                 <C>          <C>
                       (In thousands)
 
2 - 3.99%.........  $   121      $     8
4 - 5.99%.........   21,926       24,599
6 - 7.99%.........    3,617        2,384
8 - 9.99%.........       42           42
                    -------      -------
                    $25,706      $27,033
                    =======      =======
</TABLE>
        The following table sets forth the amount and maturities of certificates
of deposit accounts in actual rate categories at June 30, 1997.
<TABLE>
<CAPTION>
 
                                                  Amount Due
                               ----------------------------------------
                               Less Than                         After
Rate                           One Year   1-2 Years  2-3 Years  3 Years   Total
----                           ---------  ---------  ---------  -------  -------
<S>                            <C>        <C>        <C>        <C>      <C>
                                                (In thousands)
 
3 - 3.99%....................    $   100     $   --     $   --  $    21  $   121
4 - 4.99%....................        582         --         --       --      582
5 - 5.99%....................     15,084      4,720        869      671   21,344
6 - 6.99%....................        248      1,473      1,408      488    3,617
7 - 7.99%....................         --         --         --       --       --
8 - 8.99%....................         --         --         --       --       --
9 - 9.99%....................         42         --         --       --       42
                                 -------     ------     ------   ------  -------
                                 $16,056     $6,193     $2,277   $1,180  $25,706
                                 =======     ======     ======   ======  =======
</TABLE>

                                       17
<PAGE>
 
        The following table indicates the amount of the Bank's certificates of
deposit of $100,000 or more by time remaining until maturity at June 30, 1997.
<TABLE>
<CAPTION>
                                                  Certificates
           Maturity Period                         of Deposit
           ---------------                        ------------
                                                 (In thousands)
<S>                                              <C>
 
           Three months or less................         $  345
           Over three through six months.......             --
           Over six through twelve months......          1,114
           Over twelve months..................            964
                                                        ------
              Total............................         $2,423
                                                        ======
</TABLE>

        The following table sets forth the average balances and interest rates
based on monthly balances for transaction accounts and certificates of deposit
for the periods indicated.
<TABLE>
<CAPTION>
 
                                    Year Ended June 30,
                        --------------------------------------------
                                1997                   1996
                        ---------------------  ---------------------
                        Interest-              Interest-
                        Bearing                Bearing
                        Demand      Time       Demand      Time
                        Deposits    Deposits   Deposits    Deposits
                        ----------  ---------  ----------  ---------
                                   (Dollars in thousands)
<S>                     <C>         <C>        <C>         <C>
 
Average balance........    $10,248    $28,074      $7,685    $25,679
Average rate...........       3.80%      5.36%       3.74%      5.35%
</TABLE>

        The following table sets forth the change in dollar amount of interest-
bearing deposits in the various types of accounts offered by the Bank between
the dates indicated (in thousands).
<TABLE>
<CAPTION>
 
                                                          Increase
                               Balance at                (Decrease)   Balance at
                                June 30,       %          from June    June 30,       %
                                 1997       Deposits      30, 1996      1996       Deposits
                               ----------  ----------    ----------   ----------  ----------
                                                      (Dollars in thousands)
<S>                            <C>         <C>           <C>          <C>         <C>
 
NOW, Super NOW and other
  transaction accounts.........   $ 2,076        5.03%     $   776      $ 1,300         3.64%
Money market deposit accounts..     2,457        5.96           26        2,431         6.81
Passbook savings...............    11,004       26.68        6,093        4,911        13.77
                                                                      
Certificates:                                                         
  6 months or less.............     5,457       13.23       (2,283)       7,740        21.70
  6 months through 1 year......     4,617       11.20       (1,510)       6,127        17.17
  1 year through 3 years.......    13,884       33.66        3,658       10,226        28.66
  More than 3 years............     1,748        4.24       (1,192)       2,940         8.24
                                  -------      ------      -------      -------       ------
     Total.....................   $41,243      100.00%     $ 5,568      $35,675       100.00
                                  =======      ======      =======      =======       ======
</TABLE>

                                       18
<PAGE>
 
        The following table sets forth deposit activities of the Bank for the
years indicated.
<TABLE>
<CAPTION>
 
                                                            Year Ended June 30,
                                                         -------------------------
                                                           1997            1996
                                                         --------        ---------
                                                              (In thousands)
<S>                                                      <C>             <C>
                                                                       
Deposits..........................................       $115,803        $ 58,051
Withdrawals.......................................        110,535         (55,541)
                                                         --------        --------
                                                            5,268           2,510
Interest credited.................................          1,846           1,335
                                                         --------        --------
     Net increase (decrease) in savings deposits..       $  7,114        $  3,845
                                                         ========        ========
 
</TABLE>

        Management attributes the net increase in deposits for 1997 to increased
presence in the Bank's market area. The Bank has adopted new business strategies
to increase its presence which was also enhanced by the stock conversion in
September 1995.

        BORROWINGS. Savings deposits historically have been the primary source
of funds for the Bank's lending and investment activities and for its general
business activities. The Bank is authorized, however, to use advances from the
FHLB of Chicago to supplement its supply of lendable funds and to meet deposit
withdrawal requirements. Advances from the FHLB are secured by the Bank's stock
in the FHLB and a portion of the Bank's mortgage loans. The Bank had $8.0
million in advances from the FHLB as of June 30, 1997, which consisted of one
fixed rate advance maturing February 21, 2000 at 5.48% rate of interest, payable
monthly, in the amount of $1.5 million. An additional fixed rate advance
maturing July 15, 1997 at 5.72% rate of interest, payable monthly, in the amount
of $1.5 million. The Bank's daily advance from the FHLB amounted to $5.0 million
at 5.76% average monthly rate of interest which can adjust daily.

        The FHLB of Chicago functions as a central reserve bank providing credit
for savings institutions and certain other financial institutions. As a member,
the Bank is required to own capital stock in the FHLB and is authorized to apply
for advances on the security of such stock and certain of its home mortgages and
other assets (principally, securities which are obligations of, or guaranteed by
the United States) provided certain standards related to creditworthiness have
been met.

SUBSIDIARY ACTIVITIES

        ILLINOIS LEASING CORPORATION. Illinois Leasing Corporation ("ILC") is a
subsidiary incorporated to conduct leasing and lease brokering activities
outside of the banking activities of Illinois Community Bank. ILC is wholly
owned by the Company and was incorporated during the year ended June 30, 1997.
The operations of ILC are currently insignificant in comparison to the retail
operations of the Company. During the year ended June 30, 1997, ILC originated
thirteen commercial leases, primarily operating leases, in the total among of
$567,000. ILC generated $5,000 in net consolidated income for the year ended
June 30, 1997. The operations of ILC have been consolidated into those of the
Company.

        ILLINOIS FINANCIAL CORPORATION. Illinois Financial Corporation (IFC) is
a subsidiary incorporated to render financial services in the Bank's market
area. IFC is wholly owned by the Company and was incorporated during the year
ended June 30, 1997. IFC did not have any operational activities in the year
ended June 30, 1997.

        ILLINOIS GUARANTEE SERVICE CORPORATION. The Bank has one service
corporation, Illinois Guarantee Service Corporation. The primary purpose of the
corporation is to provide credit insurance products to existing Bank borrowers.
The Bank's investment in this service corporation was $26,000 at June 30, 1997,
with no commitments for further

                                  19
<PAGE>
 
investment, and the service corporation generated $5,000 in net income for the
Bank during the year ended June 30, 1997.

COMPETITION

        The Bank experiences substantial competition both in attracting and
retaining savings deposits and in the making of mortgage and other loans. Direct
competition for savings deposits primarily comes from other commercial banks and
savings institutions located in or near the Bank's primary market area.
Additional significant competition for savings deposits comes from credit
unions, money market funds and brokerage firms. The primary factors in competing
for loans are interest rates and loan origination fees and the range of services
offered by the various financial institutions. Competition for origination of
real estate loans normally comes from other commercial banks, thrift
institutions, mortgage bankers, mortgage brokers and insurance companies.
Management considers the Bank's competitors in its market area to consist of six
commercial banks and one savings institution located outside of its market area.
Overall, management believes that the Bank is the smallest of the financial
institutions competing for deposits and loans in its market area.

        The Bank is able to compete effectively in its primary market by
offering competitive interest rates and loan fees, providing a wide variety of
deposit products, and by emphasizing personal customer service. Management
believes that, as a result of the Bank's commitment to varied products and
personal service, the Bank has developed a solid base of core deposits and the
Bank's loan origination quality is among the leaders in the Bank's market area.

                                  REGULATION

REGULATION OF THE COMPANY

        GENERAL. The Company is a bank holding company within the meaning of the
Bank Holding Company Act ("BHCA"). As such, the Company is registered with the
Federal Reserve Board and subject to Federal Reserve Board regulation,
examination, supervision and reporting requirements. As a bank holding company,
the Company is required to furnish to the Federal Reserve Board annual and
quarterly reports of its operations at the end of each period and to furnish
such additional information as the Federal Reserve Board may require pursuant to
the BHCA. The Company is also subject to regular examination by the Federal
Reserve Board.

        Under the BHCA, a bank holding company must obtain the prior approval of
the Federal Reserve Board before (i) acquiring direct or indirect ownership or
control of any voting shares of any bank or bank holding company if, after such
acquisition, the bank holding company would directly or indirectly own or
control more than 5% of such shares; (2) acquiring all or substantially all of
the assets of another bank or bank holding company; or (3) merging or
consolidating with another bank holding company.

        Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994.
Effective September 29, 1995, the Riegle-Neal Interstate Banking and Branching
Efficiency Act of 1994 (the "Riegle-Neal Act") allows the Federal Reserve Board
to approve an application of an adequately capitalized and adequately managed
bank holding company to acquire control of, or acquire all or substantially all
of the assets of, a bank located in a state other than such holding company's
home state, without regard to whether the transaction is prohibited by the laws
of any state. The Federal Reserve Board may not approve the acquisition of bank
that has not been in existence for the minimum time period (not exceeding five
years) specified by the statutory law of the host state. The Riegle-Neal Act
also prohibits the Federal Reserve Board from approving an application if the
applicant (and its depository institution affiliates) controls or would control
more than 10% of the insured deposits in the United States or 30% or more of the
deposits in the target bank's home state or in any state in which the target
bank maintains a branch. The Riegle-Neal Act does not affect the authority of
states to limit the percentage of total insured deposits in the state which may
be held or controlled by a bank or bank

                                      20
<PAGE>
 
holding company to the extent such limitation does not discriminate against out-
of-state banks or bank holding companies. Individual states may also waive the
30% state-wide concentration limit contained in the Riegle-Neal Act.

        Additionally, beginning on June 1, 1997, the federal banking agencies
were authorized to approve interstate merger transactions without regard to
whether such transaction is prohibited by the law of any state, unless the home
state of one of the banks opts out of the Riegle-Neal Act by adopting a law
after the date of enactment of the Riegle-Neal Act and prior to June 1, 1997
which applies equally to all out-of-state banks and expressly prohibits merger
transactions involving out-of-state banks. Interstate acquisitions of branches
are permitted only if the law of the state in which the branch is located
permits such acquisitions. Interstate mergers and branch acquisitions are also
be subject to the nationwide and statewide insured deposit concentration amounts
described above.

        The Riegle-Neal Act authorizes the Office of Comptroller of the Currency
("OCC") and FDIC to approve interstate branching de novo by national and state
banks, respectively, only in states which specifically allow for such branching.
The Riegle-Neal Act also requires the appropriate federal banking agencies to
prescribe regulations by June 1, 1997 which prohibit any out-of-state bank from
using the interstate branching authority primarily for the purpose of deposit
production. These regulations include guidelines to ensure that interstate
branches operated by an out-of-state bank in a host state are reasonably helping
to meet the credit needs of the communities which they serve.

        The BHCA also prohibits, with certain exceptions, a bank holding company
from acquiring direct or indirect ownership or control of more than 5% of the
voting shares of a company that is not a bank or a bank holding company, or from
engaging directly or indirectly in activities other than those of banking,
managing or controlling banks, or providing services for its subsidiaries. The
principal exceptions to these prohibitions involve certain non-bank activities
which, by statute or by Federal Reserve Board regulation or order, have been
identified as activities closely related to the business of banking or managing
or controlling banks. The activities of the Company are subject to these legal
and regulatory limitations under the BHCA and the Federal Reserve Board's
regulations thereunder. Notwithstanding the Federal Reserve Board's prior
approval of specific nonbanking activities, the Federal Reserve Board has the
power to order a holding company or its subsidiaries to terminate any activity,
or to terminate its ownership or control of any subsidiary, when it has
reasonable cause to believe that the continuation of such activity or such
ownership or control constitutes a serious risk to the financial safety,
soundness or stability of any bank subsidiary of that holding company.

        CAPITAL ADEQUACY. The Federal Reserve Board has adopted guidelines
regarding the capital adequacy of bank holding companies, which require bank
holding companies to maintain specified minimum ratios of capital to total
assets and capital to risk-weighted assets. See "--Regulation of the Bank --
Capital Adequacy."

        DIVIDENDS AND DISTRIBUTIONS. The Federal Reserve Board has the power to
prohibit dividends by bank holding companies if their actions constitute unsafe
or unsound practices. The Federal Reserve Board has issued a policy statement on
the payment of cash dividends by bank holding companies, which expresses the
Federal Reserve Board's view that a bank holding company should pay cash
dividends only to the extent that the company's net income for the past year is
sufficient to cover both the cash dividends and a rate of earning retention that
is consistent with the company's capital needs, asset quality, and overall
financial condition.

        Bank holding companies are required to give the Federal Reserve Board
notice of any purchase or redemption of their outstanding equity securities if
the gross consideration for the purchase or redemption, when combined with the
net consideration paid for all such purchases or redemptions during the
preceding 12 months, is equal to 10% or more of the bank holding company's
consolidated net worth. The Federal Reserve Board may disapprove such a purchase
or redemption if it determines that the proposal would violate any law,
regulation, Federal Reserve Board order, directive, or any condition imposed by,
or written agreement with, the Federal Reserve Board. Bank holding companies
whose capital ratios exceed the thresholds for "well capitalized" banks on a
consolidated basis are exempt from the foregoing requirement if they were rated
composite 1 or 2 in their most recent inspection and are not the subject of any
unresolved supervisory issues.

                                      21
<PAGE>
 
REGULATION OF THE BANK

        GENERAL. The Bank is an Illinois state chartered commercial bank, a
member of the FHLB of Chicago and its deposits are insured by the FDIC through
the SAIF. The lending activities and other investments of the Bank must comply
with various state and federal regulatory requirements. The Bank is subject to
extensive governmental regulation and periodic regulatory reporting
requirements. The regulations by various governmental entities, as well as
Federal and State laws of general application affect the Bank in many ways
including but not limited to: requirements to maintain reserves against
deposits, payment of FDIC insurance, restrictions on investments, establishment
of lending limits and payment of dividends. The Bank is primarily supervised and
examined by OBRE, and specifically the Illinois Commissioner of Banks and Real
Estate (the "Commissioner") and the FDIC. The FDIC as well as the State of
Illinois have the authority to conduct special examinations of the Bank because
its deposits are insured by the SAIF (up to the legal maximum of $100,000 for
each insured depositor). The Bank is also subject to certain reserve
requirements promulgated by the Federal Reserve Board. This supervision and
regulation is intended primarily for the protection of depositors. Certain of
these regulatory requirements are referred to below or discussed elsewhere
herein.

        CAPITAL ADEQUACY. The Federal Reserve Board has established guidelines
with respect to the maintenance of appropriate levels of capital by bank holding
companies and state member banks, such as the Bank. The regulations impose two
sets of capital adequacy requirements: minimum leverage rules, which require
bank holding companies and banks to maintain a specified minimum ratio of
capital to total assets, and risk-based capital rules, which require the
maintenance of specified minimum ratios of capital to "risk-weighted" assets.

        The regulations of the Federal Reserve Board require bank holding
companies and state member banks to maintain a minimum leverage ratio of "Tier 1
capital" (as defined in the risk-based capital guidelines discussed in the
following paragraphs) to total assets of 3.0%. Although setting a minimum 3.0%
leverage ratio, the capital regulations state that only the strongest bank
holding companies and banks, with composite examination ratings of 1 under the
rating system used by the federal bank regulators, would be permitted to operate
at or near such minimum level of capital. All other bank holding companies and
banks are expected to maintain a leverage ratio of at least 1% to 2% above the
minimum ratio, depending on the assessment of an individual organization's
capital adequacy by its primary regulator. Any bank or bank holding company
experiencing or anticipating significant growth would be expected to maintain
capital well above the minimum levels. In addition, the Federal Reserve Board
has indicated that whenever appropriate, and in particular when a bank holding
company is undertaking expansion, seeking to engage in new activities or
otherwise facing unusual or abnormal risks, it will consider, on a case-by-case
basis, the level of an organization's ratio of tangible Tier 1 capital (after
deducting all intangibles) to total assets in making an overall assessment of
capital.

        The risk-based capital rules of the Federal Reserve Board require bank
holding companies and state member banks to maintain minimum regulatory capital
levels based upon a weighting of their assets and off-balance sheet obligations
according to risk. The risk-based capital rules have two basic components: a
core capital (Tier 1) requirement and a supplementary capital (Tier 2)
requirement. Core capital consists primarily of common stockholders' equity,
certain perpetual preferred stock (which must be noncumulative with respect to
banks), and minority interests in the equity accounts of consolidated
subsidiaries; less all intangible assets, except for certain purchased mortgage
servicing rights and purchased credit card relationships. Supplementary capital
elements include, subject to certain limitations, the allowance for losses on
loans and leases; perpetual preferred stock that does not qualify as Tier 1
capital and long-term preferred stock with an original maturity of at least 20
years from issuance; hybrid capital instruments, including perpetual debt and
mandatory convertible securities; and subordinated debt and intermediate-term
preferred stock.

        The risk-based capital regulations assign balance sheet assets and
credit equivalent amounts of off-balance sheet obligations to one of four broad
risk categories based principally on the degree of credit risk associated with
the obligor. The assets and off-balance sheet items in the four risk categories
are weighted at 0%, 20%, 50% and 100%. These computations result in the total
risk-weighted assets. The risk-based capital regulations require all banks and
bank holding companies to maintain a minimum ratio of total capital to total
risk-weighted assets of 8%, with at least 4% as

                                      22
<PAGE>
 
core capital. For the purpose of calculating these ratios: (i) supplementary
capital will be limited to no more than 100% of core capital; and (ii) the
aggregate amount of certain types of supplementary capital will be limited. In
addition, the risk-based capital regulations limit the allowance for loan losses
includable as capital to 1.25% of total risk-weighted assets.

        The table below provides information with respect to the Bank's
compliance with its regulatory capital requirements at June 30, 1997.
<TABLE>
<CAPTION>
 
                                                                                                                  To Be Well
                                                                                                               Capitalized Under
                                                                                             For Capital       Prompt Corrective
                                                                       Actual             Adequacy Purposes    Action Provisions
                                                                   ---------------        -----------------    -----------------
                                                                   Amount    Ratio         Amount    Ratio      Amount    Ratio
                                                                   ------    -----         ------    -----      ------    -----
                                                                                      (Dollars in thousands)
<S>                                                                <C>       <C>           <C>       <C>        <C>       <C>
As of June 30, 1997:                                                                                       
   Total Capital (to Risk Weighted Assets)..................       $6,478    16.51%        $3,140    8.0%       $3,924    10.0%
   Tier 1 Capital (to Risk Weighted Assets).................        6,176    15.74          1,570    4.0         2,355     6.0
   Tier 1 Capital (to Average Assets).......................        6,176    10.74          2,301    4.0         2,876     5.0
<CAPTION> 
(1)Reconciliation from GAAP capital to tangible capital:
                                                        (In thousands)
    GAAP capital..........................................  $6,499
    Real estate held for investment.......................      45
    Unrealized gains on available-for-sale securities.....     278     
                                                            ------     
                                                            $6,176     
                                                            ====== 
</TABLE> 

        Federal law provides the federal banking regulators with broad power to
take prompt corrective action to resolve the problems of undercapitalized
institutions. The extent of the regulators' powers depends on whether the
institution in question is "well capitalized," "adequately capitalized,"
"undercapitalized," "significantly undercapitalized" or "critically
undercapitalized." Depending upon the capital category to which an institution
is assigned, the regulators' corrective powers include: requiring the submission
of a capital restoration plan; placing limits on asset growth and restrictions
on activities; requiring the institution to issue additional capital stock
(including additional voting stock) or to be acquired; restriciting transactions
with affiliates; restricting the interest rate the institution may pay on
deposits; ordering a new election of directors of the institution; requiring the
senior executive officers or directors by dismissed; prohibiting the institution
from accepting deposits from correspondent banks; requiring the institution to
divest certain subsidiaries; prohibiting the payment of principal or interest on
subordinated debt; and ultimately, appointing a receiver for the institution.

        Additionally, institutions insured by the FDIC may be liable for any
loss incurred by, or reasonably expected to be incurred by, the FDIC in
connection with the default of commonly controlled FDIC insured depository
institutions or any assistance provided by the FDIC to commonly controlled FDIC
insured depository institutions in danger of default.

        At June 30, 1997, the Bank exceeded all regulatory minimum capital
requirements.

        DIVIDEND RESTRICTIONS. Under the Illinois Banking Act, Illinois-
chartered banks, such as the Bank, may not pay, without prior regulatory
approval, dividends in excess of their net profits. The payment of dividends by
any financial institution is affected by the requirements to maintain adequate
capital pursuant to applicable capital adequacy guidelines and regulations, and
a financial institution generally is prohibited from paying any dividends if,
following payment thereof, the institution would be undercapitalized. As
described above, the Bank exceeded its minimum capital requirements under
applicable guidelines as of June 30, 1997. Notwithstanding the availability of
funds for dividends,

                                      23
<PAGE>
 
however, the federal banking regulators may prohibit the payment of any
dividends by the Bank if they determine such payment would constitute an unsafe
or unsound practice.

        SUPERVISORY ASSESSMENTS. Illinois banks are required to pay supervisory
fees to the Commissioner to fund the operations of that state agency. The amount
of such supervisory fees is based upon each institution's total assets,
including consolidated subsidiaries, as reported to the agency. The amount of
such fees was not material to the Bank's operations during the year ended June
30, 1997.

        DEPOSIT INSURANCE. Because the Bank was a savings association prior to
the Bank Conversion, its deposits continue to insured by the SAIF rather than by
the Bank Insurance Fund ("BIF") which generally insured the deposits of
commercial banks. The Bank is required to pay semi-annual assessments based on a
percentage of its insured deposits to the FDIC for insurance of its deposits by
the SAIF. Under the Federal Deposit Insurance Act, the FDIC is required to set
semi-annual assessments for SAIF-insured institutions to maintain the designated
reserve ratio of the SAIF at 1.25% of estimated insured deposits or at a higher
percentage of estimated insured deposits that the FDIC determines to be
justified for that year by circumstances raising a significant risk of
substantial future losses to the SAIF.

        Under the risk-based deposit insurance assessment system adopted by the
FDIC, the assessment rate for an insured depository institution depends on the
assessment risk classification assigned to the institution by the FDIC, which is
determined by the institution's capital level and supervisory evaluations. Based
on the data reported to regulators for the date closest to the last day of the
seventh month preceding the semi-annual assessment period, institutions are
assigned to one of three capital groups-- "well capitalized," "adequately
capitalized" or "undercapitalized." Within each capital group, institutions are
assigned to one of three subgroups on the basis of supervisory evaluations by
the institution's primary supervisory authority and such other information as
the FDIC determines to be relevant to the institution's financial condition and
the risk posed to the deposit insurance fund.

        For the past several semi-annual periods, institutions with SAIF-
assessable deposits, like the Bank, have been required to pay higher deposit
insurance premiums than institutions with deposits insured by the BIF. In order
to recapitalize the SAIF and address the premium disparity, the recently-enacted
Deposit Insurance Funds Act of 1996 authorized the FDIC to impose a one-time
special assessment on institutions with SAIF-assessable deposits based on the
amount determined by the FDIC to be necessary to increase the reserve levels of
the SAIF to the designated reserve ratio of 1.25% of insured deposits.
Institutions were assessed at the rate of 65.7 basis points based on the amount
of their SAIF-assessable deposits as of March 31, 1995. As a result of the
special assessment the Bank incurred an expense of $208,000 during the first
quarter of fiscal 1997, the quarter ended September 30, 1996.

        The FDIC has adopted a new assessment schedule for SAIF deposit
insurance pursuant to which the assessment rate for well-capitalized
institutions with the highest supervisory ratings would be reduced to zero and
institutions in the lowest risk assessment classification will be assessed at
the rate of 0.27% of insured deposits. Until December 31, 1999, however, SAIF-
insured institutions, will be required to pay assessments to the FDIC at the
rate of 6.5 basis points to help fund interest payments on certain bonds issued
by the Financing Corporation ("FICO") an agency of the federal government
established to finance takeovers of insolvent thrifts. During this period, BIF
members will be assessed for these obligations at the rate of 1.3 basis points.
After December 31, 1999, both BIF and SAIF members will be assessed at the same
rate for FICO payments.

        TRANSACTIONS WITH AFFILIATES. Transactions between a state member bank
and any affiliate are governed by Sections 23A and 23B of the Federal Reserve
Act. An affiliate of a state member bank is any company or entity which
controls, is controlled by or is under common control with the state member
bank. In a holding company context, the parent holding company of a state member
bank (such as the Company) and any companies which are controlled by such parent
holding company are affiliates of the state member bank. Generally, Sections 23A
and 23B (i) limit the extent to which the bank or its subsidiaries may engage in
"covered transactions" with any one affiliate to an amount equal to 10% of such
bank's capital stock and surplus, and contain an aggregate limit on all such
transactions with all affiliates to an amount equal to 20% of such capital stock
and surplus and (ii) require that all such transactions be on

                                  24
<PAGE>
 
terms substantially the same, or at least as favorable, to the institution or
subsidiary as those provided to a non-affiliate. The term "covered transaction"
includes the making of loans, purchase of assets, issuance of a guarantee and
similar other types of transactions. In addition to the restrictions imposed by
Sections 23A and 23B, no state member bank may (i) loan or otherwise extend
credit to an affiliate, except for any affiliate which engages only in
activities which are permissible for bank holding companies, or (ii) purchase or
invest in any stocks, bonds, debentures, notes or similar obligations of any
affiliate, except for affiliates which are subsidiaries of the state member
bank. The BHCA further prohibits a depository institution from extending credit
to or offering any other services, or fixing or varying the consideration for
such extension of credit or service, on the condition that the customer obtain
some additional service from the institution or certain of its affiliates or not
obtain services of a competitor of the institution, subject to certain
exceptions.

        LOANS TO DIRECTORS, EXECUTIVE OFFICERS AND PRINCIPAL STOCKHOLDERS. State
member banks such as the Bank, are also subject to the restrictions contained in
Section 22(h) and 22(g) of the Federal Reserve Act on loans to executive
officers, directors and principal stockholders. Under Section 22(h), loans to a
director, executive officer or greater than 10% stockholder of a state member
bank and certain affiliated interests of the foregoing, may not exceed, together
with all other outstanding loans to such person and affiliated interests, the
bank's loans to one borrower limit (generally equal to 15% of the institution's
unimpaired capital and surplus) and all loans to such persons may not exceed the
institution's unimpaired capital and unimpaired surplus. Section 22(h) also
prohibits loans, above amounts prescribed by the appropriate federal banking
agency, to directors, executive officers and greater than 10% stockholders of a
state member bank, and their respective affiliates, unless such loan is approved
in advance by a majority of the board of directors of the state member bank with
any "interested" director not participating in the voting. The Federal Reserve
Board has prescribed the loan amount (which includes all other outstanding loans
to such person), as to which such prior board of director approval if required,
as being the greater of $25,000 or 5% of capital and surplus (up to $500,000).
Further, the Federal Reserve Board pursuant to Section 22(h) requires that loans
to directors, executive officers and principal stockholders be made on terms
substantially the same as offered in comparable transactions to other persons
unless the loan is made pursuant to a benefit or compensation plan that is
widely available to other employees and does not give preference to insiders.
Section 22(h) also prohibits a depository institution from paying the overdrafts
of any of its executive officers or directors. Section 22(g) of the Federal
Reserve Act requires that loans to executive officers of depository institutions
be approved by the board of directors of the institution, and imposes reporting
requirements for and additional restrictions on the type, amount and terms of
credits to such officers. In addition, Section 106 of the BHCA prohibits
extensions of credit to executive officers, directors, and greater than 10%
stockholders of a depository institution by any other institution which has a
correspondent banking relationship with the institution, unless such extension
of credit is on substantially the same terms as those prevailing at the time for
comparable transactions with other persons and does not involve more than the
normal risk of repayment or present other unfavorable features.

        LIMITS ON LOANS TO ONE BORROWER. State member banks, such as the Bank
generally are subject to the lending limits applicable to national banks. With
certain limited exceptions, the maximum amount that a savings institution may
lend to any borrower (including certain related entities of the borrower) at one
time may not exceed 15% of the unimpaired capital and surplus of the savings
institution, plus an additional 10% of unimpaired capital and surplus for loans
fully secured by readily marketable collateral.

        At June 30, 1997, the maximum amount that the Bank could have loaned to
any one borrower without prior approval was $1.3 million. At such date, the
largest aggregate amount of loans that the Bank had outstanding to any one
borrower and their related interests was $1.0 million.

        TRANSACTIONS WITH AFFILIATES. Transactions between a state member bank
and any affiliate are governed by Sections 23A and 23B of the Federal Reserve
Act. An affiliate of a state member bank is any company or entity which
controls, is controlled by or is under common control with the state member
bank. In a holding company context, the parent holding company (such as the
Company) and any companies which are controlled by such parent holding company
are affiliates of the state member bank. Generally, Sections 23A and 23B (i)
limit the extent to which the state

                                  25
<PAGE>
 
member bank or its subsidiaries may engage in "covered transactions" with any
one affiliate to an amount equal to 10% of such institution's capital stock and
surplus, and contain an aggregate limit on all such transactions with all
affiliates in an amount equal to 20% of such capital stock and surplus and (ii)
require that all such transactions be on terms substantially the same, or at
least as favorable, to the institution or subsidiary as those provided to a non-
affiliate. The term "covered transaction" includes the making of loans, purchase
of assets, issuance of a guarantee and similar other types of transactions. In
addition to the restrictions imposed by Sections 23A and 23B, no state member
bank may (i) loan or otherwise extend credit to an affiliate, except for any
affiliate which engages only in activities which are permissible for bank
holding companies, or (ii) purchase or invest in any stocks, bonds, debentures,
notes or similar obligations of an affiliate, except for affiliates which are
subsidiaries of the state member bank.

        BRANCHING AUTHORITY. Illinois banks, such as the Bank, have the
authority under Illinois law to establish branches anywhere in the State of
Illinois, subject to receipt of all required regulatory approvals. As noted
above, effective June 1, 1997, the Riegle-Neal Interstate Banking and Branching
Efficiency Act of 1994 allowed banks to establish interstate branch networks
through acquisitions of other banks, subject to certain conditions, including
certain limitations on the aggregate amount of deposits that may be held by the
surviving bank and all of its insured depository institution affiliates. The
establishment of DE NOVO interstate branches or the acquisition of individual
branches of a bank in another state (rather than the acquisition of an out-of-
state bank in its entirety) is allowed by the Act only if specifically
authorized by state law. The legislation allows individual states to "opt-out"
of certain provisions of the Act by enacting appropriate legislation prior to
June 1, 1997. Illinois enacted legislation permitting interstate mergers
beginning on June 1, 1997.

        STATE BANK ACTIVITIES. Under federal law and FDIC regulations, FDIC
insured state banks, such as the Bank, are prohibited, subject to certain
exceptions, from making or retaining equity investments of a type, or in an
amount, that are not permissible for a national bank. Federal law and FDIC
regulations also prohibit FDIC insured state banks and their subsidiaries,
subject to certain exceptions, from engaging as principal in any activity that
is not permitted for a national bank or its subsidiary, respectively, unless the
bank meets, and continues to meet, its minimum regulatory capital requirements
and the FDIC determines the activity would not pose a significant risk to the
deposit insurance fund of which the bank is a member. Impermissible investments
and activities must be divested or discontinued within certain time frames set
by the FDIC. These restrictions have not had, and are not currently expected to
have, a material impact on the operations of the Bank.

        FEDERAL HOME LOAN BANK SYSTEM. The Bank is a member of the FHLB System,
which consists of 12 district Federal Home Loan Banks subject to supervision and
regulation by the Federal Housing Finance Board ("FHFB"). The Federal Home Loan
Banks provide a central credit facility primarily for member institutions. As a
member of the FHLB of Chicago, the Bank is required to acquire and hold shares
of capital stock in the FHLB of Chicago in an amount at least equal to 1% of the
aggregate unpaid principal of its home mortgage loans, home purchase contracts,
and similar obligations at the end of each year, or 1/20 of its advances
(borrowings) from the FHLB of Chicago, whichever is greater. The Bank was in
compliance with this requirement with investment in FHLB of Chicago stock at
June 30, 1997, of $398,000. The FHLB of Chicago serves as a reserve or central
bank for its member institutions within its assigned district. It is funded
primarily from proceeds derived from the sale of consolidated obligations of the
FHLB System. It offers advances to members in accordance with policies and
procedures established by the FHFB and the Board of Directors of the FHLB of
Chicago. Long-term advances may only be made for the purpose of providing funds
for residential housing finance. The Bank had $8.0 million in advances
outstanding from the FHLB of Chicago with $35,000 of accrued interest payable as
of June 30, 1997. The advances consisted of a one fixed rate advance maturing
February 21, 2000 at 5.48% rate of interest, payable monthly, in the amount of
$1.5 million. An additional fixed rate advance maturing July 15, 1997 at 5.72%
rate of interest, payable monthly, in the amount of $1.5 million. The Bank's
daily advance from the FHLB amounted to $5.0 million at 5.76% average monthly
rate of interest which can adjust daily.

                                  26
<PAGE>
 
        FEDERAL RESERVE SYSTEM. Pursuant to regulations of the Federal Reserve
Board, all FDIC-insured depository institutions must maintain average daily
reserves against their net transaction accounts. This percentage is subject to
adjustment by the Federal Reserve Board. No reserves are required to be
maintained on the first $4.3 million of transaction accounts, reserves equal to
3% must be maintained on the next $49.3 million of transaction accounts, and a
reserve of 10% must be maintained against all remaining transaction accounts.
These reserve requirements are subject to adjustment by the Federal Reserve
Board. Because required reserves must be maintained in the form of vault cash or
in a noninterest bearing account at a Federal Reserve Bank, the effect of the
reserve requirement is to reduce the amount of the institution's interest-
earning assets. As of June 30, 1997, the Bank met its reserve requirements.

PROMPT CORRECTIVE REGULATORY ACTION

        General. Under the Federal Deposit Insurance Corporation Improvement Act
of 1991 ("FDICIA") federal banking regulators are required to take prompt
corrective action if an insured depository institution fails to satisfy certain
minimum capital requirements, including a leverage limit, a risk-based capital
requirement, and any other measure of capital deemed appropriate by the federal
banking regulators for measuring the capital adequacy of an insured depository
institution. All institutions, regardless of their capital levels, are
restricted from making any capital distribution or paying any management fees
that would cause the institution to fail to satisfy the minimum levels for any
of its capital requirements. An institution that fails to meet the minimum level
for any relevant capital measure (an "undercapitalized institution") may be: (i)
subject to increased monitoring by the appropriate federal banking regulator;
(ii) required to submit an acceptable capital restoration plan within 45 days;
(iii) subject to asset growth limits; and (iv) required to obtain prior
regulatory approval for acquisitions, branching and new lines of businesses. The
capital restoration plan must include a guarantee by the institution's holding
company that the institution will comply with the plan until it has been
adequately capitalized on average for four consecutive quarters, under which the
holding company would be liable up to the lesser of 5% of the institution's
total assets or the amount necessary to bring the institution into capital
compliance as of the date it failed to comply with its capital restoration plan.
A "significantly undercapitalized" institution, as well as any undercapitalized
institution that does not submit an acceptable capital restoration plan, may be
subject to regulatory demands for recapitalization, broader application of
restrictions on transactions with affiliates, limitations on interest rates paid
on deposits, asset growth and other activities and possible replacement of
directors and officers, and restrictions on capital distributions by any bank
holding company controlling the institution. Any company controlling the
institution could also be required to divest the institution or the institution
could be required to divest subsidiaries. The senior executive officers of a
significantly undercapitalized institution may not receive bonuses or increases
in compensation without prior approval and the institution is prohibited from
making payments of principal or interest on its subordinated debt. In their
discretion, the federal banking regulators may also impose the foregoing
sanctions on an undercapitalized institution if the regulators determine that
such actions are necessary to carry out the purposes of the prompt corrective
action provisions. If an institution's ratio of tangible capital to total assets
falls below a "critical capital level," the institution will be subject to
conservatorship or receivership within 90 days unless periodic determinations
are made that forbearance from such action would better protect the deposit
insurance fund. Unless appropriate findings and certifications are made by the
appropriate federal bank regulatory agencies, a critically undercapitalized
institution must be placed in receivership if it remains critically
undercapitalized on average during the calendar quarter beginning 270 days after
the date it became critically undercapitalized.

        The federal banking regulators have adopted regulations implementing the
prompt corrective action provisions of FDICIA. Under such regulations, the
federal banking regulators will generally measure a depository institution's
capital adequacy on the basis of its total risk-based capital ratio (the ratio
of its total capital to risk-weighted assets), Tier 1 risk-based capital ratio
(the ratio of its core capital to risk-weighted assets) and leverage ratio (the
ratio of its core capital to adjusted total assets). Under the regulations, a
depository institution that is not subject to an order or written directive by
its primary federal regulator to meet or maintain a specific capital level is
deemed "well-capitalized" if it also has: (i) a total risk-based capital ratio
of 10% or greater; (ii) a Tier 1 risk-based capital ratio of 6% or greater; and
(iii) a leverage ratio of 5% or greater. An "adequately capitalized" depository
institution is an institution that does not meet the definition of well-
capitalized and has: (i) a total risk-based capital ratio of 8% or greater; (ii)
a Tier 1 risk-based capital ratio of 4% or greater; and (iii) a leverage ratio
of 4% or greater (or 3% or greater if the institution has a

                                      27
<PAGE>
 
composite 1 CAMEL rating). An "undercapitalized institution" is a depository
institution that has (i) a total risk-based capital ratio less than 8%; or (ii)
a Tier 1 risk-based capital ratio of less than 4%; or (iii) a leverage ratio of
less than 4% (or 3% if the institution has a composite 1 CAMEL rating). A
"significantly undercapitalized" institution is defined as a depository
institution that has: (i) a total risk-based capital ratio of less than 6%; or
(ii) a Tier 1 risk-based capital ratio of less than 3%; or (iii) a leverage
ratio of less than 3%. A "critically undercapitalized" depository institution is
defined as a depository institution that has a ratio of "tangible equity" to
total assets that is equal to or less than 2%. "Tangible equity" is defined as
core capital plus the institution's outstanding cumulative perpetual preferred
stock (and related surplus) less all intangibles other than qualifying
supervisory goodwill and certain mortgage servicing rights. The appropriate
federal banking agency may reclassify a well capitalized depository institution
as adequately capitalized and may require an adequately capitalized or
undercapitalized institution to comply with the supervisory actions applicable
to institutions in the next lower capital category (but may not reclassify a
significantly undercapitalized institution as critically undercapitalized) if
the federal banking agency determines, after notice and an opportunity for a
hearing, that the depository institution is in an unsafe or unsound condition or
if the federal banking agency determines that the institution has received and
not corrected a less-than-satisfactory rating. As of June 30, 1997, the Bank was
classified as "well-capitalized" under the prompt corrective action regulations.

        Safety and Soundness Guidelines. Under FDICIA, as amended by the Riegle
Community Development and Regulatory Improvement Act of 1994 (the "CDRI Act"),
each Federal banking agency is required to establish safety and soundness
standards for institutions under its authority. On July 10, 1995, the federal
banking agencies, including the Federal Reserve Board, released Interagency
Guidelines Establishing Standards for Safety and Soundness and published a final
rule establishing deadlines for submission and review of safety and soundness
compliance plans. The final rule and the guidelines went into effect on August
9, 1995. The guidelines require depository institutions to maintain internal
controls and information systems and internal audit systems that are appropriate
for the size, nature and scope of the institution's business. The guidelines
also establish certain basic standards for loan documentation, credit
underwriting, interest rate risk exposure, and asset growth. The guidelines
further provide that depository institutions should maintain safeguards to
prevent the payment of compensation, fees and benefits that are excessive or
that could lead to material financial loss, and should take into account factors
such as comparable compensation practices at comparable institutions. If the
appropriate federal banking agency determines that a depository institution is
not in compliance with the safety and soundness guidelines, it may require the
institution to submit an acceptable plan to achieve compliance with the
guidelines. A depository institution must submit an acceptable compliance plan
to its primary federal regulator within 30 days of receipt of a request for such
a plan. Failure to submit or implement a compliance plan may subject the
institution to regulatory sanctions. Management believes that the Bank already
meets substantially all the standards adopted in the interagency guidelines, and
therefore does not believe that implementation of these regulatory standards
will materially affect the Bank's operations.

        Additionally under FDICIA, as amended by the CDRI Act, the federal
banking agencies are required to establish standards relating to the asset
quality and earnings that the agencies determine to be appropriate. On July 10,
1995, the federal banking agencies, including the Federal Reserve Board, issued
proposed guidelines relating to asset quality and earnings. Under the proposed
guidelines, an FDIC insured depository institution should maintain systems,
commensurate with its size and the nature and scope of its operations, to
identify problem assets and prevent deterioration in those assets as well as to
evaluate and monitor earnings and ensure that earnings are sufficient to
maintain adequate capital and reserves. Management believes that the asset
quality and earnings standards, in the form proposed by the banking agencies,
would not have a material effect on the Bank's operations.

                                   TAXATION

        The Company and its subsidiaries will file a consolidated federal income
tax return on a June 30 fiscal year basis. Consolidated returns have the effect
of eliminating intercompany distributions, including dividends, from the
computation of consolidated taxable income for the taxable year in which the
distributions occur.

        The Company's and the Bank's federal income tax returns have not been
audited in the last five years.

                                      28
<PAGE>
 
        For additional information regarding federal income taxes, see Notes H
and I of Notes to Consolidated Financial Statements.

        The State of Illinois has a corporate income tax which subjects the
Company's Illinois taxable income to a 4.8% tax and a Personal Property
Replacement tax of 2.5%. However, by virtue of statutory provisions relative to
a calculations of taxes assessed against corporations, such corporations do not
pay state income tax in years in which income on United States Government
securities exceeds taxable income.

        For additional information regarding taxation, see Note I of Notes to
Consolidated Financial Statements.

                                   EMPLOYEES

        At June 30, 1997, the Bank had 29 full-time and six part-time employees.
The Company has no separate employees, except those of the Bank. None of the
Bank's employees is represented by a collective bargaining agreement. The Bank
believes that it enjoys good relations with its personnel.

EXECUTIVE OFFICERS OF THE COMPANY AND THE BANK

        The Bank has made significant changes in its management personnel. For
more information, see "Changes in Key Management Personnel." The current
management of the Bank is described below.

        JOHN H. LEONARD has been in the financial institutions industry for more
than 22 years and currently serves as Senior Vice President and Chief Credit
Officer, a position he has held since May 1996. Prior to that time, Mr. Leonard
was Assistant Vice-President/Commercial Loan Officer of Citizens Bank of
Illinois in Effingham, Illinois. He is a Director for the Effingham Chamber of
Commerce and a Director for the Effingham Family YMCA.

        GERALD E. LUDWIG is owner of Ludwig Medical, Inc., a manufacturer of
plastic disposable medical devices. Mr. Ludwig was elected Chairman of the Board
and Chief Executive Officer of the Bank on April 18, 1995. Mr. Ludwig also
serves as Chairman of the Company.

        DOUGLAS A. PIKE has been in the financial institutions industry for more
than 12 years and joined the Bank in February 1995 as Vice President of Lending.
Mr. Pike was appointed President and Chief Operating Officer of the Bank on 
June 20, 1995. Prior to joining the Bank, he served as loan officer of Effingham
State Bank and, prior to that, as consumer loan officer of First National Bank
of Effingham, both in Effingham, Illinois. Mr. Pike is a Commissioner for the
Effingham City Council, and a Director for the Effingham County Community
Development Corporation. Mr. Pike also serves as President of the Company.

        RONALD R. SCHETTLER has been in the financial institutions industry for
more than 29 years, and currently serves as Senior Vice President of the Bank in
charge of administration and investments, a position he has held since joining
the Bank in June 1995. Prior to that time, Mr. Schettler was Vice President of
Effingham State Bank in Effingham, Illinois. He is a member of the United
Methodist Church, the Scottish Rite, the Effingham Chamber of Commerce and the
Master Masons. Mr. Schettler also serves as director of the Company.

        DONNIE U. DUEKER has been in the financial institution industry for more
than 8 years and currently serves as Vice President and Trust Officer of the
Bank, while also serving as a General Securities Representative for the Bank and
Primevest Financial Services, Inc. Prior to working for the Bank, Mr. Dueker was
Assistant Vice President and Trust Officer of Citizens Trust Company in
Effingham, Illinois. He is a member of the Presbyterian Church and served as
Secretary and Treasurer as a member of the Effingham County United Way Board of
Directors.

                                      29
<PAGE>
 
ITEM 2.  DESCRIPTION OF PROPERTY
--------------------------------

        The following table sets forth certain information at June 30, 1997
regarding the Bank's office facilities, which are owned by the Bank, and certain
other information relating to this property at that date.
<TABLE>
<CAPTION>
 
 
                         Year Completed   Square Footage   Net Book Value
                         --------------   --------------   --------------
<S>                      <C>              <C>              <C>     
Main Office:
 
 210 E. Fayette Avenue
 Effingham, Illinois           1970             2,940          $  239
 
Mid-America Office:
 
 1300 North Keller Drive
 Effingham, Illinois           1997(1)         10,000          $1,762
 
</TABLE>        
----------------------
(1)  The branch, a two story building with a basement, was completed in
     January of 1997.  This facility was constructed in a high traffic area of
     Effingham to increase needed office space and increase market awareness.
     The lending operation of Illinois Community Bank is primarily located at
     this branch.  In addition, a portion of this branch is rented until the
     Bank needs additional space.

        At June 30, 1997, the net book values of the Bank's computer equipment
and other furniture, fixtures and equipment totaled $741,000. For more
information, see Note F of Notes to Consolidated Financial Statements.

ITEM 3.  LEGAL PROCEEDINGS
--------------------------

        Although the Bank, from time to time, is involved in various legal
proceedings in the normal course of business, there are no material legal
proceedings to which the Bank or its subsidiary is a party or to which any of
their property is subject.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
------------------------------------------------------------

        No matters were submitted to a vote of security holders during the
fourth quarter of the fiscal year ended June 30, 1997.

                                    PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER 
------------------------------------------------------------------------
        MATTERS
        -------

        The information contained under the section captioned "Market
Information" in the Annual Report to Stock holders for the Fiscal Year Ended
June 30, 1997 (the "Annual Report") is incorporated herein by reference. For
information regarding restrictions on the payment of dividends see Item 1.
"Business -- Regulation -- Dividend Limitations."

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
------------------------------------------------------------------

        The information contained in the section captioned "Management's
Discussion and Analysis of Financial Condition and Results of Operations" in the
Annual Report is incorporated herein by reference.

                                       30
<PAGE>
 
ITEM 7.  FINANCIAL STATEMENTS
-----------------------------

         The consolidated financial statements contained in the Annual Report
which are listed under Item 14 herein are incorporated herein by reference.


ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
------------------------------------------------------------------------
         FINANCIAL DISCLOSURE
         --------------------

         Not applicable.


                                   PART III

ITEM 9.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT; COMPLIANCE
-----------------------------------------------------------------------
         WITH SECTION 16(A) OF THE EXCHANGE ACT
         --------------------------------------

         The information contained under the section captioned "Proposal I--
Election of Directors" in the Company's definitive proxy statement for the 1997
Annual Meeting of Stockholders (the "Proxy Statement") is incorporated herein by
reference.

         During the year ended June 30, 1997, the Registrant's directors and
officers complied with the filing requirements of Section 16(a) of the
Securities Exchange Act of 1934.

ITEM 10. EXECUTIVE COMPENSATION
-------------------------------

         The information contained under the section captioned "Proposal I--
Election of Directors -- Executive Compensation" in the Proxy Statement is
incorporated herein by reference.


ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
-----------------------------------------------------------------------

(a) and (b)   The information required by this item is incorporated herein by
              reference to the sections captioned "Proposal I - Election of
              Directors" and "Voting Securities and Principal Holders Thereof"
              of the Proxy Statement.

(c)           Management knows of no arrangements, including any pledge by any
              person of securities of the Bank, the operation of which may at a
              subsequent date result in a change in control of the registrant.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
-------------------------------------------------------

         The information required by this item is incorporated herein by
reference to the section captioned "Proposal I -- Election of Directors" of the
Proxy Statement.

                                       31
<PAGE>
 
                                    PART IV

ITEM 13.  FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
----------------------------------------------------------------

(a)   1.  Independent Auditors' Report (incorporated by reference to the Annual
          Report)

          Consolidated Financial Statements (incorporated by reference to the
          Annual Report)

          (a)  Consolidated Statements of Financial Condition at June 30, 1997
               and 1996

          (b)  Consolidated Statements of Earnings for the Years Ended June 30,
               1997 and 1996

          (c)  Consolidated Statements of Stockholders' Equity for the Years
               Ended June 30, 1997 and 1996

          (d)  Consolidated Statements of Cash Flows for the Years Ended 
               June 30, 1997 and 1996

          (e)  Notes to Consolidated Financial Statements.

      2.  All schedules have been omitted as the required information is either
          inapplicable or included in the Notes to Consolidated Financial
          Statements.

      3.  Exhibits and Index to Exhibits

          (a)  Exhibits
 
          The following exhibits are either attached to or incorporated by
          reference in this Annual Report on Form 10-KSB.
<TABLE> 
<CAPTION> 

                                                                                    Page No.
                                                                                in Sequentially
      No.    Description                                                         Numbered Copy
     -----   -----------                                                        ---------------
<S>          <C>                                                               <C> 
      (3a)   Articles of Incorporation of Illinois Community Bancorp, Inc.              *
 
      (3b)   Bylaws of Illinois Community Bancorp, Inc.                                 *

      (4)    Common Stock Certificate of Illinois Community Bancorp, Inc.               *

     (10a)   Illinois Community Bancorp, Inc. Stock Option Plan                         *

     (10b)   Illinois Community Bancorp, Inc. Management Recognition Plan               *

     (10c)   Retirement Plan for Non-employee Directors                                 *

     (10d)   Profit Sharing Plan                                                        *

     (10e)   Employment Agreement between the Bank and Douglas A. Pike                  *
             dated January 16, 1996
</TABLE> 
                                       32
<PAGE>
<TABLE> 
<CAPTION> 
<S>           <C>                                                               <C> 
   (10f)      Employment Agreement between the Bank and Ronald R. Schettler
              dated January 16, 1996                                                    *

   (10g)      Employment Agreement between the Bank and John H. Leonard                **
              dated May 13, 1996

   (13)       Annual Report to Stockholders for the Fiscal Year Ended 
              June 30, 1997

   (21)       Subsidiaries of the Registrant

   (27)       Financial Data Schedule
</TABLE> 
----------------
*   Incorporated by reference to the Corporation's Registration Statement on
    Form S-4 (333-3322) filed with the Securities and Exchange Commission on
    April 9, 1996.
**  Previously filed.

(b) During the last quarter of the fiscal year ended June 30, 1997, the Bank did
    not file any Current Reports on Form 8-K.

(c) All required exhibits are filed as attached.

(d) No financial statement schedules are required.

                                      33
<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.

                                   ILLINOIS COMMUNITY BANCORP, INC.

Date: September 30, 1997           By: /s/ Gerald E. Ludwig
                                      -----------------------------------------
                                           Gerald E. Ludwig
                                           Chairman of the Board and Chief
                                           Executive Officer
                                           Duly Authorized Representative

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


By: /s/ Gerald E. Ludwig                        Date: September 30, 1997
   -----------------------------------------
        Gerald E. Ludwig
        Chairman of the Board 
        (Principal Executive Officer)


By: /s/ Michael F. Sehy                         Date: September 30, 1997
   -----------------------------------------
        Michael F. Sehy
        Vice Chairman of the Board


By: /s/ Douglas A. Pike                         Date: September 30, 1997
   -----------------------------------------
        Douglas A. Pike
        Director and President (Principal
        Financial and Accounting Officer)


By: /s/ Milton Hinkle                           Date: September 30, 1997
   -----------------------------------------
        Milton Hinkle
        Director


By: /s/ Frederick C. Schaefer                   Date: September 30, 1997
   -----------------------------------------
        Frederick C. Schaefer
        Director


By: /s/ Ernest E. Garbe                         Date: September 30, 1997
   -----------------------------------------
        Ernest E. Garbe
        Director


By: /s/ Garrett M. Andes, II                    Date: September 30, 1997
   -----------------------------------------
        Garrett M. Andes, II
        Director

 
By: /s/ Scott R. Kabbes                         Date: September 30, 1997
   -----------------------------------------
        Scott R. Kabbes
        Director
 

By: /s/ Ronald R. Schettler                     Date: September 30, 1997
   -----------------------------------------
        Ronald R. Schettler
        Director


<PAGE>
 
                               INDEX TO EXHIBITS



     (3a)   Articles of Incorporation of Illinois Community Bancorp, Inc. *
     (3b)   Bylaws of Illinois Community Bancorp, Inc. *
     (4)    Common Stock Certificate of Illinois Community Bancorp, Inc. *
     (10a)  Illinois Community Bancorp, Inc. Stock Option Plan *
     (10b)  Illinois Community Bancorp, Inc. Management Recognition Plan *
     (10c)  Retirement Plan for Non-employee Directors *
     (10d)  Profit Sharing Plan *
     (10e)  Employment Agreement between the Bank and Douglas A. Pike dated
            January 16, 1996 *
     (10f)  Employment Agreement between the Bank and Ronald R. Schettler dated
            January 16, 1996 *
     (10g)  Employment Agreement between the Bank and John H. Leonard dated 
            May 13, 1996 **
     (13)   Annual Report to Stockholders for the Fiscal Year Ended June 30,
            1997
     (21)   Subsidiaries of the Registrant
     (27)   Financial Data Schedule
----------------
*   Incorporated by reference to the Corporation's Registration Statement on
    Form S-4 (333-3322) filed with the Securities and Exchange Commission on
    April 9, 1996.
**  Previously filed.