SECURITIES AND EXCHANGE COMMISSION
                                Washington, D.C.

                                    FORM 10-K

                  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                   For the fiscal year ended December 31, 1998

                               PARK BANCORP, INC.
             (Exact name of registrant as specified in its charter)

                                    DELAWARE
                            (State of incorporation)

                                   36-4082530
                        (IRS Employer Identification No.)

                   5400 SOUTH PULASKI ROAD, CHICAGO, ILLINOIS
                    (Address of Principal Executive Offices)

                                      60632
                                   (ZIP Code)

                                 (773) 582-8616
              (Registrant's telephone number, including area code)

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

           Securities registered pursuant to Section 12(g) of the Act:
                    COMMON STOCK, $0.01, PAR VALUE PER SHARE
                              (Title of each class)

Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.

                               Yes __X__ No _____

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

The aggregate market value of the voting stock of the Registrant held by
non-affiliates was approximately $28,250,249 as of March 12, 1999.

As of March 12, 1999, the Registrant had outstanding 2,119,878 shares of common
stock.


                       DOCUMENTS INCORPORATED BY REFERENCE

Selected portions of the definitive Proxy Statement for the Registrant's Annual
Meeting of Stockholders to be held on April 21, 1999. Incorporated into Part
III.


                                       1.

<PAGE>


                                     PART I


ITEM 1.       BUSINESS

Park Bancorp, Inc. (the "Company") is a bank holding company engaged in the
business of banking through its wholly-owned subsidiary, Park Federal Savings
Bank (the "Bank"), and real estate development through its wholly-owned
subsidiary, PBI Development Corporation. The Bank is engaged in the business of
retail banking, with operations conducted through its main office and two branch
offices located in Chicago and Westmont, Illinois. The Bank also has two wholly
owned subsidiaries. GPS Development Corp. is an Illinois corporation which also
participates in residential real estate development projects. GPS Corporation is
an Illinois corporation previously engaged in the sale of retail insurance
products. In December 1994, the Bank sold the insurance policies to an
unaffiliated insurance agency. Presently, the activities of GPS Corporation are
limited to recordkeeping and receipt of certain fees relating to the sold
policies.

All table amounts throughout the Form 10-K are in thousands except share and per
share data.

GENERAL

On August 9, 1996, the Bank converted from a federally chartered mutual savings
bank to a federally chartered stock savings bank (the "Conversion"). In
connection with the Conversion, the Bank issued all of its common stock to the
Company and concurrently the Company issued 2,701,441 shares of common stock at
$10.00 per share. As part of the Conversion, approximately 50% of the net
proceeds, or $13.5 million, was used to purchase the common stock of the Bank.

The Bank attracts retail deposits from the general public in the area
surrounding its offices and invests those deposits, together with funds
generated from operations, primarily in fixed-rate one-to-four-family
residential mortgage loans and securities. The Bank invests, on a limited basis,
in multi-family mortgage, commercial real estate, construction, land, and
consumer loans. The Bank's revenues are derived principally from interest on its
mortgage loans and interest and dividends on its securities. The Bank's primary
sources of funds are deposits, advances from the Federal Home Loan Bank,
securities sold under repurchase agreements, and principal and interest payments
from loans and securities. The Company and the Bank also engage in real estate
development activities through their subsidiaries. The Company's investment in
real estate held for development totaled $2.9 million, or 1.4% of total assets,
at December 31, 1998. During 1998, the Bank continued sales of its primary
development project, Prairie Ridge, and the Company began development of its
latest project, Prairie Trail South. During the years ended December 31, 1998,
1997, and 1996, the Bank recorded income of $817,000, $276,000, and $60,000,
respectively, related to real estate development.

MARKET AREA AND COMPETITION

The Bank is a community-oriented savings bank. The Bank's primary deposit
gathering area is concentrated in the communities surrounding its offices, while
its lending activities primarily include areas throughout Cook, DuPage, and Will
counties.


                                       2.
<PAGE>

The Bank's market area is both an urban and suburban area with the manufacturing
industry as the major industrial group, followed by the services sector, and
then the wholesale/retail sector. The Bank's Chicago offices are located in
diverse communities which have a high percentage of customers of various ethnic
backgrounds. Management of the Bank believes that its urban communities are
stable, residential neighborhoods of predominantly one-to-four-family residences
and low to middle income families. The Bank's Westmont office is located in
DuPage County which consists predominantly of middle to upper income families.

The Bank does not formally track real estate value or construction starts in its
primary market area; however, the officers and directors of the Bank maintain
relationships with area contractors and real estate agents which enable them to
continually monitor the trends in housing construction and real estate sales in
its primary market area. In addition, the Bank obtains information on real
estate sales on a periodic basis through the publication of public records.
Management is not aware of any material adverse trends in real estate values in
its market area.

The Bank's primary market area is a highly competitive market for financial
services and the Bank faces significant competition both in making loans and in
attracting deposits. The Bank faces direct competition from a significant number
of financial institutions operating in its market area, many with a state-wide
or regional presence, and in some cases, a national presence. Many of these
financial institutions are significantly larger and have greater financial
resources than the Bank. The Bank's competition for loans comes principally from
savings institutions, mortgage banking companies, and commercial banks. In
addition, the Bank faces increasing competition for deposits and other financial
products from nonbank institutions such as brokerage firms and insurance
companies in such areas as short-term money market funds, corporate and
government securities funds, mutual funds, and annuities. Competition may also
increase as a result of the lifting of restrictions on the interstate operations
of financial institutions.

LENDING ACTIVITIES

LOAN PORTFOLIO COMPOSITION. The Bank's loan portfolio consists primarily of
conventional first mortgage loans secured by one-to-four-family residences. At
December 31, 1998, the Bank had total gross loans outstanding of $77.5 million,
of which $60.1 million were one-to-four-family residential mortgage loans or
77.5% of the Bank's total gross loans. The remainder of the portfolio consists
of $9.9 million of multi-family mortgage loans, or 12.8% of total gross loans;
$3.2 million of commercial real estate loans, or 4.1% of total gross loans; $2.0
million of construction and land loans, or 2.6% of total gross loans; and
consumer loans of $2.3 million, or 3.0% of total gross loans. At December 31,
1998, 93.2% of the Bank's loan portfolio had fixed interest rates. The Bank had
no loans held for sale at December 31, 1998.

The types of loans that the Bank may originate are subject to federal and state
laws and regulations. Interest rates charged by the Bank on loans are affected
by the demand for such loans, the supply of money available for lending
purposes, and the rates offered by competitors. These factors are, in turn,
affected by, among other things, economic conditions, fiscal policies of the
federal government, the monetary policies of the Federal Reserve Board, and
legislative tax policies.


                                       3.
<PAGE>

The following table sets forth the composition of the Bank's loan portfolio in
dollar amounts and as a percentage of the portfolio at the dates indicated.

<TABLE>
<CAPTION>
                           -----------------------------At December 31,-------------------------------
                                                        ---------------
                           --------1998--------      --------1997---------      --------1996--------
                                   ----                      ----                       ----
                                       Percent                     Percent                   Percent
                             Amount   of Total          Amount    of Total       Amount     of Total
                             ------   --------          ------    --------       ------     --------
<S>                        <C>            <C>        <C>             <C>        <C>            <C>
Real estate
    Residential
       One-to-four-
         family            $   60,103     77.51%     $   55,634      79.24%     $  53,757      78.88%
       Multi-family             9,947     12.83           7,860      11.19          8,168      11.99
    Commercial                  3,200      4.12           1,794       2.56          1,716       2.52
    Construction and
      land                      1,963      2.53           3,421       4.87          3,284       4.82
Consumer                        2,333      3.01           1,501       2.14          1,223       1.79
                           ----------    ------      ----------     ------      ---------     ------

    Total loans, gross         77,546    100.00%         70,210     100.00%        68,148     100.00%
                                         ======                     ======                   =======

Undisbursed loan
  funds                          (910)                   (1,042)                   (1,043)
Unamortized
  discounts, net                   (2)                       (4)                       (8)
Deferred loan
  origination fees               (358)                     (337)                     (418)
Allowance for
  loan losses                    (500)                     (500)                     (500)
                           ----------                ----------                 ---------

    Total loans, net       $   75,776                $   68,327                 $  66,179
                           ==========                ==========                 =========
</TABLE>

                       [WIDE TABLE CONTINUED FROM ABOVE]

                           ---------------------At December 31,-----------------
                                                ---------------
                                 -------1995---------    ---------1994----------
                                        ----                      ----
                                             Percent                    Percent
                                  Amount    of Total        Amount     of Total
                                  ------    --------        ------     --------
Real estate
    Residential
       One-to-four-
         family               $    48,577     77.42%     $   44,655     75.88%
       Multi-family                 6,163      9.82           5,907     10.04
    Commercial                      1,750      2.79           1,426      2.42
    Construction and
      land                          5,073      8.09           6,038     10.26
Consumer                            1,179      1.88             825      1.40
                              -----------     -----      ----------     -----

    Total loans, gross             62,742    100.00%         58,851    100.00%
                                             ======                    ======

Undisbursed loan
  funds                            (1,148)                   (1,493)
Unamortized
  discounts, net                      (23)                      (51)
Deferred loan
  origination fees                   (460)                     (474)
Allowance for
  loan losses                        (573)                     (275)
                              -----------                ----------

    Total loans, net          $    60,538                $   56,558
                              ===========                ==========


                                       4.
<PAGE>


LOAN MATURITY. The following table shows the contractual maturity of the Bank's
gross loans at December 31, 1998. The table does not include principal
prepayments.

<TABLE>
<CAPTION>
                                      One-to-                              Construction                  Total
                                       Four-       Multi-                       and                      Loans
                                      Family       Family     Commercial       Land       Consumer    Receivable
                                      -------      ------     ----------   ------------   --------    ----------
<S>                                 <C>          <C>          <C>          <C>          <C>          <C>
Amounts due
    One year or less                $     418    $        -   $      368   $      992   $      581   $    2,359

    After one year
       More than one year
         to three years                   790         1,668          203          971          726        4,358
       More than three years
         to five years                    884           766          197            -          748        2,595
       More than five years
         to ten years                   6,676         4,079        1,849            -           46       12,650
       More than ten years
         to twenty years               12,854         3,127          546            -          232       16,759
       More than twenty years          38,481           307           37            -            -       38,825
                                    ---------    ----------   ----------   ----------   ----------   ----------

          Total due after
            December 31, 1999          59,685         9,947        2,832          971        1,752       75,187
                                    ---------    ----------   ----------   ----------   ----------   ----------

              Gross loans
                receivable          $  60,103    $    9,947   $    3,200   $    1,963   $    2,333   $   77,546
                                    =========    ==========   ==========   ==========   ==========   ==========
</TABLE>

The following table sets forth at December 31, 1998 the dollar amount of total
gross loans receivable contractually due after December 31, 1999 and whether
such loans have fixed interest rates or adjustable interest rates.

<TABLE>
<CAPTION>
                                                                          ------Due After December 31, 1999---
                                                                                ---------------------------
                                                                              Fixed     Adjustable     Total
                                                                              -----     ----------     -----
<S>                                                                       <C>          <C>          <C>
    Real estate loans
       Residential
          One-to-four-family                                              $   54,896   $    4,789   $   59,685
          Multi-family                                                         9,728          219        9,947
       Commercial                                                              2,795           37        2,832
       Construction and land                                                     971            -          971
    Consumer                                                                   1,520          232        1,752
                                                                          ----------   ----------   ----------

       Total gross loans receivable                                       $   69,910   $    5,277   $   75,187
                                                                          ==========   ==========   ==========
</TABLE>

ORIGINATION AND PURCHASE OF LOANS. The Bank's mortgage lending activities are
conducted through its home office and two branch offices. Although the Bank may
originate adjustable-rate mortgage loans, the substantial majority of the Bank's
loan originations are fixed-rate mortgage loans. The Bank's ability to originate
loans is dependent upon the relative customer demand for fixed-rate or
adjustable-rate mortgage loans, which is affected by the current and expected
future level of interest rates. While the Bank retains for its portfolio all of
the mortgage loans that it originates, the Bank may, in the future, sell
mortgage loans that it originates depending on market conditions and the
financial condition of the Bank. At December 31, 1998, there were no loans
categorized as held for sale.


                                       5.
<PAGE>


The Bank has purchased loans or participated in loans originated by other
institutions based upon the Bank's investment needs and market opportunities.

The following table sets forth the Bank's loan originations, purchases, and
principal repayments for the periods indicated:

                                              For the Year Ended December 31,
                                              -------------------------------
                                               1998        1997        1996
                                               ----        ----        ----
    Gross loans
       Beginning balance                   $   70,210   $   68,148   $   62,742
          Loans originated
              One-to-four-family               17,554        8,382       14,305
              Multi-family                      4,223        2,958        3,076
              Commercial                        1,616          488          290
              Construction and land             9,322        5,932        6,001
              Consumer                            658          217          415
                                           ----------   ----------   ----------
                 Total loans originated        33,373       17,977       24,087
          Loans purchased                         798          538          118
                                           ----------   ----------   ----------
                                               34,171       18,515       24,205

       Principal prepayments                  (28,737)     (18,208)     (20,677)
       Transfer to REO                              -         (129)        (269)
       Change in undisbursed loan funds           132            1          105
       Change in allowance for loan losses          -            -           73
                                           ----------   ----------   ----------

          Ending balance, net              $   75,776   $   68,327   $   66,179
                                           ==========   ==========   ==========

One-to-Four-Family Mortgage Lending. The Bank offers mortgage loans secured by
one-to-four-family residences located in the Bank's primary market area. Loan
originations are obtained by the Bank's loan officers and their contacts with
the local real estate industry, customers, and members of the local communities.

The Bank's policy is to originate one-to-four-family residential mortgage loans
in amounts up to 80% of the lower of the appraised value or the selling price of
the property securing the loan and up to 95% of the appraised value or selling
price if private mortgage insurance is obtained. The residential mortgage loans
originated by the Bank are for maturity terms of up to 30 years.

The Bank offers ARM loans as a means of reducing its exposure to changes in
interest rates, however, the volume and types of ARM loans originated by the
Bank have been affected by such market factors as the level of interest rates,
competition, consumer preferences, and the availability of funds. In recent
years, the Bank has not originated a significant amount of ARM loans as compared
to its originations of fixed-rate loans. ARM loans pose credit risks different
from the risks inherent in fixed rate loans, primarily because as interest rates
rise, the underlying payments of the borrower rise, thereby increasing the
potential for default. The ARM loans offered by the Bank do not provide for
initial deep discount "teaser" interest rates. Although the Bank will continue
to offer ARM loans, there can be no assurance that in the future the Bank will
be able to originate a sufficient volume of ARM loans to constitute a
significant portion of the Bank's loan portfolio.


                                       6.
<PAGE>

Multi-Family Lending. The Bank originates multi-family mortgage loans secured by
properties located in the Bank's primary market area. The amount of multi-family
loans originated by the Bank depends upon market conditions.

In reaching its decision on whether to make a multi-family loan, the Bank
considers a number of factors including: the net operating income of the
mortgaged premises before debt service and depreciation; the debt service ratio
(the ratio of net operating income to debt service); and the ratio of loan
amount to appraised value. Pursuant to the Bank's current underwriting policies,
a multi-family mortgage loan may be made in an amount up to 80% of the appraised
value of the underlying property. In addition, the Bank generally requires a
debt service ratio of 120%. Properties securing a multi-family loan are
appraised by an independent appraiser. Title and property insurance are required
on all multi-family loans.

When evaluating a multi-family loan, the Bank also considers the financial
resources and income level of the borrower, the borrower's experience in owning
or managing similar property, and the Bank's lending experience with the
borrower. The Bank's underwriting policies require that the borrower be able to
demonstrate strong management skills and the ability to maintain the property
for current rental income. The borrower is required to present evidence of the
ability to repay the mortgage and a satisfactory credit history. In making its
assessment of the creditworthiness of the borrower, the Bank reviews the
financial statements and the employment and credit history of the borrower as
well as other related documentation.

Loans secured by multi-family residential properties generally involve a greater
degree of risk than one-to-four-family residential mortgage loans. Because
payments on loans secured by multi-family properties are often dependent on
successful operation or management of the properties, repayment of such loans
may be subject to a greater extent to adverse conditions in the real estate
market or the economy. The Bank seeks to minimize these risks through its
underwriting policies, which require such loans to be qualified at origination
on the basis of the property's income and debt coverage ratio.

The largest multi-family loan in the Bank's portfolio at December 31, 1998 was
$1,088,000.

Commercial Real Estate Lending. On a limited basis, the Bank originates
commercial real estate loans that are generally secured by properties used for
business purposes such as small office buildings or retail facilities located in
its primary market area. The Bank's underwriting procedures provide that
commercial real estate loans may be made in amounts up to the lesser of 80% of
the appraised value of the property or the sales price. The Bank's underwriting
standards and procedures are similar to those applicable to its multi-family
loans. The Bank has generally required that the properties securing commercial
real estate loans have debt service coverage ratios of at least 120%. The
largest commercial real estate loan in the Bank's portfolio at December 31, 1998
was $427,000. The loan is currently performing in accordance with its terms.

Loans secured by commercial real estate properties, like multi-family loans, are
generally larger and involve a greater degree of risk than one-to-four-family
residential mortgage loans. Because payments on loans secured by commercial real
estate properties are often dependent on successful operation or management of
the properties, repayment of such loans may be subject to a great extent to
adverse conditions in the real estate market or the economy. The


                                       7.
<PAGE>


Bank seeks to minimize these risks through its underwriting standards, which
require such loans to be qualified on the basis of the property's income and
debt service ratio.

Construction and Land Lending. The Bank originates construction and land
development loans to contractors and individuals in its primary market area. The
Bank's construction loans primarily are made to finance real estate development
and the construction of one-to-four-family residential properties. These loans
are primarily fixed-rate loans with maturities of three years or less. The
Bank's policies provide that construction loans may be made in amounts up to 80%
of the appraised value of the property for construction of one-to-four-family
residences. These loans typically have terms of less than one year. The Bank
requires an independent appraisal of the property. Loan proceeds are disbursed
in increments as construction progresses and as inspections warrant. The Bank
requires regular inspections to monitor the progress of construction. Land loans
are determined on an individual basis, but generally they do not exceed 75% of
the actual cost or current appraised value of the property, whichever is less.
The largest construction and land loan in the Bank's portfolio at December 31,
1998 was $353,000. This loan is currently performing in accordance with its
terms.

Construction and land financing is considered to involve a greater degree of
risk than one-to-four family residential mortgage loans. 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 compared to
the estimated cost (including interest) of construction. If the estimate of
value proves to be inaccurate, the Bank may be confronted with a project, when
completed, having a value which is insufficient to assure full repayment.

Consumer and Other Lending. The Bank's originated consumer loans generally
consist of automobile loans, second mortgage loans, and loans secured by
deposits.

The Bank purchases one-to-four-family mortgage loans and loan participations
from other financial institutions in its primary market area. At December 31,
1998, the Bank had $1.5 million in purchased mortgage loans and loan
participations serviced by others, totaling 1.9% of the total loan portfolio at
that date, primarily secured by one-to-four-family residences. The Bank may
purchase loans to supplement reduced loan demand as needed and must meet the
same underwriting criteria as loans originated by the Bank.

Loan Approval Procedures and Authority. The Board of Directors establishes the
lending policies of the Bank and delegates lending authority and responsibility
to the Executive Committee, a management committee of the Bank. All real estate
loans must be approved by the Executive Committee. The maximum loan amount is
$350,000 unless approved by the Board of Directors. Pursuant to Office of Thrift
Supervision ("OTS") regulations, loans to one borrower cannot exceed 15% of the
Bank's unimpaired capital and surplus without regulatory notification. The Bank
has no loans to one borrower that are in excess of regulatory limits.

Delinquencies and Classified Assets. The Board of Directors performs a monthly
review of all delinquent loans sixty days or more past due. In addition,
management reviews on an ongoing basis all loans thirty or more days delinquent.
The procedures taken by the Bank with respect to delinquencies vary depending on
the nature of the loan and period of delinquency. When a borrower fails to make
a required payment on a loan, the Bank takes a number of steps to have the
borrower cure the delinquency and restore the loan to current status. The Bank
sends the


                                       8.
<PAGE>


borrower a written notice of nonpayment after the loan is first past due. If the
loan is not brought current and it becomes necessary for the Bank to take legal
action, which occurs after a loan is delinquent at least 60 days or more, the
Bank will commence foreclosure proceedings against any real property that
secures the loan. If a foreclosure action is instituted and the loan is not
brought current, paid in full, or refinanced before the foreclosure sale, the
real property securing the loan is foreclosed upon and sold.

Federal regulations and the Bank's Classification of Assets Policy require that
the Bank utilize an internal asset classification system as a means of reporting
problem and potential problem assets. The Bank has incorporated the OTS internal
asset classifications as a part of its credit monitoring system. The Bank
currently classifies problem and potential problem assets as "Substandard,"
"Doubtful," or "Loss" assets, depending upon the severity of the delinquency
status or repayment capacity of the borrower. The likelihood of collection on
the loan declines with each classification, and assets classified as "Loss" are
those considered "uncollectible" and of such little value that their continuance
as assets without the establishment of a specific loss allowance is not
warranted. Assets which do not currently expose the insured institution to
sufficient risk to warrant classification in one of the aforementioned
categories but possess weaknesses are required to be designated "Special
Mention."

The Bank's Executive Committee reviews and classifies the Bank's assets monthly
and reports the results of its review to the Board of Directors. The Bank
classifies assets in accordance with the management guidelines described above.
Real estate owned ("REO") is classified as "Substandard." At December 31, 1998,
the Bank had $188,000 of assets classified as "Special Mention." No assets were
classified as "Substandard," "Doubtful," or "Loss."

NON-ACCRUAL AND PAST-DUE LOANS. The following table sets forth information
regarding nonaccrual loans, troubled-debt restructurings, and REO. It is the
policy of the Bank to cease accruing interest on loans 90 days or more past due.
For the years ended December 31, 1998, 1997, 1996, 1995, and 1994, respectively,
the amount of interest income that would have been recognized on nonaccrual
loans if such loans had continued to perform in accordance with their
contractual terms was $7,000, $20,000, $13,000, $83,000, and $33,000,
respectively, none of which was recognized.

<TABLE>
<CAPTION>
                                      -----------------------------At December 31,----------------------------
                                                                   ---------------
                                          1998          1997           1996           1995            1994
                                          ----          ----           ----           ----            ----
<S>                                       <C>           <C>            <C>            <C>             <C>
Nonaccrual loans
     Residential real estate
         One-to-four-family               $188          $241           $ 93           $416            $603
         Multi-family                        -            99            190             71              67
     Commercial                              -             -              -            430               -
     Construction and land                   -             -              -              -               -
     Consumer                                -             8             16              -              18
                                          ----          ----           ----           ----            ----
Total nonperforming loans                  188           348            299            917             688
REO                                          -            60             60             50              50
                                          ----          ----           ----           ----            ----

Total nonperforming assets                $188          $408           $359           $967            $738
                                          ====          ====           ====           ====            ====
</TABLE>

<TABLE>
<CAPTION>
                                         ----------------------------At December 31,--------------------------
                                                                     ---------------
                                           1998            1997           1996            1995          1994
                                           ----            ----           ----            ----          ----
<S>                                         <C>             <C>            <C>             <C>            <C>
Allowance for loan losses as a percent
  of gross loans receivable                 0.64%           0.71%          0.73%           0.91%          0.47%
Allowance for loan losses as a percent
  of total nonperforming loans            265.96          143.68         167.22           62.49          39.97
</TABLE>


                                       9.
<PAGE>


<TABLE>
<S>                                         <C>             <C>            <C>             <C>            <C>
Nonperforming loans as a percent of
  gross loans receivable                    0.24            0.50           0.44            1.46           1.17
Nonperforming assets as a percentage
  of total assets(1)                        0.09            0.23           0.20            0.61           0.51
</TABLE>

(1) Nonperforming assets consist of nonperforming loans and REO. Nonperforming
    loans consist of all loans 90 days or more past due.

ALLOWANCE FOR LOAN LOSSES. The allowance for loan losses is established through
a provision for loan losses based on management's evaluation of the risks
inherent in the loan portfolio, its classifications of individual loans, and the
general economy. The allowance for loan losses is maintained at an amount
management considers adequate to cover estimated losses in loans receivable
which are deemed probable and estimable. The allowance is based upon a number of
factors, including current economic conditions, actual loss experience, and
industry trends. In addition, various regulatory agencies, as an integral part
of their examination process, periodically review the Bank's allowance for loan
losses. Such agencies may require the Bank to make additional provisions for
loan losses based upon information available at the time of the review. The Bank
will continue to monitor and modify the allowance for loan losses as conditions
dictate.

The following table sets forth activity in the Bank's allowance for loan losses
for the period set forth in the table.

<TABLE>
<CAPTION>
                                      -------------------------Year Ended December 31,------------------------
                                                               -----------------------
                                          1998          1997           1996           1995            1994
                                          ----          ----           ----           ----            ----
<S>                                   <C>            <C>             <C>            <C>            <C>
Balance at beginning
  of period                           $       500    $       500     $       573    $       275    $       250
Provision for loan losses                       -              -               -            298             48
Charge-offs
     Real estate
         One-to-four-family                     -              -               -              -            (23)
         Multi-family                           -              -             (73)             -              -
         Construction and land                  -              -               -              -              -
     Consumer                                   -              -               -              -              -
                                      -----------    -----------     -----------    -----------    -----------
         Total                                  -              -             (73)             -            (23)
Recoveries                                      -              -               -              -              -
                                      -----------    -----------     -----------    -----------    -----------

Balance at end of period              $       500    $       500     $       500    $       573    $       275
                                      ===========    ===========     ===========    ===========    ===========

Net charge-offs to average
  gross loans outstanding                      -              -            0.12%             -            0.04%
</TABLE>


                                      10.
<PAGE>


The following table sets forth delinquencies in the Bank's loan portfolio as of
the dates indicated.

<TABLE>
<CAPTION>
                         -------------At December 31, 1998---------------   ------------------At December 31, 1997--------------
                                      --------------------                                    --------------------
                                 60-89 Days            90 Days or More(1)           60-89 Days                 90 Days or More(1)
                                 ----------            ------------------           ----------                 ------------------
                                       Principal                 Principal                  Principal                   Principal
                           Number       Balance      Number       Balance     Number         Balance        Number       Balance
                          of Loans     of Loans     of Loans     of Loans    of Loans       of Loans       of Loans     of Loans
                          --------     --------     --------     --------    --------       --------       --------     --------

<S>                      <C>          <C>           <C>         <C>           <C>           <C>            <C>          <C>
One-to-four-family               2    $     128           2     $     188            5      $    310              4    $    241
Multi-family                     -            -           -             -            -             -              1          99
Commercial                       -            -           -             -            -             -              -           -
Construction and land            -            -           -             -            -             -              -           -
Consumer                         -            -           -             -            -             -              2           8
                         ---------    ---------     -------     ---------    ---------      --------       --------    --------

     Total                       2    $     128           2     $     188            5      $    310              7    $    348
                         =========    =========     =======     =========    =========      ========       ========    ========

Delinquent loans to
  total gross loans                        0.17%                     0.24%                      0.44%                      0.50%
                                      =========                 =========                   ========                   ========
</TABLE>


<TABLE>
<CAPTION>
                        -------------------At December 31, 1996----------------  -----------------At December 31, 1995-------------
                                           --------------------                                   --------------------
                               60-89 Days               90 Days or More(1)            60-89 Days               90 Days or More(1)
                               ----------               ------------------            ----------               ------------------
                                       Principal                      Principal                 Principal                  Principal
                         Number         Balance         Number         Balance    Number         Balance      Number        Balance
                        of Loans       of Loans        of Loans       of Loans   of Loans       of Loans     of Loans      of Loans
                        --------       --------        --------       --------   --------       --------     --------      --------

<S>                     <C>            <C>              <C>            <C>        <C>            <C>          <C>          <C>
One-to-four-family             6       $   344               2         $     93         3        $   391           5       $  416
Multi-family                   -             -               2              190         -              -           1           71
Commercial                     2           209               -                -         -              -           2          430
Construction and land          -             -               -                -         -              -           -            -
Consumer                       -             -               2               16         2              9           -            -
                        --------       -------          ------         --------  --------        -------     -------       ------

     Total                     8       $   553               6         $    299         5        $   400           8       $  917
                        ========       =======          ======         ========  ========        =======     =======       ======

Delinquent loans to
  total gross loans                       0.81%                            0.44%                    0.64%                    1.46%
                                       =======                         ========                  =======                   ======
</TABLE>

(1) Loans 90 days or more past due are included in nonaccrual loans.


                                      11.
<PAGE>


The following table sets forth the amount of the Bank's allowance for loan
losses, the percent of allowance for loan losses to total allowance, and the
percent of gross loans to total gross loans in each of the categories listed at
the dates indicated.


<TABLE>
<CAPTION>
                 ------------------------------------------At December 31,------------------------------------------
                                                           ---------------
                 ------------1998--------------     ------------1997--------------  -------------1996---------------
                             ----                               ----                             ----
                                     Percent of                         Percent of                       Percent of
                                        Gross                              Gross                            Gross
                                      Loans in                           Loans in                         Loans in
                                        Each                               Each                             Each
                          Percent of  Category               Percent of  Category             Percent of  Category
                           Allowance  to Total                Allowance  to Total              Allowance  to Total
                           to Total     Gross                 to Total     Gross               to Total     Gross
                 Amount    Allowance    Loans       Amount    Allowance    Loans     Amount    Allowance    Loans
                 ---------------------------------------------------------------------------------------------------
<S>               <C>         <C>        <C>         <C>         <C>        <C>        <C>         <C>        <C>
One-to-four-
  family          $301        60.20%     77.51%      $278        55.60%     79.24%     $269        53.80%     78.88%
Multi-family        99        19.80      12.82         79        15.80      11.19        82        16.40      11.99
Commercial          32         6.40       4.13         36         7.20       2.56        35         7.00       2.52
Construction
  and land          20         4.00       2.53         68        13.60       4.87        65        13.00       4.82
Consumer            11         2.20       3.01          4         0.80       2.14         6         1.20       1.79
Unallocated         37         7.40          -         35         7.00          -        43         8.60          -
                  ----       ------     ------       ----       ------     ------      ----       ------     ------

   Total
     allowance
     for loan
     losses       $500       100.00%    100.00%      $500       100.00%    100.00%     $500       100.00%    100.00%
                  ====       ======     ======       ====       ======     ======      ====       ======     ======
</TABLE>

                       [WIDE TABLE CONTINUED FROM ABOVE]

<TABLE>
<CAPTION>
                   ------------------------At December 31,-----------------------
                                           ---------------
                   ------------1995--------------   ------------1994-------------
                               ----                             ----
                                       Percent of                       Percent of
                                          Gross                            Gross
                                        Loans in                         Loans in
                                          Each                             Each
                            Percent of  Category             Percent of  Category
                             Allowance  to Total              Allowance  to Total
                             to Total     Gross               to Total     Gross
                   Amount    Allowance    Loans     Amount    Allowance    Loans
                 ---------------------------------------------------------------
<S>                   <C>        <C>        <C>        <C>      <C>        <C>
One-to-four-
  family              $245       42.76%     77.42%     $112     40.73%     75.88%
Multi-family           135       23.56       9.82        30     10.91      10.04
Commercial              35        6.11       2.79        15      5.45       2.42
Construction
  and land             103       17.98       8.09        61     22.18      10.26
Consumer                17        2.96       1.88        17      6.18       1.40
Unallocated             38        6.63          -        40     14.55          -
                      ----      ------     ------      ----    ------     ------

   Total
     allowance
     for loan
     losses           $573      100.00%    100.00%     $275    100.00%    100.00%
                      ====      ======     ======      ====    ======     ======
</TABLE>




                                      12.
<PAGE>

REAL ESTATE OWNED

There was no real estate owned (REO) held at December 31, 1998. If the Bank
acquires any REO, it is initially recorded at fair value less costs to sell, and
thereafter, REO is recorded at the lower of the recorded investment in the loan
or the fair value of the related assets at the date of foreclosure, less costs
to sell. If there is a further deterioration in value, the Bank provides for a
specific valuation allowance. The Bank relies on appraisals or market valuations
in the disposition of all REO.

INVESTMENT ACTIVITIES

The investment policies of the Company and the Bank as established by the Board
of Directors attempt to provide and maintain liquidity, generate a favorable
return on investments without incurring undue interest rate and credit risk, and
complement the Bank's lending activities. The policies provide the authority to
invest in United States Treasury and federal agency securities, mortgage-backed
securities guaranteed by the United States government and agencies thereof, and
equity securities.

Investments in mortgage-backed securities involve a risk that actual prepayments
will be greater than estimated prepayments over the life of the security which
may require adjustments to the amortization of any premium or accretion of any
discount relating to such instruments thereby reducing or increasing,
respectively, the net yield on such securities. There is also reinvestment risk
associated with the cash flows from such securities. In addition, the market
value of such securities may be adversely affected by changes in interest rates.

The Company adopted Statement of Financial Accounting Standards ("SFAS") No.
133, ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES, on July 1,
1998. SFAS No. 133 states that all derivative instruments shall be recorded at
fair value in the financial statements and addresses the accounting for
derivative instruments such as hedges and swaps. As permitted by SFAS 133, the
Company reclassified all of its securities held-to-maturity to securities
available-for-sale.

The following table sets forth information regarding the carrying amount and
fair values of the Company's securities at the dates indicated.

<TABLE>
<CAPTION>
                                    ------------------------------At December 31,-------------------------------
                                                                  ---------------
                                    -----------1998--------   ----------1997--------    ----------1996----------
                                               ----                     ----                      ----
                                       Carrying      Fair        Carrying       Fair       Carrying       Fair
                                        Amount       Value        Amount        Value       Amount        Value
                                       --------      -----       --------       -----      --------       -----
<S>                                 <C>          <C>          <C>          <C>          <C>          <C>
Available-for-sale
    U.S. Treasury bills and notes   $         -  $        -   $        -   $        -   $    1,514   $    1,514
    U.S. government agency notes         87,794      87,231       29,167       29,167       39,371       39,371
    FNMA                                 12,465      12,608        4,166        4,166        5,078        5,078
    FHLMC                                 7,296       7,326        3,073        3,073        4,146        4,146
    Municipal securities                    351         343          287          287            -            -
    Equity securities                     1,015         998          408          408            -            -
                                    -----------  ----------   ----------   ----------   ----------   ----------

       Total available-for-sale     $   108,921  $  108,506   $   37,101   $   37,101   $   50,109   $   50,109
                                    ===========  ==========   ==========   ==========   ==========   ==========

Held-to-maturity
    U.S. government agency notes    $         -  $        -   $   44,975   $   45,088   $   34,134   $   34,017
    FNMA                                      -           -        5,651        5,566        6,290        6,206
    FHLMC                                     -           -        5,110        5,030        7,416        7,330
                                    -----------  ----------   ----------   ----------   ----------   ----------

       Total held-to-maturity       $         -  $        -   $   55,736   $   55,684   $   47,840   $   47,553
                                    ===========  ==========   ==========   ==========   ==========   ==========
</TABLE>





                                      13.
<PAGE>


The table below sets forth certain information regarding the carrying amount,
weighted average yields, and contractual maturities of the Company's securities
and mortgage-backed securities as of December 31, 1998. All of the Company's
securities are classified as available-for-sale. Equity securities have no
stated maturity and are included in the total column only.

<TABLE>
<CAPTION>
                           --------------------------------------------At December 31, 1998-----------------------------------------
                                                                       --------------------
                                                     More than One        More than Five          More than
                              One Year or Less    Year to Five Years    Years to Ten Years        Ten Years              Total
                              ----------------    ------------------    ------------------        ---------              -----

                                      Weighted              Weighted              Weighted              Weighted            Weighted
                           Carrying    Average   Carrying    Average   Carrying    Average   Carrying    Average  Carrying   Average
                            Amount      Yield     Amount      Yield     Amount      Yield     Amount      Yield    Amount     Yield
                           --------   --------   --------   --------   --------   --------   --------   --------  --------  --------
<S>                         <C>        <C>       <C>        <C>        <C>         <C>        <C>         <C>      <C>        <C>
Securities
    U.S. government agency
      notes                 $ 1,999    5.07%     $     -         -%     $ 7,044     7.36%     $78,188     7.11%    $87,231    7.08%
    Municipal securities          -       -            -         -            -        -          343     4.95         343    4.95
    Equity securities             -       -            -         -            -        -            -        -         998    5.55
                            -------    ----      -------      ----      -------     ----      -------     ----     -------    ----

       Total securities     $ 1,999    5.07%     $     -         -%     $ 7,044     7.36%     $78,531     7.10%    $88,572    7.05%
                            =======    ====      =======      ====      =======     ====      =======     ====     =======    ====




Mortgage-backed securities
    FNMA                    $   301    6.93%     $ 3,658      6.40%     $ 3,664     6.09%     $ 4,985     6.46%    $12,608    6.34%
    FHLMC                     1,036    6.59          836      6.73        2,545     5.75        2,909     6.70       7,326    6.39
                            -------    ----      -------      ----      -------     ----      -------     ----     -------    ----



       Total mortgage-
         backed securities  $ 1,337    6.67%     $ 4,494      6.46%     $ 6,209     5.95%     $ 7,894     6.57%    $19,934    6.36%
                            =======    ====      =======      ====      =======     ====      =======     ====     =======    ====
</TABLE>


                                      14.
<PAGE>

SOURCES OF FUNDS

GENERAL. Deposits, loan payments, cash flows generated from operations, and FHLB
advances are the primary sources of the Bank's funds for use in lending,
investing, and for other general purposes.

DEPOSITS. The Bank offers a variety of deposit accounts with a range of interest
rates and terms. The Bank's deposits consist of passbook savings, NOW accounts,
money market accounts, and certificates of deposit. The term of the certificates
of deposit offered by the Bank varies from three months to seven years and the
offering rates are established by the Bank on a weekly basis. Specific terms of
an individual account vary according to the type of account, the minimum balance
required, the time period funds must remain on deposit, and the interest rate,
among other factors. The flow of deposits is influenced significantly by general
economic conditions, changes in money market rates, prevailing interest rates,
and competition. At December 31, 1998, the Bank had $77.6 million of certificate
accounts maturing in less than one year. The Bank's deposits are obtained
predominantly from the areas surrounding its banking offices. The Bank relies
primarily on customer service and long-standing relationships with customers to
attract and retain these deposits; however, market interest rates and rates
offered by competitors significantly affect the Bank's ability to attract and
retain deposits.

The following table presents the deposit activity of the Bank for the periods
indicated:

<TABLE>
<CAPTION>
                                                                     ----------Year Ended December 31,--------
                                                                               -----------------------
                                                                         1998           1997           1996
                                                                         ----           ----           ----

<S>                                                                  <C>            <C>            <C>
     Net deposits (withdrawals)                                      $    10,460    $    (2,317)   $    (7,086)
     Interest credited on deposit accounts                                 6,025          5,330          5,435
                                                                     -----------    -----------    -----------

         Total increase (decrease) in deposit accounts               $    16,485    $     3,013    $    (1,651)
                                                                     ===========    ===========    ===========
</TABLE>

At December 31, 1998, the Bank had approximately $25.9 million in certificate
accounts in amounts of $100,000 or more maturing as follows:

                                                            Weighted
                                                             Average
          Maturity Period                      Amount         Rate
          ---------------                      ------       --------

     Three months or less                    $    13,213        6.11%
     Over three through six months                 2,509        5.37
     Over six through twelve months                4,881        5.92
     Over twelve months                            5,324        5.84
                                             -----------    --------

         Total                               $    25,927        5.95%
                                             ===========    ========




                                      15.
<PAGE>


The following table sets forth the distribution of the Bank's deposit accounts
for the periods indicated.

<TABLE>
<CAPTION>
                                         ------------------------------------Year Ended December 31,--------------------------------
                                                                             -----------------------
                                         -----------1998------------   ------------1997--------------    -----------1996------------
                                                    ----                           ----                             ----
                                                         Percent of                       Percent of                      Percent of
                                            Amount          Total         Amount             Total          Amount           Total
                                            ------       ----------       ------          ----------        ------        ----------

<S>                                      <C>                <C>        <C>                   <C>        <C>                   <C>
Passbook accounts                        $     31,675       21.35%     $     32,155          23.62%     $     33,875          26.29%
Money market savings accounts                   6,185        4.17             4,002           2.94             4,041           3.14
NOW accounts                                    7,472        5.04             5,708           4.20             5,672           4.40
Non-interest-bearing accounts                   1,743        1.17             1,115           0.82             1,088           0.84
                                         ------------    --------      ------------    -----------      ------------    -----------
     Total                                     47,075       31.73            42,980          31.58            44,676          34.67

Certificate accounts
     3.00% to 3.99%                             1,027         .69                 -              -                 -              -
     4.00% to 4.99%                            17,085       11.52                 -              -             1,056           0.82
     5.00% to 5.99%                            63,110       42.54            76,199          59.10            56,516          43.86
     6.00% to 6.99%                            20,053       13.52            12,432           9.13            25,785          20.01
     7.00% to 7.99%                                 -           -               254           0.19               354           0.28
     8.00% and over                                 -           -                 -              -               465           0.36
                                         ------------     -------       -----------    -----------      ------------    -----------

         Total certificate accounts           101,275       68.27            88,885          68.42            84,176          65.33
                                         ------------     -------       -----------    -----------      ------------    -----------

              Total deposits             $    148,350      100.00%      $   131,865         100.00%     $    128,852         100.00%
                                         ============     =======       ===========    ===========      ============    ===========
</TABLE>



The following table presents, by various rate categories, the amount of
certificate accounts outstanding at the dates indicated and the periods to
maturity of the certificate accounts outstanding at December 31, 1998.

<TABLE>
<CAPTION>
                                        -----------------------Period to Maturity from December 31,------------------
                                                               ------------------------------------
                                        Less than       1 to         2 to         3 to         4 to       More than
                                          1 Year        2 Years      3 Years      4 Years      5 Years      5 Years        Total
                                          ------        -------      -------      -------      -------      -------        -----
Certificate accounts
<S>                                     <C>          <C>          <C>           <C>          <C>          <C>          <C>
    3.00% to 3.99%                      $      100   $      927   $        -    $       -    $        -   $        -   $    1,027
    4.00% to 4.99%                          13,095        3,628          313            -            49            -       17,085
    5.00% to 5.99%                          48,028       11,006        2,088          929           949          110       63,100
    6.00% to 6.99%                          16,370        2,475          235          973             -            -       20,053
                                        ----------   ----------   ----------    ---------    ----------   ----------   ----------

       Total                            $   77,593   $   18,036   $    2,636    $   1,902    $      998   $      110   $  101,275
                                        ==========   ==========   ==========    =========    ==========   ==========   ==========
</TABLE>




                                      16.
<PAGE>


BORROWINGS. The Bank has obtained advances from the Federal Home Loan Bank of
Chicago ("FHLB") as an alternative to retail deposits. These advances are
collateralized primarily by the Bank's mortgage loans which are less than 90
days past due. Such advances are made pursuant to several different credit
programs, each of which has its own interest rate and range of maturities. The
maximum amount that the FHLB will advance to member institutions fluctuates in
accordance with the policies of the OTS and the FHLB. There were $10 million of
FHLB advances outstanding at December 31, 1998 which carry interest rates
ranging from 4.70% to 4.95% and all mature on January 15, 2008, subject to
certain redemption options by the FHLB.

The Bank's borrowings also include collateralized borrowings through securities
sold under repurchase agreements whereby a customer will maintain deposit
balances in excess of federal deposit insurance limits and are secured by
securities which are pledged to the depositor by the Bank. The Bank maintains
physical control over the securities. The Bank had $6.4 million of securities
sold under repurchase agreements outstanding at December 31, 1998 which carried
interest rates ranging from 5.55% to 5.80% and terms ranging from 12 to 364
days.

SUBSIDIARY ACTIVITIES

The Company and the Bank engage in the business of purchasing unimproved land
for development into residential subdivisions of primarily single-family lots
through their wholly-owned subsidiaries, PBI Development Corporation ("PBI"),
which was incorporated in 1998, and GPS Development Corp. ("GPS"), which was
incorporated in 1993. The Company has been engaged in this activity since 1985
and, since that time, has developed and sold over 475 lots in four different
subdivisions in the western suburbs of Chicago. Both PBI and GPS act as joint
venture partners in their developments. For the joint ventures they engage in,
PBI and GPS provide essentially all of the capital for the project in exchange
for an ownership interest which entitles them to a percentage of the profit or
loss generated by the venture. PBI and GPS only invest in real estate
development projects which they believe they can monitor effectively. Both PBI
and GPS have a percentage interest in the net profit of each joint venture with
the percentage based upon a number of factors, including characteristics of the
venture, the perceived risks involved, and the time to completion. The net
profit distributions are defined in the joint venture agreement as the gross
profits of the joint venture from sales, less all expenses, loan repayments,
capital contributions, and an agreed-upon rate of return to PBI and GPS on such
capital contribution.

At December 31, 1998, GPS was involved in the Prairie Ridge development, located
in Naperville, Illinois. This project consists of 88 single-family lots, and as
of December 31, 1998, 51 of the lots have been sold.

During 1998, PBI purchased and began development of the Prairie Trail South
development located in Batavia, Illinois. The project will consist of 96
single-family lots, and management expects completion of the development and
sales to begin during the second quarter of 1999.



                                      17.
<PAGE>


Real estate development activities involve risks that could have an adverse
effect on the profitability of the Bank. PBI and GPS incur substantial costs to
acquire, improve, and market the land prior to commencement of construction.
There are negative cash flows in the early stages of the project because it does
not recoup such costs until sales of the lots are closed. During the
construction phase, a number of factors could result in cost overruns, which
could decrease or possibly eliminate the potential profit from the project. In
addition, the profit potential on any given project may cease if the project is
not completed, the underlying value of the project or the general market area
declines, the project is not sold or is sold over a longer period of time than
initially contemplated, or a combination of these factors occurs. Additionally,
the ability to generate income from such projects is dependent, in part, on the
economy of the metropolitan Chicago area. Although the economy in such area has
been stable in recent years, there can be no assurance that such economy will
continue to be favorable. For the years ended December 31, 1998, 1997, and 1996,
gain on the sale of real estate held for development totaled $817,000, $276,000,
and $60,000, respectively.

EMPLOYEES

At December 31, 1998, the Company had a total of 52 full-time equivalents. None
of the Company's employees are represented by any collective bargaining group.
Management considers its relationship with employees to be excellent.

FEDERAL TAXATION

GENERAL. The Company and the Bank report their income on a calendar year basis
using the accrual method of accounting and are subject to federal income
taxation in the same manner as other companies with some exceptions, including
particularly the Bank's reserve for bad debts discussed below. The following
discussion of tax matters is intended only as a summary and does not purport to
be a comprehensive description of the tax rules applicable to the Bank or the
Company.

In August 1996, legislation was enacted that repeals the reserve method of
accounting used by many thrifts to calculate their bad debt reserve for federal
income tax purposes. As a result, the Bank is required to recapture that portion
of the reserve that exceeds the amount which could have been deducted under the
experience method for post-1987 tax years, and now account for bad debts for
federal income tax purposes on the same basis as commercial banks. The recapture
will occur over a six-year period beginning in 1998 since the institution meets
certain residential lending requirements. The legislation did not have a
material impact on the Company or the Bank.

To the extent earnings appropriated to a savings association's bad debt reserves
for "qualifying real property loans" and deducted for federal income tax
purposes exceed the allowable amounts of such reserves computed under the
experience method and to the extent of the association's supplemental reserves
for losses on loans ("Excess"), such Excess may not, without adverse tax
consequences, be utilized for the payment of cash dividends or other
distributions to a stockholder (including distributions on redemption,
dissolution, or liquidation) or for any other purpose (except to absorb bad debt
losses). As of December 31, 1998, the Company's Excess for tax purposes totaled
approximately $3.3 million.



                                      18.
<PAGE>

CORPORATE ALTERNATIVE MINIMUM TAX. The Internal Revenue Code of 1986, as amended
(the "Code"), imposes a tax on alternative minimum taxable income ("AMTI") at a
rate of 20%. The excess of the bad debt reserve deduction using the percentage
of taxable income method over the deduction that would have been allowable under
the experience method is treated as a preference item for purposes of computing
the AMTI. Only 90% of AMTI can be offset by net operating loss carryovers of
which the Bank currently has none. AMTI is increased by an amount equal to 75%
of the amount by which the Bank's adjusted current earnings exceeds its AMTI
(determined without regard to this preference and prior to reduction for net
operating losses). The Bank does not expect to be subject to AMTI.

STATE AND LOCAL TAXATION

STATE OF ILLINOIS. The Company and the Bank file a combined Illinois income tax
return. For Illinois income tax purposes, they are taxed at an effective rate
equal to 7.18% of Illinois taxable income. For these purposes, "Illinois taxable
income" generally means federal taxable income, subject to certain adjustments
including the addition of interest income on state and municipal obligations and
the exclusion of interest income on United States Treasury and qualifying agency
obligations. The exclusion of income on United States Treasury and qualifying
agency obligations has the effect of reducing Illinois taxable income. The
Company is also required to file an annual report with and pay an annual
franchise tax to the state of Illinois.

DELAWARE TAXATION. As a Delaware holding company not earning income in Delaware,
the Company is exempted from Delaware corporate income tax but is required to
file an annual report with and pay an annual franchise tax to the state of
Delaware.

REGULATION

The Bank is subject to extensive regulation, examination, and supervision by the
OTS, as its chartering agency, and the Federal Deposit Insurance Corporation
("FDIC"), as the deposit insurer. The Bank's deposit accounts are insured up to
applicable limits by the FDIC. The Bank must file reports with the OTS and the
FDIC concerning its activities and financial condition in addition to obtaining
regulatory approvals prior to entering into certain transactions such as mergers
with, or acquisitions of, other financial institutions. There are periodic
examinations by the OTS and the FDIC to test the Bank's compliance with various
regulatory requirements. The Company, as a savings bank holding company, is also
required to file certain reports with and otherwise comply with the rules and
regulations of the OTS and of the Securities and Exchange Commission ("SEC")
under the federal securities laws. This regulation and supervision establishes a
comprehensive framework of activities in which a depository institution and its
holding company can engage and is intended primarily for the protection of the
insurance fund and depositors. The regulatory authorities have extensive
discretion in connection with their supervisory and enforcement activities and
examination policies, including polices with respect to the classification of
assets and the establishment of adequate loan loss reserves for regulatory
purposes. Any change in the regulatory structure or the applicable statutes or
regulations, or policies, whether by the OTS, the FDIC, the SEC, or the
Congress, could have a material impact on the Company, the Bank, and their
operations.




                                      19.
<PAGE>

RECENT FEDERAL LEGISLATIVE INITIATIVES. Various proposals to eliminate or
grandfather unitary savings and loan holding companies, create a uniform
financial institutions charter and allow the affiliation between financial
institutions, insurance companies and securities firms have been introduced in
Congress as part of an effect to modernize the financial services industry. Some
of these bills provide that savings and loan holding companies would become
subject to the same regulation as holding companies that control commercial
banks, with some limited grandfathering and that the grandfathering would be
lost under certain circumstances such as a change in control of the Company.
Unless grandfathered, these restrictions would prevent unitary savings and loan
holding companies from engaging in such non-commercial activities as real estate
development. A bill has also been introduced in the Senate to provide the thrift
and banking industries with regulatory relief including, but not limited to, the
following initiatives: allowing banks and savings institutions to pay interest
on business NOW accounts, repealing HOLA's statutory liquidity requirement, the
30-day notice for dividends declared by thrifts in a holding company structure,
and the 5% ownership threshold of voting shares of a non-subsidiary thrift, and
eliminating the SAIF special reserve. The Company is unable to predict whether
any of these legislative initiatives would be enacted or the extent to which
such legislation would restrict or disrupt its operations.


ITEM 2.       PROPERTIES

The Bank conducts its business through three banking offices. The Company
believes that the current facilities are adequate to meet the present and
immediately foreseeable needs of the Bank and the Company. In addition, the Bank
currently holds two properties, a vacant parcel near its Chicago branch facility
which is currently being developed as a parking lot with a net book value of
$162,000 and a property in a western suburb for a possible future branch office
with a net book value of $145,000.

The following table sets forth certain information regarding the Bank's three
banking offices, all of which are owned by the Bank.

                                                     Net Book Value of Property
                Location             Date Acquired     at December 31, 1998
                --------             -------------   --------------------------

     Home office:
         5400 South Pulaski Road
         Chicago, Illinois 60632         1985              $   918,000

     Branch offices:
         2740 West 55th Street           1954                   10,000
         Chicago, Illinois 60632

         21 East Ogden Avenue
         Westmont, Illinois 60559        1975                  634,000



                                      20.
<PAGE>




ITEM 3.       LEGAL PROCEEDINGS

The Bank is not involved in any pending proceedings other than the legal
proceedings occurring in the ordinary course of business. Such legal proceedings
in the aggregate are believed by management to be immaterial to the Company's
financial condition or results of operations.


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

No matters were submitted to a vote of stockholders during the fourth quarter of
the year ended December 31, 1998.


                    EXECUTIVE OFFICERS OF PARK BANCORP, INC.

DAVID A. REMIJAS, age 46, has served as the President and Chief Executive
Officer of the Bank since 1993. Mr. Remijas also serves as a Director and
Chairman of the Board of the Bank. Mr. Remijas has been with the Bank since 1974
and has held various positions during that time. Mr. Remijas is the brother of
Richard J. Remijas, Jr.

RICHARD J. REMIJAS, JR., age 49, has served as Executive Vice President, Chief
Operating Officer, and Corporate Secretary since 1993. Mr. Remijas has served as
a Director of the Bank since 1977. Mr. Remijas is a principal in Sheridan Beach
Realty Group. Mr. Remijas is the brother of David A. Remijas.

STEVEN J. POKRAK, age 39, joined the Bank in 1985 and has served as Treasurer
and Chief Financial Officer since 1993.

SANDRA L. REMIJAS, age 37, joined the Bank in 1986 and has served as Vice
President-Lending since 1993. Mrs. Remijas is the wife of David A. Remijas.



                                      21.
<PAGE>


                                     PART II


ITEM 5.       MARKET FOR COMPANY'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS

The Company's common stock is traded on the NASDAQ National Market under the
symbol "PFED" and has 1,297 stockholders as of December 31, 1998. The table
below shows the reported high and low sales price of the common stock during the
period indicated in 1998.

                         ----------1998---------      ----------1997---------
                                   ----                         ----
                             High           Low          High           Low
                             ----           ---          ----           ---

      First quarter      $   19.75     $   17.88      $  16.25      $  12.75
      Second quarter         19.75         18.00         16.63         14.25
      Third quarter          18.38         13.50         18.00         15.88
      Fourth quarter         15.50         13.25         18.63         17.13


The Board continually reviews its dividend policy in light of capital needs and
other factors.


ITEM 6.       SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA

The following tables set forth selected historical financial and other data of
the Company for the periods and at the dates indicated. The information should
be read in conjunction with the Consolidated Financial Statements and Notes
thereto of the Company contained elsewhere herein.

SELECTED FINANCIAL DATA

<TABLE>
<CAPTION>
                                            -----------------------------At December 31,-------------------------------
                                                                         ---------------
                                                   1998            1997           1996           1995         1994
                                                   ----            ----           ----           ----         ----

<S>                                         <C>             <C>            <C>            <C>             <C>
Total assets                                $      203,788  $     176,672  $     178,194  $      158,939  $     144,788
Cash and cash equivalents                           10,709          7,812          6,213          12,790          2,573
Securities available-for-sale                      108,506         37,101         50,109          37,134         14,958
Securities held-to-maturity                              -         55,736         47,840          42,494         65,896
Loans receivable, net(1)                            75,776         68,327         66,179          60,538         56,558
Deposits                                           148,350        131,865        128,852         130,503        118,521
Securities sold under repurchase
  agreements                                         6,418          4,250              -               -              -
FHLB advances                                       10,000              -          5,000           9,000          8,000
Stockholders' equity(2)                             37,023         38,601         42,457          17,533         16,413

Interest income                                     13,792         12,464         11,335           9,755          8,861
Interest expense                                     7,410          6,390          6,320           5,706          4,643
Provision for loan losses                                -              -              -             298             48
Noninterest income                                   1,151            585            307             694          1,284
Noninterest expense                                  4,252          4,261          3,718           3,096          2,822
Provision for income taxes                           1,130            855            543             413            881
Net income                                           2,151          1,543          1,061             936          1,751
</TABLE>



                                      22.
<PAGE>


SELECTED FINANCIAL RATIOS AND OTHER DATA

<TABLE>
<CAPTION>
                                                      ------------At or for the Year Ended December 31,-----------
                                                                  -------------------------------------
                                                      1998           1997         1996         1995         1994
                                                      ----           ----         ----         ----         ----
<S>                                                    <C>           <C>           <C>         <C>           <C>
PERFORMANCE RATIOS:
     Return on average assets                          1.09%         0.87%         0.65%       0.65%         1.25%
     Return on average equity                          5.59          3.84          3.92        5.49         11.15
     Average equity to average assets                 19.52         22.75         16.48       11.82         11.26
     Average interest rate spread(3)                   2.52          2.58          2.48        2.38          2.80
     Net interest margin(4)                            3.39          3.61          3.19        2.90          3.15
     Efficiency ratio(5)                              56.44         63.99         69.86       65.28         51.28
     Noninterest expense to average assets             2.16          2.41          2.26        2.15          2.02

ASSET QUALITY RATIOS:
     Nonperforming loans as a
       percent of gross loans receivable(6)            0.24%         0.50%         0.44%       1.46%         1.17%
     Nonperforming assets as a
       percentage of total assets(6)                   0.09          0.23          0.20        0.61          0.51
     Allowance for loan losses as a
       percent of gross loans receivable               0.64          0.71          0.73        0.91          0.47
     Allowance for loan losses as a
       percent of nonperforming loans(6)             265.96        143.68        167.22       62.49         39.97

OTHER DATA:
     Number of full service offices                    3             3             3           3             3
</TABLE>


(1)  The allowance for loan losses at December 31, 1998, 1997, 1996, 1995, and
     1994 was $500,000, $500,000, $500,000, $573,000, and $275,000,
     respectively.

(2)  Retained earnings for years prior to 1996.

(3)  The average interest rate spread represents the difference between the
     weighted average yield on interest-earning assets and the weighted average
     cost of interest-bearing liabilities.

(4)  The net interest margin represents net interest income as a percent of
     average interest-earning assets.

(5)  The efficiency ratio represents noninterest expense as a percent of net
     interest income before the provision for loan losses and noninterest
     income.

(6)  Nonperforming assets consist of nonperforming loans and REO. Nonperforming
     loans consist of all loans 90 days or more past due and all other
     nonaccrual loans.




                                      23.
<PAGE>


ITEM 7.       MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
              CONDITION AND RESULTS OF OPERATIONS

GENERAL

The primary business of the Company is the ownership of the Bank. The Bank's
results of operations are dependent primarily on net interest income, which is
the difference between the interest income earned on the Bank's interest-earning
assets, such as loans and investments, and the interest expense on its
interest-bearing liabilities, such as deposits and borrowings. The Bank also
generates noninterest income such as income from real estate development
activities and other fees. The Bank's noninterest expenses consist of employee
compensation and benefits as well as occupancy expenses. The Bank's results of
operations are also significantly affected by general economic and competitive
conditions, particularly changes in market interest rates, government policies,
and actions of regulatory agencies.


SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

This report contains certain forward-looking statements within the meaning of
Section 27a of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. The Company intends such
forward-looking statements to be covered by the safe harbor provisions for
forward-looking statements contained in the Private Securities Reform Act of
1995, and are including this statement for purposes of these safe harbor
provisions. Forward-looking statements, which are based on certain assumptions
and describe future plans, strategies and expectations of the Company, are
generally identifiable by use of the words "believe," "expect," "intend,"
"anticipate," "estimate," "project," or similar expressions. The Company's
ability to predict results or the actual effect of future plans or strategies is
inherently uncertain. Factors which could have a material adverse effect on the
operations and future prospects of the Company and its wholly-owned subsidiary
include, but are not limited to, changes in: interest rates; the economic health
of the local real estate market general economic conditions;
legislative/regulatory provisions; monetary and fiscal policies of the U.S.
Government, including policies of the U.S. Treasury and the Federal Reserve
Board; the quality or composition of the loan or investment portfolios; demand
for loan products; deposit flows; competition; demand for financial services in
the Company's market area; and accounting principles, policies, and guidelines
subject to the effectiveness of the Company's Year 2000 program. These risks and
uncertainties should be considered in evaluating forward-looking statements and
undue reliance should not be placed on such statements.



                                      24.
<PAGE>


AVERAGE STATEMENT OF FINANCIAL CONDITION

The following table sets forth certain information relating to the Company's
Average Statement of Financial Condition and reflects the average yield on
assets and average cost of liabilities for the years ended December 31, 1998,
1997, and 1996. The yields and costs are derived by dividing income or expense
by the average balance of assets or liabilities, respectively, for the years
shown. Average balances are derived from average month-end balances. Management
does not believe that the use of average monthly balances instead of average
daily balances has caused any material differences in the information presented.
Average balances of loans receivable include loans on which the Bank has
discontinued accruing interest. The yields and costs include fees which are
considered adjustments to yields.

<TABLE>
<CAPTION>
                                                     ----------------------------Year Ended December 31,----------------------------
                                                                                 -----------------------
                                                     -----------------1 9 9 8-------------     -----------------1 9 9 7-------------
                                                                      -------                                   -------
                                                                                   Average                                   Average
                                                        Average                    Yield/        Average                     Yield/
                                                        Balance      Interest       Cost         Balance       Interest       Cost
                                                        -------      --------      -------       -------       --------      -------
<S>                                                  <C>             <C>             <C>       <C>            <C>             <C>
ASSETS
   Interest-earnings assets
     Interest-earning deposits and other investments  $    9,499     $    474        4.99%     $     4,848    $     175       3.61%
     Securities, net(1)                                   85,510        6,038        7.06           75,579        5,261       6.96
     Loans receivable(2)                                  73,022        6,000        8.22           67,408        5,649       8.38
     Mortgage-backed securities, net(1)                   20,387        1,280        6.28           20,623        1,379       6.68
                                                      ----------     --------                  -----------    ---------
       Total interest-earning assets                     188,418       13,792        7.32          168,458       12,464       7.40
   Non-interest-earning assets                             8,830                                     8,010
                                                      ----------                               -----------

     Total assets                                     $  197,248                               $   176,468
                                                      ==========                               ===========

LIABILITIES AND STOCKHOLDERS' EQUITY
   Interest-bearing liabilities
     Passbook accounts                                    31,656          801        2.53      $    33,336          915       2.74
     Money market savings accounts                         5,704          218        3.82            3,988          134       3.36
     NOW accounts                                          7,000          111        1.59            5,839          111       1.90
     Certificate accounts                                 94,646        5,432        5.74           85,106        4,931       5.79
                                                      ----------     --------                  -----------    ---------
       Total                                             139,006        6,562        4.72          128,269        6,091       4.75
     FHLB advances and other borrowings                   15,500          848        5.47            4,392          299       6.81
                                                      ----------     --------                  -----------    ---------
       Total interest-bearing liabilities                154,506        7,410        4.80          132,661        6,390       4.82
                                                                     --------                                 ---------
   Non-interest-bearing liabilities                        4,244                                     3,662
                                                      ----------                               -----------
     Total liabilities                                   158,750                                   136,323
   Stockholders' equity                                   38,498                                    40,145
                                                      ----------                               -----------

     Total liabilities and stockholders' equity       $  197,248                               $   176,468
                                                      ==========                               ===========

   Net interest income before provision for
     estimated loan losses                                           $  6,382                                 $   6,074
                                                                     ========                                 =========
   Net interest rate spread(3)                                                       2.52%                                    2.58%
                                                                                  =======                                 ========
   Net interest margin(4)                                                            3.39                                     3.61
                                                                                  =======                                 ========
   Ratio of average interest-earning assets to
     average interest-bearing liabilities                 121.95%                                   126.98%
                                                      ==========                              ============
</TABLE>

                       [WIDE TABLE CONTINUED FROM ABOVE]

<TABLE>
<CAPTION>
                                                          -------Year Ended December 31,-------
                                                                 -----------------------
                                                          ----------------1 9 9 6--------------
                                                                          -------
                                                                                        Average
                                                           Average                      Yield/
                                                           Balance      Interest         Cost
                                                           -------      --------        -------
<S>                                                      <C>            <C>              <C>
ASSETS
   Interest-earnings assets
     Interest-earning deposits and other investments      $    9,595    $     438        4.56%
     Securities, net(1)                                       62,868        4,022        6.40
     Loans receivable(2)                                      62,447        5,398        8.64
     Mortgage-backed securities, net(1)                       22,541        1,477        6.55
                                                          ----------    ---------
       Total interest-earning assets                         157,451       11,335        7.20
   Non-interest-earning assets                                 6,672
                                                          ----------

     Total assets                                         $  164,123
                                                          ==========

LIABILITIES AND STOCKHOLDERS' EQUITY
   Interest-bearing liabilities
     Passbook accounts                                        34,266          950        2.77%
     Money market savings accounts                             4,121          138        3.35
     NOW accounts                                              5,887          111        1.89
     Certificate accounts                                     84,740        5,003        5.90
                                                          ----------    ---------
       Total                                                 129,014        6,202        4.81
     FHLB advances and other borrowings                        4,758          118        2.48
                                                          ----------    ---------
       Total interest-bearing liabilities                    133,772        6,320        4.72
                                                                        ---------
   Non-interest-bearing liabilities                            3,298
                                                          ----------
     Total liabilities                                       137,070
   Stockholders' equity                                       27,053
                                                          ----------

     Total liabilities and stockholders' equity           $  164,123
                                                          ==========

   Net interest income before provision for
     estimated loan losses                                              $   5,015
                                                                        =========
   Net interest rate spread(3)                                                           2.48%
                                                                                         ====
   Net interest margin(4)                                                                3.19
                                                                                         ====
   Ratio of average interest-earning assets to
     average interest-bearing liabilities                     117.70%
                                                          ==========
</TABLE>

(1)  Includes related assets available for sale and unamortized discounts and
     premiums and certificates of deposit.
(2)  Amount is net of deferred loan origination fees, undisbursed loan funds,
     unamortized discounts, and allowance for loan losses and includes
     non-performing loans.
(3)  Net interest rate spread represents the difference between the yield on
     average interest-earning assets and the average cost of interest-bearing
     liabilities.
(4)  Net interest margin represents net interest income divided by average
     interest-earning assets.

                                      25.
<PAGE>


RATE/VOLUME ANALYSIS

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

<TABLE>
<CAPTION>
                                                Year Ended                              Year Ended
                                             December 31, 1998                       December 31, 1997
                                                Compared to                             Compared to
                                                Year Ended                              Year Ended
                                    ---------December 31, 1997---------    ----------December 31, 1996--------
                                             -----------------                       -----------------
                                        Increase (Decrease) Due to              Increase (Decrease) Due to
                                    -----------------------------------    -----------------------------------
                                       Volume        Rate           Net       Volume         Rate         Net
                                       ------        ----           ---       ------         ----         ---

<S>                                 <C>          <C>          <C>          <C>          <C>          <C>
INTEREST-EARNING ASSETS
    Interest-earning deposits
      and other investments         $     214    $       85   $      299   $     (185)  $      (78)  $     (263)
    Securities, net(1)                    700            77          777          863          376        1,239
    Loans receivable, net                 463          (112)         351          419         (168)         251
    Mortgage-backed securities,
      net(1)                              (16)          (83)         (99)        (128)          30          (98)
                                    ---------    ----------       ------   ----------   ----------   ----------

       Total interest-earning
         assets                         1,361           (33)       1,328          969          160        1,129
                                    ---------    ----------   ----------   ----------   ----------   ----------

INTEREST-BEARING LIABILITIES
    Passbook savings accounts             (45)          (69)        (114)         (26)          (9)         (35)
    Money market savings accounts          64            20           84           (4)           -           (4)
    NOW accounts                           20           (20)           -           (1)           1            -
    Certificate accounts                  548           (47)         501           22          (94)         (72)
    FHLB advances and other
      borrowings                          618           (69)         549          (10)         191          181
                                    ---------    ----------   ----------   ----------   ----------   ----------
       Total interest-bearing
         liabilities                    1,205          (185)       1,020          (19)          89           70
                                    ---------    ----------   ----------   ----------   ----------   ----------

Change in net interest income       $     156    $      152   $      308   $      988   $       71   $    1,059
                                    =========    ==========   ==========   ==========   ==========   ==========
</TABLE>


(1)  Includes assets available-for-sale.



                                      26.
<PAGE>

COMPARISON OF FINANCIAL CONDITION AT DECEMBER 31, 1998 AND DECEMBER 31, 1997

Total assets at December 31, 1998 were $203.8 million compared to $176.7 million
at December 31, 1997, an increase of $27.1 million. During 1998, loans increased
by $7.5 million to $75.8 million due to demand for fixed-rate mortgage loans in
the Chicago market. Securities increased $15.7 million to $108.5 million at
December 31, 1998.

Total liabilities at December 31, 1998 were $166.7 million compared to $138.0
million at December 31, 1997, an increase of $28.7 million. The increase is
attributable to Federal Home Loan Bank advances totaling $10.0 million, and an
increase in deposits and repurchase agreements of $16.5 million and $2.2
million, respectively.

Stockholders' equity at December 31, 1998 was $37.0 million compared to $38.6
million at December 31, 1997, a decrease of $1.6 million, due primarily to net
income of $2.1 million for the year offset by the repurchase of 230,973 shares
of treasury stock.

COMPARISON OF FINANCIAL CONDITION AT DECEMBER 31, 1997 AND DECEMBER 31, 1996

Total assets at December 31, 1997 were $176.7 million compared to $178.2 million
at December 31, 1996, a decrease of $1.5 million. During 1997, loans increased
by $2.1 million to $68.3 million due to demand for fixed-rate mortgage loans in
the Chicago market. Securities decreased $5.1 million to $92.8 million at
December 31, 1997.

Total liabilities at December 31, 1997 were $138.0 million compared to $135.7 at
December 31, 1996, an increase of $2.3 million. The increase is attributable to
deposit growth of $3.0 million and an increase in securities sold under
repurchase agreements of $4.2 million, offset by the repayment of Federal Home
Loan Bank advances of $5.0 million.

Stockholders' equity at December 31, 1997 was $38.6 million compared to $42.4
million at December 31, 1996, a decrease of $3.8 million, due primarily to net
income of $1.5 million for the year offset by the repurchase of 391,709 shares
of treasury stock.

COMPARISON OF OPERATING RESULTS FOR THE YEARS ENDED DECEMBER 31, 1998 AND
DECEMBER 31, 1997

General
Net income increased to $2.1 million for the year ended December 31, 1998 from
$1.5 million for the year ended December 31, 1997. The increase is primarily due
to increases in the Company's net interest income and increased gains on sales
of real estate held for development.



                                      27.
<PAGE>




Interest Income
Interest income for the year ended December 31, 1998 was $13.8 million compared
to $12.5 million for the year ended December 31, 1997, an increase of $1.3
million. The increase in interest income was due primarily to an increase of
$20.0 million in the average balance of the Company's interest-earning assets.
The overall growth in assets helped offset a decline in the total asset yield.
The decline in the yield was led primarily by the yield on loans as rates
declined in response to competitive factors felt throughout the industry.

Interest Expense
Interest expense for the year ended December 31, 1998 was $7.4 million compared
to $6.4 million for the year ended December 31, 1997, an increase of $1.0
million. The increase in interest expense was primarily due to growth in
certificates of deposit and an increase in the Federal Home Loan Bank advances
for the year ended December 31, 1998.

Provision for Loan Losses
There was no provision for losses on loans for the years ended December 31, 1998
and 1997. The lack of provision is indicative of management's assessment that
the allowance for loan losses is adequate, given the trends in historical loss
experience of the portfolio and current economic conditions.

Noninterest Income
Noninterest income for the year ended December 31, 1998 was $1.2 million
compared to $585,000 for the year ended December 31, 1997, an increase of
$566,000. The increase was primarily attributable to increased sales volume of
real estate held for development which generated a gain of $817,000 as compared
to a gain of $276,000 for the year ended December 31, 1997.

Noninterest Expense
Noninterest expense for the year ended December 31, 1998 and 1997 was $4.3
million. There were no significant changes in any one component of noninterest
expense.

Income Taxes
Income tax expense was $1.1 million for the year ended December 31, 1998
compared to $855,000 for the year ended December 31, 1997, an increase of
$275,000. The increase in income tax expense was primarily the result of the
increase in income before income taxes to $3.3 million for the year ended
December 31, 1998 from $2.4 million for the year ended December 31, 1997.



                                      28.
<PAGE>



COMPARISON OF OPERATING RESULTS FOR THE YEARS ENDED DECEMBER 31, 1997 AND
DECEMBER 31, 1996

General
Net income increased to $1.5 million for the year ended December 31, 1997, from
$1.1 million for the year ended December 31, 1996. Fiscal 1996 results were
negatively affected by the $736,000 one-time special assessment paid by the Bank
to recapitalize the Savings Association Insurance Fund ("SAIF") as further
discussed below.

Interest Income
Interest income for the year ended December 31, 1997 was $12.5 million compared
to $11.3 million for the year ended December 31, 1996, an increase of $1.1
million. The increase in interest income was caused primarily by an increase in
the average yield on investment and mortgage-backed securities.

Interest Expense
Interest expense for the year ended December 31, 1997 was $6.4 million compared
to $6.3 million for the year ended December 31, 1996, an increase of $71,000.
The increase in interest expense was primarily due to growth in the average
balance of certificates of deposit and higher costs of Federal Home Loan Bank
advances for the year ended December 31, 1997.

Provision for Loan Losses
There was no provision for losses on loans for the years ended December 31, 1997
and 1996. The lack of provision is indicative of management's assessment that
the allowance for loan losses is adequate, given the trends in historical loss
experience of the portfolio and current economic conditions.

Noninterest Income
Noninterest income for the year ended December 31, 1997 was $585,000 compared to
$307,000 for the year ended December 31, 1996, an increase of $278,000. The
increase was primarily attributable to increased sales volume of real estate
held for development which generated a gain of $276,000 as compared to a gain of
$60,000 for the year ended December 31, 1996. Additionally, the Company
recognized a one-time completion fee of $106,000 during 1997 on a land
development loan. Service fee income decreased from $177,000 for the year ended
December 31, 1996 to $145,000 for the year ended December 31, 1997 primarily due
to a lesser amount of construction loans.

Noninterest Expense
Noninterest expense for the year ended December 31, 1997 was $4.3 million
compared to $3.7 million for the year ended December 31, 1996, an increase of
$543,000. The primary components attributable to the increase were increased
compensation expense associated with the employee stock ownership plan ("ESOP")
and management retention plan ("MRP") as well as other costs incurred as a
result of operating as a public company. The Company also realized a decrease in
federal deposit insurance costs due to a $736,000 special one-time assessment to
recapitalize the SAIF recorded in 1996. Additionally, the insurance premium rate
was reduced after this special assessment.



                                      29.
<PAGE>

Income Taxes
Income tax expense was $855,000 for the year ended December 31, 1997 compared to
$543,000 for the year ended December 31, 1996, an increase of $312,000. The
increase in income tax expense was primarily the result of the increase in
income before income taxes to $2.4 million for the year ended December 31, 1997
from $1.6 million for the year ended December 31, 1996.

LIQUIDITY AND CAPITAL RESOURCES

The Bank's primary sources of funds are deposits, principal and interest
payments on loans and securities, proceeds from the maturation of securities,
FHLB advances, and securities sold under repurchase agreements. While maturities
and scheduled amortization of loans and securities are predictable sources of
funds, deposit flows and mortgage prepayments are greatly influenced by general
interest rates, economic conditions, and competition. The Bank maintains a
liquidity ratio substantially above the regulatory requirement. This
requirement, which may be varied at the direction of the OTS depending upon
economic conditions and deposit flows, is based upon a percentage of deposits
and short-term borrowings. The required ratio is currently 5%. The Bank's
average regulatory liquidity ratios were 52.51%, 53.48%, and 52.98% for the
years ended December 31, 1998, 1997, and 1996, respectively.

The Bank's cash flows are comprised of three primary classifications -- cash
flows from operating activities, investing activities, and financing activities.
Cash flows provided by operating activities were $1.7 million, $1.9 million, and
$895,000 for the years ended December 31, 1998, 1997, and 1996, respectively.
Net cash from investing activities consisted primarily of disbursements for loan
originations and the purchase of securities, offset by principal collections on
loans, proceeds from maturation of investments and paydowns on mortgage-backed
securities, and the investment in and proceeds from the sale of real estate held
for development. Net cash from financing activities consisted primarily of the
activity in deposit accounts, FHLB borrowings, and securities sold under
repurchase agreements in addition to the repurchase of Company common stock in
1998 and 1997. The net cash from financing activities was $24.7 million, $(4.0)
million, and $18.4 million for the years ended December 31, 1998, 1997, and
1996, respectively.

At December 31, 1998, the Bank exceeded all of its regulatory capital
requirements with a tangible capital level of $21.1 million or 11.2% of adjusted
total assets, which is above the required level of $2.8 million or 1.5%; core
capital of $21.1 million or 11.2% of adjusted total assets, which is above the
required level of $5.7 million or 3.0%; and risk-based capital of $21.6 million
or 31.7% of risk-weighted assets, which is above the required level of $5.5
million or 8.0%.

The Bank's most liquid assets are cash and short-term investments. The levels of
these assets are dependent on the Bank's operating, financing, lending, and
investing activities during any given period. At December 31, 1998, cash and
short-term investments totaled $10.7 million. The Bank has other sources of
liquidity if a need for additional funds arises, including securities maturing
within one year and the repayment of loans. The Bank may also utilize FHLB
advances or the sale of securities available-for-sale as a source of funds.

At December 31, 1998, the Bank had outstanding commitments to originate mortgage
loans of $2.2 million compared to $891,000 at December 31, 1997. The Bank
anticipates that it will have



                                      30.
<PAGE>

sufficient funds available to meet its current loan origination commitments.
Certificate accounts which are scheduled to mature in less than one year from
December 31, 1998 totaled $77.6 million. The Bank expects that a substantial
portion of the maturing certificate accounts will be retained by the Bank at
maturity. However, if a substantial portion of these deposits is not retained,
the Bank may utilize Federal Home Loan Bank advances, or raise interest rates on
deposits to attract new accounts, which may result in higher levels of interest
expense.

IMPACT OF INFLATION AND CHANGING PRICES

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

IMPACT OF NEW ACCOUNTING STANDARDS

Mortgage loans originated in mortgage banking are converted into securities on
occasion. A new accounting standard for 1999 will allow classifying these
securities as available-for-sale, trading, or held-to-maturity, instead of the
current requirement to classify as trading. This is not expected to have a
material effect but the effect will vary depending on the level and designation
of securitizations as well as on market price movements.

YEAR 2000 ISSUE

GENERAL. The Year 2000 ("Y2K") issue confronting the Company and its suppliers,
customers, customers' suppliers, and competitors centers on the inability of
computer systems to recognize the year 2000. Many existing computer programs and
systems originally were programmed with six-digit dates that provided only two
digits to identify the calendar year in the date field. With the impending new
millennium, these programs and computers will recognize "00" as the year 1900
rather than the year 2000.




                                      31.
<PAGE>


Financial institution regulators recently have increased their focus upon Y2K
compliance issues and have issued guidance concerning the responsibilities of
senior management and directors. The Federal Financial Institutions Examination
Council has issued several interagency statements on Y2K project management
awareness. These statements require financial institutions to, among other
things, examine the Y2K implications of their reliance on vendors and with
respect to the data exchange and the potential impact of the Y2K issue on their
customers, suppliers, and borrowers. These statements also require each
federally regulated institution to survey its exposure, measure its risk, and
prepare a plan to address the Y2K issue. In addition, the federal banking
regulators have issued safety and soundness guidelines to be followed by insured
depository institutions, such as the Bank, to assure resolution of any Y2K
problems. The federal banking agencies have assessed that Y2K testing and
certification is a key safety and soundness issue in conjunction with regulatory
exams and, thus, that an institution's failure to address appropriately the Y2K
issue could result in supervisory action, including reduction of the
institution's supervisory ratings, the denial of applications for approval of
mergers or acquisitions, or the imposition of civil money penalties.

RISKS. Like most financial service providers, the Company and its operations may
be significantly affected by the Y2K issue due to its dependence on technology
and date-sensitive data. Computer software and hardware and other equipment,
both within and outside the Company's direct control, and third parties with
whom the Company electronically or operationally interfaces (including without
limitation its customers and third party vendors) are likely to be affected. If
computer systems are not modified in order to be able to identify the year 2000,
many computer applications could fail or create erroneous results. As a result,
many calculations which rely on date field information, such as interest,
payment on due dates, and all operating functions, could generate results which
are significantly misstated and the Company could experience an inability to
process transactions, prepare statements, or engage in similar normal business
activities. Likewise, under certain circumstances, a failure to adequately
address the Y2K issue could adversely affect the viability of the Company's
suppliers and creditors and the creditworthiness of its borrowers. Thus, if not
adequately addressed, the Y2K issue could result in a significant adverse impact
on the Company's operations and, in turn, its financial condition and results of
operations.

STATE OF READINESS. The Company has established a formal plan to address the Y2K
issue consisting of the following phases:

     AWARENESS PHASE. The Company formally established a Y2K plan and
     established a project team for management of the Y2K project. The project
     team created a plan of action that includes milestones, budget estimates,
     strategies, and methodologies to track and report the status of the
     project. Members of the project team also attended conferences and
     information sharing sessions to gain more insight into the Y2K issue and
     potential strategies for addressing it. This phase is substantially
     complete.

     RENOVATION PHASE. The Company's corporate inventory revealed that Y2K
     upgrades were available for all vendor-supplied mission-critical systems,
     and all these Y2K-ready versions have been delivered and placed into
     production and have entered the validation process.

     VALIDATION PHASE. The validation phase is designed to test the ability of
     hardware and software to accurately process date-sensitive data. The
     Company has substantially



                                      32.
<PAGE>

     completed the validation testing of each mission-critical system. The
     project team completed various tests, and during the validation testing
     process, no significant Y2K problems have been identified relating to any
     modified or upgraded mission-critical systems.

     COMPANY RESOURCES INVESTED. The Company's Y2K project team has been
     assigned the task of ensuring that all systems across the Company are
     identified, analyzed for Y2K compliance, corrected if necessary, tested,
     and have the changes into service by March 31, 1999. The Y2K project team
     members represent all functional areas of the Company, including data
     processing, loan administration, accounting, item processing and
     operations, compliance, human resources, and marketing. The Company's Board
     of Directors oversees the Y2K plan and provides guidance and resources to,
     and receives quarterly updates from, the Y2K team.

     The Company is expensing all costs associated with required system changes
     as those costs are incurred, and such costs are being funded through
     operating cash flows. The total cost of the Y2K conversion project since
     commencement for the Company is estimated to be $35,000. The Company does
     not expect significant increases in future data processing costs related to
     Y2K compliance.

     CONTINGENCY PLANS. During the assessment phase, the Company began
     developing back-up or contingency plans for each of its mission-critical
     systems. Virtually all of the Company's mission-critical systems are
     dependent upon third party vendors or service providers. Therefore,
     contingency plans include selecting a new vendor or service provider and
     converting their system. In the event a current vendor's system fails
     during the validation phase and it is determined that the vendor is unable
     or unwilling to correct the failure, the Company will convert to a new
     system from a pre-selected list of prospective vendors. In each case,
     realistic trigger dates have been established to allow for orderly and
     successful conversions. For some systems, contingency plans consist of
     using spreadsheet software or reverting to manual systems until system
     problems can be corrected.


ITEM 7a.       QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
               RISK

The principal objective of the Bank's interest rate risk management function is
to evaluate the interest rate risk included in certain balance sheet accounts;
determine the level of risk appropriate given the Bank's business focus,
operating environment, capital and liquidity requirements, and performance
objectives; and manage the risk consistent with Board approved guidelines.
Through such management, the Bank seeks to reduce the vulnerability of its
operations to changes in interest rates. The Bank monitors its interest rate
risk as such risk relates to its operating strategies. The Bank's executive
committee meets regularly and reviews the Bank's interest rate risk position and
makes recommendations for adjusting such position. In addition, the Bank's Board
of Directors reviews on a quarterly basis the Bank's asset/liability position,
including simulations of the effect on the Bank's capital of various interest
rate scenarios.


                                      33.
<PAGE>

The Bank's interest rate sensitivity is monitored by management through the use
of a model which estimates the change in net portfolio value ("NPV") over a
range of interest rate scenarios. NPV is the present value of expected cash
flows from assets, liabilities, and off-balance-sheet contracts. An NPV Ratio,
in any interest rate scenario, is defined as the NPV in that scenario divided by
the market value of assets in the same scenario. The Sensitivity Measure is the
decline in the NPV Ratio, in basis points, caused by a 2% increase or decrease
in rates, whichever produces a larger decline. The higher an institution's
Sensitivity Measure is, the greater its exposure to interest rate risk is
considered to be. The Bank utilizes a market value model prepared by the OTS
(the "OTS NPV model"), which is prepared quarterly, based on the Bank's
quarterly Thrift Financial Reports filed with the OTS. The OTS NPV model
measures the Bank's interest rate risk by approximating the Bank's NPV, which is
the net present value of expected cash flows from assets, liabilities, and any
off-balance-sheet contracts, under various market interest rate scenarios which
range from a 400 basis point increase to a 400 basis point decrease in market
interest rates. The interest rate risk policy of the Bank provides that the
maximum permissible change at a 400 basis point increase or decrease in market
interest rates is a 90% change in the net portfolio value. The OTS has
incorporated an interest rate risk component into its regulatory capital rule.
Under the rule, an institution whose sensitivity measure exceeds 2% would be
required to deduct an interest rate risk component in calculating its total
capital for purpose of the risk-based capital requirement. As of December 31,
1998, the Bank's sensitivity measure, as measured by the OTS, resulting from a
200 basis point increase in interest rates was (0.48)% and would result in a
$1.5 million reduction in the NPV of the Bank. Accordingly, increases in
interest rates would be expected to have a negative impact on the Bank's
operating results. The NPV Ratio sensitivity measure is below the threshold at
which the Bank could be required to hold additional risk-based capital under OTS
regulations.

Certain shortcomings are inherent in the methodology used in the above interest
rate risk measurements. Modeling changes in NPV requires the making of certain
assumptions that may tend to oversimplify the manner in which actual yields and
costs respond to changes in market interest rates. First, the models assume that
the composition of the Bank's interest sensitive assets and liabilities existing
at the beginning of a period remains constant over the period being measured.
Second, the models assume that a particular change in interest rates is
reflected uniformly across the yield curve regardless of the duration to
maturity or repricing of specific assets and liabilities. Third, the model does
not take into account the impact of the Bank's business or strategic plans on
the structure of interest-earning assets and interest-bearing liabilities.
Accordingly, although the NPV measurement provides an indication of the Bank's
interest rate risk exposure at a particular point in time, such measurement is
not intended to and does not provide a precise forecast of the effect of changes
in market interest rates on the Bank's net interest income and will differ from
actual results. The results of this modeling are monitored by management and
presented to the Board of Directors, quarterly.

The following table shows the NPV and projected change in the NPV of the Bank at
December 31, 1998 assuming an instantaneous and sustained change in market
interest rates of 100, 200, 300, and 400 basis points.




                                      34.
<PAGE>




             INTEREST RATE SENSITIVITY OF NET PORTFOLIO VALUE (NPV)

<TABLE>
<CAPTION>
                                                                                       NPV as a % of
                           --------------Net Portfolio Value------------    -----------PV of Assets---------
                                         -------------------                           ------------

       Change in Rates       $ Amount         $ Change       % Change          NPV Ratio         Change
       ---------------       --------         --------       --------          ---------         ------

       <S>                 <C>            <C>                 <C>               <C>              <C>
          + 400 bp         $    20,691     $   (3,843)         (15.7)%           11.29%          -144 bp
          + 300 bp              21,905         (2,629)         (10.7)            11.79            -94 bp
          + 200 bp              23,060         (1,474)          (6.0)            12.25            -48 bp
          + 100 bp              23,998           (536)          (2.2)            12.59            -14 bp
              0 bp              24,534              -              -             12.73              -
          - 100 bp              24,589             55            0.2             12.65             -8 bp
          - 200 bp              24,409           (125)          (0.5)            12.46            -27 bp
          - 300 bp              24,426           (108)          (0.4)            12.35            -38 bp
          - 400 bp              24,043           (491)          (2.0)            12.05            -68 bp
</TABLE>

The Bank does not maintain any securities for trading purposes. The Bank does
not currently engage in trading activities or use derivative instruments in a
material amount to control interest rate risk. In addition, interest rate risk
is the most significant market risk affecting the Bank. Other types of market
risk, such as foreign currency exchange risk and commodity price risk, do not
arise in the normal course of the Company's business activities and operations.


ITEM 8.       FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

See Index to Financial Information on page F-1.


ITEM 9.       CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
              FINANCIAL DISCLOSURE

Not applicable.

                                      35.
<PAGE>


                                    PART III


ITEM 10.      DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY

(a)    Directors. This information required in response to this item regarding
       directors of the Company will be contained in the Company's definitive
       Proxy Statement (the "Proxy Statement") for its Annual Meeting of
       Stockholders to be held on April 21, 1999 under the caption "Election of
       Directors - Information with Respect to the Nominees, Continuing
       Directors, and Certain Executive Officers" and is incorporated herein by
       reference.

(b)    Executive Officers of the Company. The information required in response
       to this item regarding executive officers of the Company is contained in
       Part I of this report and is incorporated herein by reference.


ITEM 11.       EXECUTIVE COMPENSATION

The information required in response to this item will be contained in the Proxy
Statement under the captions "Election of Directors - Directors' Compensation"
and "Executive Compensation" and is incorporated herein by reference.


ITEM 12.       SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
               MANAGEMENT

The information required in response to this item will be contained in the Proxy
Statement under the captions "Security Ownership of Certain Beneficial Owners"
and "Election of Directors - Information with Respect to the Nominees,
Continuing Directors, and Certain Executive Officers" and is incorporated herein
by reference.


ITEM 13.       CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information required in response to this item will be contained in the Proxy
Statement under the caption "Election of Directors - Transactions with Certain
Related Persons" and is incorporated herein by reference.

                                      36.
<PAGE>


                                     PART IV


ITEM 14.       EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
               FORM 8-K

(a)    Documents filed as part of this report:

       1,2    Financial Statements and Schedules

              See Index to Financial Information on page F-1.

       3      Exhibits

              See Exhibit Index on page i.

(b)    Reports on Form 8-K

       No reports on Form 8-K were filed by the Company during 1998.

                                      37.
<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 on the 12th day of March
1999.

                                  PARK BANCORP, INC.



                                  By: /s/ David A. Remijas
                                      ------------------------------------------
                                          David A. Remijas
                                           Chairman of the Board,
                                           President, and
                                           Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1933, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.

           Name                             Title                      Date
           ----                             -----                      ----

/s/ David A. Remijas           Chairman of the Board,             March 12, 1999
---------------------------    President, and Chief Executive
David A. Remijas               Officer (principal executive
                               officer)

/s/ Steven J. Pokrak           Treasurer and Chief Financial      March 12, 1999
---------------------------    Officer (principal financial
Steven J. Pokrak               and accounting officer)

/s/ Richard J. Remijas, Jr.    Executive Vice President, Chief    March 12, 1999
---------------------------    Operating Officer, Corporate
Richard J. Remijas, Jr.        Secretary, and Director

/s/ Joseph M. Judickas, Jr.    Director                           March 12, 1999
---------------------------
Joseph M. Judickas, Jr.

/s/ Robert W. Krug             Director                           March 12, 1999
---------------------------
Robert W. Krug

/s/ John J. Murphy             Director                           March 12, 1999
---------------------------
John J. Murphy

/s/ Paul Shukis                Director                           March 12, 1999
---------------------------
Paul Shukis

<PAGE>


                                  EXHIBIT INDEX

                               Park Bancorp, Inc.

                         Form 10-K for Fiscal Year Ended
                                December 31, 1998


3.1      Certificate of Incorporation of Park Bancorp, Inc. ("Park Bancorp")
         (incorporated by reference to Exhibit 3.1 to Park Bancorp's
         Registration Statement No. 333-4380)

3.2      Bylaws of Park Bancorp, Inc. (incorporated by reference to Exhibit 3.2
         to Park Bancorp's Registration Statement No. 333-4380)

3.3      Federal Stock Charter and Bylaws of Park Federal Savings Bank
         (incorporated by reference to Exhibit 2.1 to Park Bancorp's
         Registration Statement No. 333-4380)

4.0      Stock Certificate of Park Bancorp, Inc. (incorporated by reference to
         Exhibit 4.0 to Park Bancorp's Registration Statement No. 333-4380)

10.1*    Form of Park Federal Savings Bank Employee Stock Ownership Plan
         (incorporated by reference to Exhibit 10.1 to Park Bancorp's
         Registration Statement No. 333-4380)

10.2*    ESOP Loan Commitment Letter and ESOP Loan Documents (incorporated by
         reference to Exhibit 10.2 to Park Bancorp's Registration Statement No.
         333-4380)

10.3*    Form of Employment Agreements between Park Federal Savings Bank and
         Park Bancorp, Inc. and certain executive officers (incorporated by
         reference to Exhibit 10.3 to Park Bancorp's Registration Statement No.
         333-4380)

10.4*    Form Proposed Park Federal Savings Bank Employee Severance Compensation
         Plan (incorporated by reference to Exhibit 10.4 to Park Bancorp's
         Registration Statement No. 333-4380)

10.5*    Park Federal Savings Bank Supplemental Executive Retirement Plan
         (incorporated by reference to Exhibit 10.5 to Park Bancorp's
         Registration Statement No. 333-4380)

10.6*    Park Bancorp, Inc. 1997 Stock-Based Incentive Plan (incorporated by
         reference to Exhibit 10.6 to the Park Bancorp, Inc. Annual Report on
         Form 10-K for the year ended December 31, 1997).

21.0     Subsidiaries of Registrant (incorporated by reference to Exhibit 21.0
         to the Park Bancorp, Inc. Annual Report on Form 10-K for the year ended
         December 31, 1997).

23.0     Consent of Independent Auditors

27.0     Financial Data Schedule

-----------
*   Management contract or compensatory plan or arrangement required to be filed
    as an exhibit to this Form 10-K pursuant to Item 14(c) of Form 10-K.


                                        i

<PAGE>


                       PARK BANCORP, INC. AND SUBSIDIARIES
                                Chicago, Illinois

                        CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 1998, 1997, and 1996






                         INDEX TO FINANCIAL INFORMATION






REPORT OF INDEPENDENT AUDITORS.............................................. F-2


CONSOLIDATED FINANCIAL STATEMENTS

     CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION......................... F-3

     CONSOLIDATED STATEMENTS OF INCOME...................................... F-4

     CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY........................ F-5

     CONSOLIDATED STATEMENTS OF CASH FLOWS.................................. F-7

     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS............................. F-9


                                      F-1

<PAGE>


                         REPORT OF INDEPENDENT AUDITORS


Board of Directors
Park Bancorp, Inc.
Chicago, Illinois


We have audited the accompanying consolidated statements of financial condition
of Park Bancorp, Inc. and Subsidiaries as of December 31, 1998 and 1997, and the
related consolidated statements of income, stockholders' equity, and cash flows
for each of the three years in the period ended December 31, 1998. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Park Bancorp, Inc.
and Subsidiaries as of December 31, 1998 and 1997, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1998 in conformity with generally accepted accounting principles.

As discussed in Note 2 to the consolidated financial statements, the Company
changed its method of accounting for derivative instruments on July 1, 1998 to
conform with Statement of Financial Accounting Standards No. 133.



                                       Crowe, Chizek and Company LLP

Oak Brook, Illinois
January 22, 1999


                                      F-2
<PAGE>


                       PARK BANCORP, INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
                           December 31, 1998 and 1997
                 (In thousands, except share and per share data)

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------

                                                                                          1998          1997
                                                                                          ----          ----
<S>                                                                                   <C>           <C>
ASSETS
Cash and due from banks                                                               $     1,273   $     1,119
Interest-bearing deposits with other financial institutions                                 9,436         6,693
                                                                                      -----------   -----------
    Total cash and cash equivalents                                                        10,709         7,812

Securities available-for-sale                                                             108,506        37,101
Securities held-to-maturity (1997 fair value - $55,684)                                         -        55,736
Loans receivable, net                                                                      75,776        68,327
Federal Home Loan Bank stock                                                                  887           841
Real estate held for development                                                            2,873         2,270
Premises and equipment, net                                                                 2,539         2,489
Accrued interest receivable                                                                 2,149         1,542
Foreclosed real estate                                                                          -            60
Other assets                                                                                  349           494
                                                                                      -----------   -----------

    Total assets                                                                      $   203,788   $   176,672
                                                                                      ===========   ===========

LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
    Deposits                                                                          $   148,350   $   131,865
    Securities sold under repurchase agreements                                             6,418         4,250
    Advances from borrowers for taxes and insurance                                         1,472         1,387
    Federal Home Loan Bank advances                                                        10,000             -
    Accrued interest payable                                                                  238           175
    Other liabilities                                                                         287           394
                                                                                      -----------   -----------
       Total liabilities                                                                  166,765       138,071

Stockholders' equity
    Preferred stock, $.01 par value, authorized 1,000,000 shares;
      none issued and outstanding                                                               -             -
    Common stock, $.01 par value per share;
      authorized 9,000,000 shares, issued 2,701,441 shares                                     27            27
    Additional paid-in capital                                                             26,353        26,222
    Retained earnings                                                                      22,211        20,060
    Treasury stock, 514,625 and 283,652 shares, at cost                                    (8,733)       (4,693)
    Unearned ESOP shares                                                                   (1,628)       (1,807)
    Unearned MRP shares                                                                      (933)       (1,226)
    Accumulated other comprehensive income (loss)                                            (274)           18
                                                                                      -----------   -----------
       Total stockholders' equity                                                          37,023        38,601
                                                                                      -----------   -----------

          Total liabilities and stockholders' equity                                  $   203,788   $   176,672
                                                                                      ===========   ===========
</TABLE>


          See accompanying notes to consolidated financial statements.


                                      F-3
<PAGE>


                       PARK BANCORP, INC. AND SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF INCOME
                  Years ended December 31, 1998, 1997, and 1996
                 (In thousands, except share and per share data)

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------

                                                                               1998         1997         1996
                                                                               ----         ----         ----
<S>                                                                        <C>          <C>          <C>
Interest income
    Loans receivable                                                       $    6,000   $    5,649   $    5,398
    Securities                                                                  7,318        6,640        5,499
    Interest-bearing deposits with other financial institutions                   474          175          438
                                                                           ----------   ----------   ----------
                                                                               13,792       12,464       11,335
Interest expense
    Deposits                                                                    6,562        6,091        6,202
    Federal Home Loan Bank advances and other borrowings                          848          299          118
                                                                                7,410        6,390        6,320
                                                                           ----------   ----------   ----------

NET INTEREST INCOME                                                             6,382        6,074        5,015

Provision for loan losses                                                           -            -            -
                                                                           ----------   ----------   ----------

NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES                             6,382        6,074        5,015

Noninterest income
    Gains on sales of securities                                                    4           18            -
    Gains on sales of real estate held for development                            817          276           60
    Service fee income                                                            239          251          177
    Other operating income                                                         91           40           70
                                                                           ----------   ----------   ----------
                                                                                1,151          585          307

Noninterest expense
    Compensation and benefits                                                   2,694        2,575        1,664
    Occupancy and equipment expense                                               478          475          374
    Federal deposit insurance premiums                                            136          132          342
    Special SAIF assessment                                                         -            -          736
    Data processing services                                                      140          128          125
    Advertising                                                                   188          172           64
    Other operating expense                                                       616          779          413
                                                                           ----------   ----------   ----------
                                                                                4,252        4,261        3,718
                                                                           ----------   ----------   ----------

INCOME BEFORE INCOME TAXES                                                      3,281        2,398        1,604

Income tax expense                                                              1,130          855          543
                                                                           ----------   ----------   ----------

NET INCOME                                                                 $    2,151   $    1,543   $    1,061
                                                                           ==========   ==========   ==========

Basic earnings per share                                                   $     1.03   $      .67   $      .15
                                                                           ==========   ==========   ==========
Diluted earnings per share                                                 $     1.02   $      .67   $      .15
                                                                           ==========   ==========   ==========
</TABLE>




                                      F-4
<PAGE>

                       PARK BANCORP, INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                 Years ended December 31, 1998, 1997, and 1996
                 (In thousands, except share and per share data)

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------------
                                                                                                                    Accumulated
                                             Additional                                  Unearned      Unearned        Other
                                 Common        Paid-in      Retained      Treasury         ESOP           MRP     Comprehensiveve
                                  Stock        Capital      Earnings        Stock         Shares        Shares     Income (Loss)
                                  -----        -------      --------        -----         ------        ------     -------------
<S>                           <C>            <C>           <C>            <C>          <C>           <C>                <C>
Balance at January 1, 1996    $        -    $        -     $   17,456    $        -    $        -    $        -         $   77

Comprehensive income
    Net income                         -             -          1,061             -             -             -              -
    Change in fair value of
      securities classified as
      available-for-sale, net          -             -              -             -             -             -           (259)


       Total comprehensive
         income

Issuance of common stock,
  net of conversion costs             27        26,038              -             -        (2,161)            -              -

ESOP shares released                   -            50              -             -           168             -              -
                              ----------    ----------     ----------    ----------    ----------    ----------     ----------

Balance at December 31, 1996          27        26,088         18,517             -        (1,993)            -           (182)

Comprehensive income
    Net income                         -             -          1,543             -             -             -              -
    Change in fair value
      of securities classified as
      available-for sale, net          -             -              -             -             -             -            200


       Total comprehensive
         income

Purchase of 391,709 shares
  of treasury stock at cost            -             -              -        (6,395)            -             -              -

ESOP shares released                   -           129              -             -           186             -              -
</TABLE>

                       [WIDE TABLE CONTINUED FROM ABOVE]

<TABLE>
<CAPTION>
                                       Total
                                   Stockholders'   Comprehensive
                                      Equity          Income
                                      ------          ------
<S>                                   <C>         <C>
Balance at January 1, 1996            $  17,533

Comprehensive income
    Net income                            1,061     $   1,061
    Change in fair value of
      securities classified as
      available-for-sale, net              (259)         (259)
                                                   ----------

       Total comprehensive
         income                                    $      802
                                                   ==========
Issuance of common stock,
  net of conversion costs                     -        23,904

ESOP shares released                        218
                                    -----------

Balance at December 31, 1996             42,457

Comprehensive income
    Net income                            1,543     $   1,543
    Change in fair value
      of securities classified as
      available-for sale, net               200           200
                                                   ----------

       Total comprehensive
         income                                     $   1,743
                                                    =========
Purchase of 391,709 shares
  of treasury stock at cost              (6,395)

ESOP shares released                        315
</TABLE>


--------------------------------------------------------------------------------
                                   (Continued)

                                      F-5
<PAGE>


                       PARK BANCORP, INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                 Years ended December 31, 1998, 1997, and 1996
                 (In thousands, except share and per share data)

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------
                                             Additional                                  Unearned      Unearned
                                 Common        Paid-in      Retained      Treasury         ESOP           MRP
                                  Stock        Capital      Earnings        Stock         Shares        Shares
                                  -----        -------      --------        -----         ------        ------

<S>                           <C>           <C>            <C>           <C>           <C>           <C>
Grant of shares under
  Management Recognition
  Plan (MRP)                  $        -    $        -     $        -    $    1,702    $        -    $   (1,702)

MRP shares earned                      -             5              -             -             -           476
                              ----------    ----------     ----------    ----------    ----------    ----------

Balance at December 31, 1997          27        26,222         20,060        (4,693)       (1,807)       (1,226)

Comprehensive income
    Net income                         -             -          2,151             -             -             -
    Effect of transfer of securities
         held-to-maturity to
         available-for-sale, net       -             -              -             -             -             -
    Change in fair value
      of securities classified as
      available-for sale, net          -             -              -             -             -             -


       Total comprehensive
         income

Purchase of 230,973 shares
  of treasury stock at cost            -             -              -        (4,040)            -             -

ESOP shares released                   -           117              -             -           179             -

MRP shares earned                      -            14              -             -             -           293
                              ----------    ----------     ----------    ----------    ----------    ----------

Balance at December 31, 1998  $       27    $   26,353     $   22,211    $   (8,733)   $   (1,628)   $     (933)
                              ==========    ==========     ==========    ==========    ==========    ==========
</TABLE>

                       [WIDE TABLE CONTINUED FROM ABOVE]

<TABLE>
<CAPTION>
                                     Accumulated
                                        Other         Total
                                    Comprehensive Stockholders'   Comprehensive
                                    Income (Loss)    Equity          Income
                                    -------------    ------          ------
<S>                                  <C>           <C>            <C>
Grant of shares under
  Management Recognition
  Plan (MRP)                         $        -    $         -

MRP shares earned                             -            481
                                     ----------    -----------

Balance at December 31, 1997                 18         38,601

Comprehensive income
    Net income                                -          2,151    $    2,151
    Effect of transfer of securities
         held-to-maturity to
         available-for-sale, net             74             74            74
    Change in fair value
      of securities classified as
      available-for sale, net              (366)          (366)         (366)
                                                                  ----------

       Total comprehensive
         income                                                   $    1,859
                                                                  ==========
Purchase of 230,973 shares
  of treasury stock at cost                   -         (4,040)

ESOP shares released                          -            296

MRP shares earned                             -            307
                                     ----------    -----------

Balance at December 31, 1998         $     (274)   $    37,023
                                     ==========    ===========
</TABLE>

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

          See accompanying notes to consolidated financial statements.


                                      F-6
<PAGE>


                       PARK BANCORP, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                  Years ended December 31, 1998, 1997, and 1996
                                 (In thousands)

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------
                                                                      1998         1997         1996
                                                                      ----         ----         ----
<S>                                                                   <C>          <C>          <C>
CASH FLOWS FROM OPERATING ACTIVITIES
    Net income                                                      $  2,151     $  1,543     $  1,061
    Adjustments to reconcile net income to net cash from
      operating activities
       Net premium amortization (discount accretion)                     (99)          (3)          23
       Loss on sale of foreclosed real estate                              6            6            4
       Gains on sales of securities available-for-sale                    (4)         (18)           -
       Depreciation                                                      206          104          124
       Deferred income tax expense (benefit)                             (87)           8           78
       Deferred loan fees                                                 21          (81)          42
       Net change in accrued interest receivable                        (607)          85         (436)
       Net change in other assets                                        232         (105)         (35)
       Net change in accrued interest payable                             63           16          (25)
       Net change in other liabilities                                    44         (156)         (99)
       ESOP expense                                                      296          315          218
       Stock award earned                                                307          481            -
       Gains on sales of real estate held for development               (817)        (276)         (60)
                                                                    --------     --------     --------
          Net cash from operating activities                           1,712        1,919          895

CASH FLOWS FROM INVESTING ACTIVITIES
    Net change in loans                                               (7,470)      (2,196)      (5,952)
    Proceeds from maturities and calls of securities
      available-for-sale                                              74,490       22,000       15,850
    Proceeds from maturities and calls of securities
      held-to-maturity                                                21,000       25,150       24,635
    Purchases of securities available-for-sale                       (79,775)     (11,652)     (30,700)
    Purchases of securities held-to-maturity                         (40,238)     (35,963)     (34,121)
    Proceeds from sales of securities available-for-sale                 756        1,001            -
    Principal repayments on mortgage-backed securities
      held-to-maturity                                                 6,051        2,917        1,719
    Principal repayments on mortgage-backed securities
      available-for-sale                                               1,707        1,984        3,872
    Purchases of Federal Home Loan Bank stock                            (46)         (85)         (80)
    Proceeds from sales of real estate held for development            3,029        1,144          384
    Investment in real estate held for development                    (2,815)        (267)      (1,405)
    Payments to participants in real estate held for development           -            -         (165)
    Proceeds from sales of foreclosed real estate                         54          123          265
    Expenditures for premises and equipment                             (256)        (443)        (186)
    Expenditures on foreclosed real estate                                 -            -          (10)
                                                                    --------     --------     --------
       Net cash from investing activities                            (23,513)       3,713      (25,894)
</TABLE>


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

                                   (Continued)

                                      F-7
<PAGE>


                       PARK BANCORP, INC. AND SUBSIDIARIES










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

                                   (Continued)


                                      F-8
<PAGE>


                       PARK BANCORP, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                  Years ended December 31, 1998, 1997, and 1996
                                 (In thousands)

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------
                                                                               1998         1997        1996
                                                                               ----         ----        ----
<S>                                                                        <C>          <C>          <C>
CASH FLOWS FROM FINANCING ACTIVITIES
    Net change in deposits                                                 $   16,485   $    3,013   $   (1,651)
    Net change in securities sold under repurchase agreements                   2,168        4,250            -
    Net change in advances from borrowers for taxes and
      insurance                                                                    85           99          169
    Net proceeds from sale of common stock                                          -            -       23,904
    Purchases of treasury stock                                                (4,040)      (6,395)           -
    Federal Home Loan Bank advances                                            10,000            -            -
    Repayment of Federal Home Loan Bank advances                                    -       (5,000)      (4,000)
                                                                           ----------   ----------   ----------
       Net cash from financing activities                                      24,698       (4,033)      18,422
                                                                           ----------   ----------   ----------

Increase (decrease) in cash and cash equivalents                                2,897        1,599       (6,577)

Cash and cash equivalents at beginning of year                                  7,812        6,213       12,790
                                                                           ----------   ----------   ----------

CASH AND CASH EQUIVALENTS AT END OF YEAR                                   $   10,709   $    7,812   $    6,213
                                                                           ==========   ==========   ==========

Supplemental disclosures of cash flow information
    Cash paid during the year for
       Interest                                                            $    7,347   $    6,374   $    6,344
       Income taxes                                                             1,062        1,025          396

Supplemental disclosures of noncash investing activities
    Real estate acquired through foreclosure                                        -          129          269
    Transfer of securities to available-for-sale from
       held-to-maturity on July 1, 1998, at fair value                         73,267            -            -
</TABLE>


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

          See accompanying notes to consolidated financial statements.


                                      F-9
<PAGE>


                       PARK BANCORP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 1998, 1997, and 1996
          (Table amounts in thousands, except share and per share data)

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


NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation: The accompanying consolidated financial statements
include the accounts of Park Bancorp, Inc. (the "Company"), and its wholly-owned
subsidiaries Park Federal Savings Bank (the Bank) and PBI Development
Corporation ("PBI"), which conducts real estate development activities. The Bank
has two wholly-owned subsidiaries, GPS Corporation, which conducts limited
insurance activities, and GPS Development Corp. ("GPS"), which also conducts
real estate development activities. All significant intercompany transactions
and balances are eliminated in consolidation.

Business: The primary business of the Company is the ownership of the Bank. The
Bank is engaged in the business of retail banking, with operations conducted
through its main office and two branches located in Chicago and Westmont,
Illinois. The Company's revenues primarily arise from interest income from
retail lending activities and investments and revenue derived from real estate
through the development and sales of residential lots to home builders through
PBI and GPS.

Use of Estimates: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of income and expenses during the reporting
period. Actual results could differ from those estimates. The collectibility of
loans, fair value of financial instruments, and status of contingencies are
particularly subject to change.

Securities: Securities are classified as held-to-maturity when the Company's
management has the positive intent and the Company has the ability to hold those
securities to maturity. Accordingly, they are stated at cost, adjusted for
amortization of premiums and accretion of discounts. Securities are classified
as available-for-sale when management may decide to sell those securities in
response to changes in market interest rates, liquidity needs, changes in yields
on alternative investments, and for other reasons. They are carried at fair
value. Unrealized gains and losses on securities available-for-sale are charged
or credited to a valuation allowance and included as a separate component of
equity, net of income taxes. Realized gains and losses on disposition are based
on the net proceeds and the adjusted carrying amount of the securities sold,
using the specific identification method.

Loans Receivable: Loans receivable are stated at unpaid principal balances, less
the allowance for loan losses, deferred loan origination fees, and discounts.


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

                                   (Continued)

                                      F-10
<PAGE>


                       PARK BANCORP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 1998, 1997, and 1996
          (Table amounts in thousands, except share and per share data)

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


NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Allowance for Loan Losses: Because some loans may not be repaid in full, an
allowance for loan losses is maintained. Increases to the allowance are recorded
by a provision for loan losses charged to expense. Estimating the risk of the
loss and the amount of loss on any loan is necessarily subjective. Accordingly,
the allowance is maintained by management at a level considered adequate to
cover possible losses that are currently anticipated based on past loss
experience, general economic conditions, information about specific borrower
situations including their financial position and collateral values, and other
factors and estimates which are subject to change over time. While management
may periodically allocate portions of the allowance for specific problem loan
situations, including impaired loans discussed below, the whole allowance is
available for any charge-offs that occur. Loans are charged off in whole or in
part when management's estimate of the undiscounted cash flows from the loan are
less than the recorded investment in the loan, although collection efforts
continue and future recoveries may occur.

Loans are considered impaired if full principal or interest payments are not
anticipated. Impaired loans are carried at the present value of expected cash
flows discounted at the loan's effective interest rate or at the fair value of
the collateral if the loan is collateral dependent. A portion of the allowance
for loan losses is allocated to an impaired loan if the present value of cash
flows or collateral value indicates the need for an allowance.

Smaller balance homogeneous loans are defined as residential first mortgage
loans secured by one-to-four-family residences, residential construction loans,
second mortgage loans, and consumer loans and are evaluated collectively for
impairment. Commercial real estate loans are evaluated individually for
impairment. Normal loan evaluation procedures are used to identify loans which
must be evaluated for impairment. In general, loans classified as doubtful or
loss are considered impaired while loans classified as substandard are
individually evaluated for impairment. A loan is placed in nonaccrual when
payments are more than 90 days past due unless the loan is adequately
collateralized and in the process of collection. Although impaired loan and
nonaccrual loan balances are measured differently, impaired loan disclosures do
not differ significantly from nonaccrual and renegotiated loan disclosures.

Loan Interest Income: Interest on loans is accrued over the term of the loans
based upon the principal outstanding. Management reviews loans delinquent 90
days or more to determine whether the interest accrual should be discontinued.
The carrying values of impaired loans are periodically adjusted to reflect cash
payments, revised estimates of future cash flows, and increases in the present
value of expected cash flows due to the passage of time. Cash payments
representing interest income are reported as such. Other cash payments are
reported as reductions in carrying value, while increases or decreases due to
changes in estimates of

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

                                   (Continued)


                                      F-11
<PAGE>

                       PARK BANCORP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 1998, 1997, and 1996
          (Table amounts in thousands, except share and per share data)

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

future payments and due to the passage of time are reported as adjustments to
the provision for loan losses.














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

                                   (Continued)



                                      F-12
<PAGE>

                       PARK BANCORP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 1998, 1997, and 1996
          (Table amounts in thousands, except share and per share data)

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


NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Loan Origination Fees: Loan origination fees, net of certain direct loan
origination costs, are deferred and recognized over the contractual life of the
loan as a yield adjustment.

Real Estate Held for Development: The Company, through PBI and GPS, engages in
the development of residential real estate lots in partnership with local
developers. Since the Company and the Bank provide substantially all of the
financing for these projects, they have been reflected as wholly-owned
investments in real estate held for development. Land inventories and real
estate projects under development are valued at the lower of acquisition cost
plus development costs, or net realizable value. The cost of each unit sold
includes a proportionate share of the total projected development expense.
Holding costs associated with undeveloped land, completed units, and suspended
construction activities are expensed. General and administrative costs related
to the real estate development projects are expensed when incurred.

Income Recognition on Real Estate: Gains on real estate sales, including those
financed by the Company, are recorded in the period that sales contracts are
executed. Loans made by the Company to builders purchasing developed lots
require a 25% down payment and mature in one year or less. Gains on sales are
reported net of all related costs, except for certain insignificant general and
administrative expenses borne by the Company.

Premises and Equipment: Premises and equipment are stated at cost less
accumulated depreciation. Depreciation is computed using the straight-line
method over the estimated useful lives of the assets, which range from 5 to 40
years.

Foreclosed Real Estate: Real estate acquired through foreclosure and similar
proceedings is carried at cost (fair value at the date of foreclosure) or at
fair value less estimated costs to sell. Losses on disposition, including
expenses incurred in connection with the disposition, are charged to operations.

Repurchase Agreements: Substantially all repurchase agreement liabilities
represent amounts advanced by various customers. Securities are pledged to cover
these liabilities, which are not covered by federal deposit insurance.

Income Taxes: The provision for income taxes is based on an asset and liability
approach that requires recognition of deferred tax assets and liabilities for
the expected future consequences of temporary differences between the carrying
amounts and the tax bases of assets and liabilities.

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

                                   (Continued)


                                      F-13
<PAGE>

                       PARK BANCORP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 1998, 1997, and 1996
          (Table amounts in thousands, except share and per share data)

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

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Employee Stock Ownership Plan: The cost of shares issued to the Employee Stock
Ownership Plan ("ESOP") but not yet allocated to participants is presented in
the consolidated balance sheet as a reduction of stockholders' equity.
Compensation expense is recorded based on the market price of the shares as they
are committed to be released for allocation to participant accounts. The
difference between the market price and the cost of shares committed to be
released is recorded as an adjustment to additional paid-in capital.

Shares are considered outstanding for earnings per share calculations as they
are committed to be released; unallocated shares are not considered outstanding.

Statement of Cash Flows: For the purpose of this statement, cash and cash
equivalents are defined to include the Company's cash on hand, demand balances,
interest-bearing deposits with other financial institutions, and investments in
certificates of deposit with maturities of less than three months.

Comprehensive Income: Comprehensive income consists of net income and other
comprehensive income. Other comprehensive income includes unrealized gains and
losses on securities available-for-sale, net of taxes, which is also recognized
as a separate component of equity. The accounting standard that requires
reporting comprehensive income first applies for 1998, with prior information
restated to be comparable.

Earnings Per Share: Basic earnings per share is based on net income divided by
the weighted average number of shares outstanding during the period, including
allocated and committed to be released ESOP shares. Diluted earnings per share
shows the dilutive effect of additional common shares issuable under stock
options and unearned Management Recognition Plan ("MRP") shares. In 1996,
earnings per share is computed using net earnings from August 9, 1996, the date
that the Bank converted to stock ownership.

Fair Values of Financial Instruments: Fair values of financial instruments are
estimated using relevant market information and other assumptions, as more fully
disclosed in a separate footnote. Fair value estimates involve uncertainties and
matters of significant judgment regarding interest rates, credit risk,
prepayments, and other factors, especially in the absence of broad markets for
particular items. Changes in assumptions or in market conditions could
significantly affect the estimates.

Hedging Activities: All derivative instruments are recorded at fair value.
Unless designated as hedges, changes in these fair values will be recorded in
the income statement. Fair value changes involving hedges are recorded by
offsetting gains and losses on the hedge and on the hedged item, even if the
fair value of the hedged item is not otherwise recorded.

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

                                   (Continued)


                                      F-14
<PAGE>


                       PARK BANCORP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 1998, 1997, and 1996
          (Table amounts in thousands, except share and per share data)

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


NOTE 2 - SECURITIES

Securities are summarized as follows:

<TABLE>
<CAPTION>
                                                      ---------------------December 31, 1998-------------------
                                                                           -----------------
                                                                         Gross            Gross
                                                        Amortized     Unrealized       Unrealized       Fair
                                                          Cost           Gains           Losses         Value
    Securities Available-for-Sale                       ---------     ----------       ----------       -----
    -----------------------------
<S>                                                   <C>             <C>            <C>            <C>
       U.S. government agency notes                   $    87,794     $        46    $      (609)   $    87,231
       Municipal securities                                   351               -             (8)           343
       Equity securities                                    1,015              13            (30)           998
       Mortgage-backed securities
          FNMA                                             12,465             146             (3)        12,608
          FHLMC                                             7,296              59            (29)         7,326
                                                      -----------     -----------    -----------    -----------
                                                           19,761             205            (32)        19,934
                                                      -----------     -----------    -----------    -----------

                                                      $   108,921     $       264    $      (679)   $   108,506
                                                      ===========     ===========    ===========    ===========

<CAPTION>
                                                      ---------------------December 31, 1997-------------------
                                                                           -----------------
                                                                         Gross            Gross
                                                        Amortized     Unrealized       Unrealized       Fair
                                                          Cost           Gains           Losses         Value
    Securities Available-for-Sale                       ---------     ----------       ----------       -----
    -----------------------------

       U.S. government agency notes                   $    29,183     $        36    $       (52)   $    29,167
       Municipal securities                                   288               -             (1)           287
       Equity securities                                      400               8              -            408
       Mortgage-backed securities:
          FNMA                                              4,141              30             (5)         4,166
          FHLMC                                             3,061              12              -          3,073
                                                      -----------     -----------    -----------    -----------
                                                            7,202              42             (5)         7,239
                                                      -----------     -----------    -----------    -----------

                                                      $    37,073     $        86    $       (58)   $    37,101
                                                      ===========     ===========    ===========    ===========

    Securities Held-to-Maturity
    ---------------------------
       U.S. government agency notes                   $    44,975     $       146    $       (33)   $    45,088
       Mortgage-backed securities:
          FNMA                                              5,651               -            (85)         5,566
          FHLMC                                             5,110               -            (80)         5,030
                                                      -----------     -----------    -----------    -----------
                                                           10,761               -           (165)        10,596
                                                      -----------     -----------    -----------    -----------

                                                      $    55,736     $       146    $      (198)   $    55,684
                                                      ===========     ===========    ===========    ===========
</TABLE>

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

                                   (Continued)


                                      F-15
<PAGE>

                       PARK BANCORP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 1998, 1997, and 1996
          (Table amounts in thousands, except share and per share data)

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

NOTE 2 - SECURITIES (Continued)

Sales of securities are summarized as follows:

                                            For the Year Ended
                                 ---------------December 31,-------------
                                                ------------
                                    1998           1997          1996
                                    ----           ----          ----

     Proceeds from sales        $       756    $     1,001    $         -
     Gross realized gains                 4             18              -

Contractual maturities of debt securities available-for-sale at December 31,
1998 were as follows. Securities not due at a single maturity date, primarily
mortgage-backed and equity securities, are shown separately.

                                                Amortized          Fair
                                                  Cost             Value
                                                ---------          -----

    Due in one year or less                     $     2,350    $     2,343
    Due after one year through five years                 -              -
    Due after five years through ten years            6,999          7,044
    Due after ten years                              78,796         78,187
                                                -----------    -----------
                                                     88,145         87,574
    Equity securities                                 1,015            998
    Mortgage-backed securities                       19,761         19,934
                                                -----------    -----------

                                                $   108,921    $   108,506
                                                ===========    ===========

Securities with a book value of $9,700,000 and $4,750,000 at December 31, 1998
and 1997 were pledged to secure securities sold under repurchase agreements.

Effective July 1, 1998, the Company adopted the provisions of Statement of
Financial Accounting Standards ("SFAS") No. 133, ACCOUNTING FOR DERIVATIVE
INSTRUMENTS AND HEDGING ACTIVITIES. As permitted by SFAS No. 133, the Company
reclassified all of its securities held-to-maturity to securities
available-for-sale. The securities which were reclassified had a book value of
$73,155,000 and a fair value of $73,267,000 at July 1, 1998.


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

                                   (Continued)

                                      F-16
<PAGE>

                       PARK BANCORP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 1998, 1997, and 1996
          (Table amounts in thousands, except share and per share data)

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

NOTE 3 - LOANS RECEIVABLE

Loans receivable are summarized as follows at:

<TABLE>
<CAPTION>
                                                           -------December 31,--------
                                                                  ------------
                                                              1998             1997
                                                              ----             ----
<S>                                                        <C>            <C>
     First mortgage loans
         Principal balances
              Secured by one-to-four-family residences     $    60,103    $    55,634
              Secured by other properties                        9,947          7,860
              Commercial, construction, and land                 5,163          5,215
                                                           -----------    -----------
                                                                75,213         68,709

     Undistributed portion of construction loans                  (910)        (1,042)
     Net deferred loan origination fees                           (358)          (337)
                                                           -----------    -----------
         Total first mortgage loans                             73,945         67,330

     Consumer loans                                              2,333          1,501
     Unearned discounts                                             (2)            (4)
                                                           -----------    -----------
         Total consumer loans                                    2,331          1,497

     Allowance for loan losses                                    (500)          (500)
                                                           -----------    -----------

                                                           $    75,776    $    68,327
                                                           ===========    ===========
</TABLE>

Information regarding impaired loans is as follows:

<TABLE>
<CAPTION>
                                                        1998           1997            1996
                                                        ----           ----            ----

<S>                                                  <C>            <C>            <C>
Impaired loans with no allowance allocated           $   188,000    $    99,000    $   190,000
Impaired loans with allowance allocated                        -              -              -
Average balance of impaired loans                        264,000        145,000        346,000
Interest income recognized during impairment               7,000         10,000         13,000
Cash-basis interest income recognized                      7,000         10,000         13,000
</TABLE>

The Company has granted loans to certain bank officers, directors, and their
related interests. Related party loans are made on substantially the same terms,
including interest rates and collateral, as those prevailing at the time for
comparable transactions with unrelated persons and do not involve more than
normal risk of collectibility. All loans are current in their contractual
payments for both principal and interest.

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

                                   (Continued)


                                      F-17
<PAGE>


                       PARK BANCORP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 1998, 1997, and 1996
          (Table amounts in thousands, except share and per share data)

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

NOTE 3 - LOANS RECEIVABLE (Continued)

Activity in the loan accounts of officers, directors, and their related
interests follows:

For the year ended December 31, 1998:

     Balance at beginning of year                                $       391
     Loans disbursed                                                       -
     Principal repayments                                               (110)
                                                                 -----------

         Balance at end of year                                  $       281
                                                                 ===========

Activity in the allowance for loan losses is as follows:

                                                 For the Year Ended
                                     --------------December 31,----------------
                                                   ------------
                                          1998         1997         1996
                                          ----         ----         ----

     Balance at beginning of year      $     500    $     500    $     573
     Provision for loan losses                 -            -            -
     Charge-offs                               -            -          (73)
     Recoveries                                -            -            -
                                       ---------    ---------    ---------

         Balance at end of year        $     500    $     500    $     500
                                       =========    =========    =========


NOTE 4 - PREMISES AND EQUIPMENT

Premises and equipment consist of the following at:

                                                --------December 31,-------
                                                        ------------
                                                   1998             1997
                                                   ----             ----
     Cost
         Land                                   $       850    $       850
         Buildings and improvements                   1,880          1,839
         Furniture and fixtures                       1,145            930
                                                -----------    -----------
              Total cost                              3,875          3,619
     Less accumulated depreciation                   (1,336)        (1,130)
                                                -----------    -----------

                                                $     2,539    $     2,489
                                                ===========    ===========

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

                                   (Continued)


                                      F-18
<PAGE>

                       PARK BANCORP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 1998, 1997, and 1996
          (Table amounts in thousands, except share and per share data)

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

NOTE 5 - DEPOSITS

Certificate of deposit accounts with balances of $100,000 or more totaled
$25,927,000 at December 31, 1998 and $7,384,000 at December 31, 1997.

At December 31, 1998, scheduled maturities of certificates of deposit are as
follows:

           1999                                              $    77,593
           2000                                                   18,036
           2001                                                    2,636
           2002                                                    1,902
           2003 and thereafter                                     1,108
                                                             -----------

                                                             $   101,275
                                                             ===========

NOTE 6 - ADVANCES FROM FEDERAL HOME LOAN BANK

Federal Home Loan Bank ("FHLB") advances consisted of the following at December
31, 1998:

<TABLE>
<CAPTION>
                                                                 Frequency of
                                   Redemption         Interest       Rate
         Maturity Date               Date               Rate      Adjustment     Collateral         Amount
         -------------             ----------         --------   ------------    ----------         ------

<S>                           <C>                     <C>         <C>             <C>            <C>
     January 15, 2008         January 15, 1999        4.70%        Fixed          Secured        $     5,000
     January 15, 2008         January 15, 2001        4.95%        Fixed          Secured              5,000
                                                                                                 -----------

                                                                                                $     10,000
                                                                                                ============
</TABLE>

The advances are redeemable by the FHLB beginning at the dates indicated and
then quarterly thereafter. The Company will incur a penalty if the advances are
repaid prior to their maturity dates.

The Company maintains a collateral pledge agreement covering secured advances
whereby the Company has agreed to at all times keep on hand, free of all other
pledges, liens, and encumbrances, fully disbursed, whole first mortgages on
improved residential property not more than 90 days delinquent, aggregating no
less than 167% of the outstanding secured advances from the FHLB.


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

                                   (Continued)

                                      F-19
<PAGE>

                       PARK BANCORP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 1998, 1997, and 1996
          (Table amounts in thousands, except share and per share data)

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

NOTE 7 - EMPLOYEE BENEFIT PLANS

The Bank maintains a profit sharing plan covering substantially all employees.
Contributions to the profit sharing plan are made at the discretion of the Board
of Directors and charged to expense annually. The plan also allows participant
salary deferrals into the plan along with a matching contribution provided by
the Bank. Total contributions to the plan were $42,000, $36,000, and $18,000 for
1998, 1997, and 1996.

The Bank maintains a non-qualified supplemental executive retirement plan
("SERP") to provide certain officers and highly compensated employees with
additional retirement benefits. The SERP is designed to restore benefits to
participants in the qualified plan whose retirement benefits had been reduced as
the result of changes in the Internal Revenue Code. Benefits to be provided
under the SERP will be funded with proportional contributions from the Company
and the Bank. During 1998 and 1997, there were no such contributions.

The Bank established an employee stock ownership plan (ESOP) for the benefit of
substantially all employees. The ESOP borrowed $2,160,990 from the Company and
used those funds to acquire 216,099 shares of the Company's stock at $10 per
share, the initial public offering price.

Shares issued to the ESOP are allocated to ESOP participants based on principal
repayments made by the ESOP on the loan from the Company. The loan is secured by
shares purchased with the loan proceeds and will be repaid by the ESOP with
funds from the Bank's discretionary contributions to the ESOP and earnings on
ESOP assets. Principal payments are scheduled to occur over a fifteen-year
period. However, in the event the Bank's contributions exceed the minimum debt
service requirements, additional principal payments will be made. Dividends on
allocated ESOP shares are recorded as a reduction of retained earnings;
dividends on unallocated ESOP shares are used to release shares.

During 1998 and 1997, 17,888 and 18,582 shares of stock with an average fair
value of $16.53 and $16.97 per share, respectively, were committed to be
released, resulting in ESOP compensation expense of $296,000 and $315,000.
Shares held by the ESOP at December 31, 1998 and 1997 are as follows:

                                                 1998            1997
                                                 ----            ----

     Allocated shares                              53,227          35,339
     Unallocated shares                           162,872         180,760
                                             ------------    ------------

         Total ESOP shares                        216,099         216,099
                                             ============    ============

     Fair value of unallocated shares        $      2,261    $      3,367
                                             ============    ============

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

                                   (Continued)


                                      F-20
<PAGE>


                       PARK BANCORP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 1998, 1997, and 1996
          (Table amounts in thousands, except share and per share data)

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

NOTE 7 - EMPLOYEE BENEFIT PLANS (Continued)

The Company adopted a management recognition plan ("MRP") during 1997. The Bank
contributed $1.7 million, allowing the MRP to acquire 108,057 shares of common
stock of the Company, at a cost of $15.75 per share. Under the MRP, 96,425
shares of common stock have been awarded to certain employees and directors. The
remaining 11,632 shares are held for future awards. The stock awards vest over
five years. The amortized cost of the shares which vested in 1998 and 1997 was
$293,000 and $476,000.

The Company also adopted a stock option plan in 1997 under the terms of which
270,141 shares of the Company's common stock were reserved for issuance. The
options become exercisable over a five-year period from the date of grant. The
options expire ten years from the date of grant.

A summary of the activity in the plan is as follows:

<TABLE>
<CAPTION>
                                                                       1 9 9 8                    1 9 9 7
                                                                       -------                    -------
                                                                             Weighted                    Weighted
                                                                              Average                     Average
                                                                             Exercise                    Exercise
                                                              Shares           Price       Shares          Price

<S>                                                             <C>        <C>                          <C>
Outstanding at beginning of year                                232,324    $   15.75              -     $      -
Granted                                                               -            -        232,324        15.75
Exercised                                                             -            -              -            -
Forfeited                                                             -            -              -            -
                                                           ------------    ---------   ------------     --------

Outstanding at end of year                                      232,324    $   15.75        232,324     $  15.75
                                                           ============    =========   ============     ========

Options exercisable at year-end                                  92,930                      46,465
Weighted-average fair value of options
  granted during year                                                 -                $       6.38
</TABLE>

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

                                   (Continued)


                                      F-21
<PAGE>

                       PARK BANCORP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 1998, 1997, and 1996
          (Table amounts in thousands, except share and per share data)

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

NOTE 7 - EMPLOYEE BENEFIT PLANS (Continued)

SFAS No. 123 requires pro forma disclosures for companies that do not adopt its
fair value accounting method for stock-based employee compensation. Accordingly,
the following pro forma information presents 1998 and 1997 net income and
earnings per share had the fair value method been used to measure compensation
cost for stock option plans. There was no compensation expense recorded for
stock options in 1998 or 1997.

                                                        1998            1997
                                                        ----            ----

       Net income as reported                       $    2,151       $   1,543
       Pro forma net income                              1,970           1,361
       Basic earnings per share as reported               1.03             .67
       Pro forma basic earnings per share                  .94             .59
       Diluted earnings per share as reported             1.02             .67
       Pro forma diluted earnings per share                .94             .59

The fair value of options granted in 1997 was estimated using a Black-Scholes
option pricing model using the following assumptions: dividend yield of 0%;
expected volatility factor of the expected market price of the Company's common
stock of 11.00%; weighted average life of 9.2 years; and risk-free interest rate
of 5.50%.

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

                                   (Continued)


                                      F-22
<PAGE>

                       PARK BANCORP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 1998, 1997, and 1996
          (Table amounts in thousands, except share and per share data)

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

NOTE 8 - EARNINGS PER SHARE

The following table presents a reconciliation of the components used to compute
basic and diluted earnings per share for the year ended December 31, 1998 and
1997, and the period from August 9, 1996 to December 31, 1996.

<TABLE>
<CAPTION>
                                                                     1998            1997             1996
                                                                     ----            ----             ----
<S>                                                             <C>              <C>             <C>
     BASIC EARNINGS PER SHARE
         Net income as reported                                 $       2,151    $       1,543   $       1,061
         Earnings prior to conversion to a stock
           form of ownership                                                -                -            (697)
                                                                -------------    -------------   -------------
         Net income available to common shareholders                    2,151            1,543             364
         Weighted average common shares outstanding                 2,089,796        2,296,427       2,493,680
                                                                -------------    -------------   -------------

              Basic earnings per share                          $        1.03    $         .67   $         .15
                                                                =============    =============   =============

     DILUTED EARNINGS PER SHARE
         Net income available to common stockholders            $       2,151    $       1,543   $         364

         Weighted average common shares outstanding                 2,089,796        2,296,427       2,493,686
         Dilutive effect of MRP                                         3,958            3,476               -
         Dilutive effect of stock options                              18,327           15,197               -
                                                                -------------    -------------   -------------
                                                                    2,112,082        2,315,100       2,493,680
                                                                -------------    -------------   -------------

              Dilutive earnings per share                       $        1.02    $         .67   $         .15
                                                                =============    =============   =============
</TABLE>


NOTE 9 - REGULATORY CAPITAL

At the time of its conversion to a public company, the Bank established a
liquidation account totaling $17,646,000. The liquidation account is maintained
for the benefit of eligible depositors who continue to maintain their accounts
at the Bank after the conversion. The liquidation account will be reduced
annually to the extent that eligible depositors have reduced their qualifying
deposits. Subsequent increases will not restore an eligible account holder's
interest in the liquidation account. In the event of a complete liquidation,
each eligible depositor will be entitled to receive a distribution from the
liquidation account in an amount proportionate to the current adjusted
qualifying balances for accounts then held. The liquidation account balance is
not available for payment of dividends.

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

                                   (Continued)


                                      F-23
<PAGE>

                       PARK BANCORP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 1998, 1997, and 1996
          (Table amounts in thousands, except share and per share data)

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

NOTE 9 - REGULATORY CAPITAL (Continued)

The Bank is subject to regulatory capital requirements administered by federal
regulatory agencies. Capital adequacy guidelines and prompt corrective action
regulations involve quantitative measures of assets, liabilities, and certain
off-balance-sheet items calculated under regulatory accounting practices.
Capital amounts and classifications are also subject to qualitative judgments by
regulators about components, risk weightings, and other factors, and the
regulators can lower classifications in certain cases. Failure to meet various
capital requirements can initiate regulatory action that could have a direct
material effect on the financial statements.

The prompt corrective action regulations provide five classifications, including
well capitalized, adequately capitalized, undercapitalized, significantly
undercapitalized, and critically undercapitalized, although these terms are not
used to represent overall financial condition. If adequately capitalized,
regulatory approval is required to accept brokered deposits. If
undercapitalized, capital distributions are limited, as is asset growth and
expansion, and plans for capital restoration are required.

At year end, the Bank's actual capital levels and minimum required levels were:

<TABLE>
<CAPTION>
                                                                                                Minimum Required
                                                                                                   to Be Well
                                                                     Minimum Required              Capitalized
                                                                        for Capital          Under Prompt Corrective
                                                Actual               Adequacy Purposes        Action Regulations
                                                ------               -----------------        ------------------
1998                                      Amount        Ratio        Amount        Ratio       Amount       Ratio
----                                      ------        -----        ------        -----       ------       -----

<S>                                     <C>             <C>       <C>              <C>       <C>            <C>
Total capital (to risk-weighted assets) $   21,621      31.7%     $    5,456       8.0%      $    6,820     10.0%
Tier 1 (core) capital (to risk-weighted
  assets)                                   21,121      31.0           2,728       4.0            4,092      6.0
Tier 1 (core) capital (to adjusted total
  assets)                                   21,121      11.2           7,552       4.0            9,440      5.0
Tangible capital (to tangible
  assets)                                   21,121      11.2           2,832       1.5              N/A      N/A

1997

Total capital (to risk-weighted assets) $   24,221      38.6%     $    5,022       8.0%      $    6,278     10.0%
Tier 1 (core) capital (to risk-weighted
  assets)                                   23,721      37.8           2,511       4.0            3,767      6.0
Tier 1 (core) capital (to adjusted total
  assets)                                   23,721      14.5           6,523       4.0            8,153      5.0
Tangible capital (to tangible
  assets)                                   23,721      14.5           2,446       1.5              N/A      N/A
</TABLE>

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

                                   (Continued)

                                      F-24
<PAGE>

                       PARK BANCORP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 1998, 1997, and 1996
          (Table amounts in thousands, except share and per share data)

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

NOTE 9 - REGULATORY CAPITAL (Continued)

The Bank at December 31, 1998 was categorized as well capitalized. Management is
not aware of any conditions or events since the most recent notification that
would change the bank's category.

Federal regulations require the Qualified Thrift Lender ("QTL") test, which
mandates that approximately 65% of assets be maintained in housing-related
finance and other specified areas. If the QTL test is not met, limits are placed
on growth, branching, new investments, and Federal Home Loan Bank advances or
the Bank must convert to a commercial bank charter. The Bank meets the
requirements of the QTL test at December 31, 1998.


NOTE 10 - INCOME TAXES

Income tax expense consists of the following:

                                                  For the Year Ended
                                       --------------December 31,---------------
                                                     ------------
                                           1998           1997          1996
                                           ----           ----          ----
     Currently payable tax
         Federal                       $     1,217    $       847    $       465
     Deferred tax (benefit) expense            (87)             8             78
                                       -----------    -----------    -----------

         Income tax expense            $     1,130    $       855    $       543
                                       ===========    ===========    ===========

The federal income tax expense differs from the amounts determined by applying
the statutory federal income tax rate to income before income taxes as a result
of the following items:

<TABLE>
<CAPTION>
                                    ----------------------------------December 31,----------------------------------
                                                                      ------------
                                    -----------1 9 9 8-------  ----------1 9 9 7-------   ----------1 9 9 6---------
                                               -------                   -------                    -------
                                                  Percentage                 Percentage                 Percentage
                                                   of Income                  of Income                  of Income
                                                    Before                     Before                     Before
                                                    Income                     Income                     Income
                                       Amount        Taxes        Amount        Taxes        Amount        Taxes
                                       ------     ----------      ------     ----------      ------     -----------

<S>                                  <C>             <C>       <C>                <C>     <C>                <C>
Income tax computed at
  the statutory rate                 $     1,116     34.0%     $       815        34.0%   $       545        34.0%
ESOP expense                                  40      1.2               44         1.8             17         1.1
Other items, net                             (26)     (.8)              (4)        (.1)           (19)       (1.2)
                                     -----------   ------      -----------   ---------    -----------    --------

                                     $     1,130     34.4%     $       855        35.7%   $       543        33.9%
                                     ===========   ======      ===========   =========    ===========    ========
</TABLE>

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

                                   (Continued)


                                      F-25
<PAGE>

                       PARK BANCORP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 1998, 1997, and 1996
          (Table amounts in thousands, except share and per share data)

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

NOTE 10 - INCOME TAXES (Continued)

Prior to 1996, the Bank had qualified under provisions of the Internal Revenue
Code which allowed it to deduct from taxable income a provision for bad debts
which differs from the provision charged to income in the financial statements.
Retained earnings at December 31, 1998 include approximately $3,298,000 for
which no deferred federal income tax liability has been recorded. Tax
legislation passed in 1996 now requires all thrift institutions to deduct a
provision for bad debts for tax purposes based on the actual loss experience and
recapture the excess bad debt reserve accumulated in tax years after 1997. The
remaining excess amount approximates $1,013,000 at December 31, 1998. The
related amount of deferred tax liability is approximately $392,000 and will be
payable over the next five years.

Deferred tax assets (liabilities) are comprised of the following at:

<TABLE>
<CAPTION>
                                                        --------December 31,------
                                                                ------------
                                                           1998             1997
                                                           ----             ----

<S>                                                     <C>            <C>
     Deferred loan fees                                 $       122    $       115
     ESOP and MRP expense                                        48             27
     Unrealized loss on securities available-for-sale           141              -
                                                        -----------    -----------
                                                                311            142

     Bad debt deduction                                        (174)          (243)
     Federal Home Loan Bank stock dividend                      (32)           (32)
     Depreciation                                              (128)          (106)
     Unrealized gain on securities available-for-sale             -            (10)
     Other                                                       (3)           (15)
                                                        -----------    -----------
                                                               (337)          (406)
                                                        -----------    -----------

         Net deferred tax liability                     $       (26)   $      (264)
                                                        ===========    ===========
</TABLE>


NOTE 11 - OFF-BALANCE-SHEET ACTIVITIES

The Company grants mortgages and installment loans to, and obtains deposits
from, customers primarily in Cook, DuPage, and Will Counties, Illinois.
Substantially all loans are secured by specific items of collateral, primarily
residential real estate and consumer assets. The Company also develops
residential housing lots in DuPage and Will Counties for sale to local home
builders.

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

                                   (Continued)

                                      F-26
<PAGE>

                       PARK BANCORP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 1998, 1997, and 1996
          (Table amounts in thousands, except share and per share data)

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

NOTE 11 - OFF-BALANCE-SHEET ACTIVITIES (Continued)

The Company is a party to financial instruments with off-balance-sheet risk in
the normal course of business to meet the financing needs of its customers.
These financial instruments consist of standby letters of credit and commitments
to make loans and fund loans in process. The Company's exposure to credit loss
in the event of nonperformance by the other party to these financial instruments
is represented by the contractual amount of these instruments. The Company
follows the same credit policy to make such commitments as is followed for those
loans recorded on the statement of financial condition.

These financial instruments are summarized as follows at:

<TABLE>
<CAPTION>
                                                                                           Contract Amount
                                                                                    -------December 31,-------
                                                                                           ------------
                                                                                       1998             1997
                                                                                       ----             ----
<S>                                                                                 <C>            <C>
     Financial instruments whose contract
       amounts represent credit risk
         Commitments to make loans (all fixed rate)                                 $     2,228    $       891
         Standby letters of credit                                                            -            793
         Loans in process                                                                   910          1,042
</TABLE>

The fixed rate loan commitments at December 31, 1998 have terms of 60 days and
rates in the range of 6.25% to 9.50%. Fixed rate loan commitments at December
31, 1997 have terms of 75 to 180 days and rates in the range of 7.125% to
10.50%.

Since certain commitments to make loans and fund loans in process expire without
being used, the amounts above do not necessarily represent future cash
commitments. No losses are anticipated as a result of these transactions.

Interest-bearing deposit accounts in other financial institutions potentially
subject the Company to concentrations of credit risk. At December 31, 1998, the
Company had deposit accounts at the Federal Home Loan Bank of Chicago with
balances totaling approximately $9,336,000. At December 31, 1997, the balance
was approximately $6,693,000.

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

                                   (Continued)


                                      F-27
<PAGE>

                       PARK BANCORP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 1998, 1997, and 1996
          (Table amounts in thousands, except share and per share data)

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


NOTE 12 - FAIR VALUES OF FINANCIAL INSTRUMENTS

The approximate carrying amount and estimated fair value of financial
instruments is as follows:

<TABLE>
<CAPTION>
                                                     ---------December 31, 1998-----  ------December 31, 1997-----
                                                              -----------------             -----------------
                                                         Approximate                     Approximate
                                                          Carrying       Estimated        Carrying     Estimated
                                                           Amount       Fair Value         Amount     Fair Value
                                                           ------       ----------         ------     ----------
<S>                                                    <C>             <C>            <C>            <C>
    Financial Assets
       Cash and cash equivalents                       $    10,709     $    10,709    $     7,812    $     7,812
       Securities available-for-sale                       108,506         108,506         37,101         37,101
       Securities held-to-maturity                               -               -         55,736         55,684
       Loans receivable, net                                75,776          76,569         68,327         70,307
       Federal Home Loan Bank stock                            887             887            841            841
       Accrued interest receivable                           2,149           2,149          1,542          1,542

    Financial Liabilities
       Deposits with no fixed maturity dates               (47,075)        (47,075)       (42,980)       (42,980)
       Deposits with fixed maturity dates                 (101,275)       (101,992)       (88,885)       (89,290)
       Securities sold under repurchase agreements          (6,418)         (6,418)        (4,250)        (4,250)
       Advances from borrowers for taxes
         and insurance                                      (1,472)         (1,472)        (1,387)        (1,387)
       Federal Home Loan Bank advances                     (10,000)         (9,290)             -              -
       Accrued interest payable                               (238)           (238)          (175)          (175)
</TABLE>

The methods and assumptions used to estimate fair value are described as
follows.

Carrying amount is the estimated fair value for cash and cash equivalents,
Federal Home Loan Bank stock, accrued interest receivable and payable, demand
deposits, short-term debt, and variable rate loans or deposits that reprice
frequently and fully. Security fair values are based on market prices or dealer
quotes, and if no such information is available, on the rate and term of the
security and information about the issuer. For fixed rate loans or deposits and
for variable rate loans or deposits with infrequent repricing or repricing
limits, fair value is based on discounted cash flows using current market rates
applied to the estimated life and credit risk. Fair values for impaired loans
are estimated using discounted cash flow analysis or underlying collateral
values. The fair value of borrowings is based on current rates for similar
financing. The fair value of off-balance-sheet items is based on the current
fees or cost that would be charged to enter into or terminate such arrangements.

Other assets and liabilities of the Company not defined as financial
instruments, such as property and equipment, are not included in the above
disclosures. Also not included are nonfinancial instruments typically not
recognized in financial statements such as the value of core deposits, customer
goodwill, and similar items.


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

                                   (Continued)


                                      F-28
<PAGE>

                       PARK BANCORP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 1998, 1997, and 1996
          (Table amounts in thousands, except share and per share data)

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



NOTE 12 - FAIR VALUES OF FINANCIAL INSTRUMENTS (Continued)

While the above estimates are based on management's judgment of the most
appropriate factors, there is no assurance that if the Company disposed of these
items on December 31, 1998 or December 31, 1997, the fair values would have been
achieved, because the market value may differ depending on the circumstances.
The estimated fair values at December 31, 1998 and December 31, 1997 should not
necessarily be considered to apply at subsequent dates.


NOTE 13 - OTHER COMPREHENSIVE INCOME

Other comprehensive income components and related taxes were as follows.

<TABLE>
<CAPTION>
                                                                           1998           1997          1996
                                                                           ----           ----          ----

<S>                                                                     <C>           <C>           <C>
     Unrealized holding gains and losses on                             $     (521)   $      286    $     (401)
       securities available-for-sale
     Reclassification adjustments for gains
       recorded in income                                                        4            18             -
     Reclassification adjustment for unrealized
       gains on securities held-to-maturity
       transferred to available-for-sale                                        74             -             -
                                                                        ----------    ----------    ----------
     Net unrealized gains and losses                                          (443)          304          (401)
     Tax effect                                                                151          (104)          142
                                                                        ----------    ----------    ----------

     Other comprehensive income (loss)                                  $     (292)   $      200    $     (259)
                                                                        ==========    ==========    ==========
</TABLE>


NOTE 14 - SEGMENT INFORMATION

The reportable segments are determined by the products and services offered,
primarily distinguished between banking and real estate development operations.
Loans, investments, and deposits provide the revenues in the banking operation,
and sales of single family residence lots provide the revenues in real estate
development operations. All operations are domestic.


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

                                   (Continued)


                                      F-29
<PAGE>

                       PARK BANCORP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 1998, 1997, and 1996
          (Table amounts in thousands, except share and per share data)

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



NOTE 14 - SEGMENT INFORMATION (Continued)

The accounting policies used are the same as those described in the summary of
significant accounting policies. Transactions among segments are made at fair
value. Information reported internally for performance assessment follows.

<TABLE>
<CAPTION>
                                                                                   Real Estate
                                                                      Banking       Development          Total
                                                                      -------      ------------          -----
<S>                                                                <C>              <C>             <C>
1998
----
   Net interest income                                             $       6,382    $          -    $      6,382
   Gain on sale of real estate held for development                            -             817             817
   Other revenue                                                             334               -             334
   Other expenses                                                          4,252               -           4,252
   Income tax expense                                                        844             286           1,130
   Segment profit                                                          1,620             531           2,151
   Segment assets                                                        200,915           2,873         203,788

1997
----
   Net interest income                                             $       6,074    $          -    $      6,074
   Gain on sale of real estate held for development                            -             276             276
   Other revenue                                                             309               -             309
   Other expenses                                                          4,261               -           4,261
   Income tax expense                                                        758              97             855
   Segment profit                                                          1,364             179           1,543
   Segment assets                                                        174,402           2,270         176,672

1996
----
   Net interest income                                             $       5,015    $          -    $      5,015
   Gain on sale of real estate held for development                            -              60              60
   Other revenue                                                             247               -             247
   Other expenses                                                          3,718               -           3,718
   Income tax expense                                                        522              21             543
   Segment profit                                                          1,022              39           1,061
   Segment assets                                                        175,323           2,871         178,194
</TABLE>

The Company, through GPS and PBI, participates with local real estate developers
in developing residential housing sites. One of the Company's investment in real
estate held for development is a single-family housing subdivision located in
Naperville, Illinois known as Prairie Ridge. This development consists of 88
single family lots, of which 51 have been sold through December 31, 1998. During
1998, the Company purchased and began development of land in Batavia, Illinois
which will be known as Prairie Trail South. The project will consist of 95
single-family homesites.


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

                                   (Continued)


                                      F-30
<PAGE>

                       PARK BANCORP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 1998, 1997, and 1996
          (Table amounts in thousands, except share and per share data)

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

NOTE 15 - PARENT COMPANY FINANCIAL STATEMENTS

Presented below are the condensed balance sheets, statements of income, and
statements of cash flows for Park Bancorp, Inc. The Company was formed on August
9, 1996. Accordingly, the statements of income and cash flows reflect the years
ended December 31, 1998 and 1997, and the period August 9, 1996 through December
31, 1996.

                             CONDENSED BALANCE SHEET
                           December 31, 1998 and 1997

<TABLE>
<CAPTION>
                                                                                       1998            1997
                                                                                       ----            ----
<S>                                                                                 <C>            <C>
ASSETS
Cash and cash equivalents                                                           $     1,838    $       743
Securities available-for-sale                                                             9,490          8,713
Securities held-to-maturity                                                                   -          1,000
ESOP loan                                                                                 1,697          1,839
Investment in real estate development subsidiary                                          2,622              -
Investment in bank subsidiary                                                            21,146         25,991
Accrued interest receivable and other assets                                                230            389
                                                                                    -----------    -----------

     Total assets                                                                   $    37,023    $    38,675
                                                                                    ===========    ===========

LIABILITIES AND STOCKHOLDERS' EQUITY
Accrued expenses and other liabilities                                              $         -    $        74
Stockholders' equity
     Common stock                                                                        37,023         38,601
                                                                                    -----------    -----------

         Total liabilities and stockholders' equity                                 $    37,023    $    38,675
                                                                                    ===========    ===========
</TABLE>


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

                                   (Continued)


                                      F-31
<PAGE>

                       PARK BANCORP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 1998, 1997, and 1996
          (Table amounts in thousands, except share and per share data)

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

NOTE 15 - PARENT COMPANY FINANCIAL STATEMENTS (Continued)

                          CONDENSED STATEMENT OF INCOME
                 For the years ended December 31, 1998 and 1997
             and the period August 9, 1996 through December 31, 1996

<TABLE>
<CAPTION>
                                                                            1998           1997          1996
                                                                            ----           ----          ----
<S>                                                                      <C>           <C>           <C>
Operating income
     Dividends from subsidiary                                           $    7,000    $    6,000    $        -
     Gains on sales of securities                                                 4            18             -
     Interest income
         Securities                                                             711           687            65
         ESOP loan                                                              133           143            79
         Interest-bearing deposits with other
           financial institutions                                                74            79           170
                                                                         ----------    ----------    ----------
              Total operating income                                          7,922         6,927           314

Operating expenses
     Interest on other borrowings                                                29            89             -
     Other expenses                                                             352           321             -
                                                                         ----------    ----------    ----------
         Total operating expenses                                               381           410             -
                                                                         ----------    ----------    ----------


INCOME BEFORE INCOME TAXES AND EQUITY IN
  UNDISTRIBUTED EARNINGS OF BANK SUBSIDIARY                                   7,541         6,517           314

Income taxes                                                                    168           164           107
                                                                         ----------    ----------    ----------


INCOME BEFORE EQUITY IN UNDISTRIBUTED EARNINGS
  OF BANK SUBSIDIARY                                                          7,373         6,353           207

Equity in undistributed earnings of bank subsidiary                          (5,222)       (4,810)          157
                                                                         ----------    ----------    ----------


NET INCOME                                                               $    2,151    $    1,543    $      364
                                                                         ==========    ==========    ==========
</TABLE>


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

                                   (Continued)


                                      F-32
<PAGE>

                       PARK BANCORP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 1998, 1997, and 1996
          (Table amounts in thousands, except share and per share data)

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


NOTE 15 - PARENT COMPANY FINANCIAL STATEMENTS (Continued)

                      CONDENSED STATEMENT OF CASH FLOWS For
                   the years ended December 31, 1998 and 1997
             and the period August 9, 1996 through December 31, 1996


<TABLE>
<CAPTION>
                                                                            1998           1997          1996
                                                                            ----           ----          ----

<S>                                                                      <C>           <C>           <C>
CASH FLOWS FROM OPERATING ACTIVITIES
     Net income                                                          $    2,151    $    1,543    $      364
     Adjustments to reconcile net income to net cash
       provided by operating activities
         Net discount accretion                                                (192)           (7)            -
         Gain on sale of securities available-for-sale                           (4)          (18)            -
         Equity in overdistributed earnings of
           bank subsidiary                                                    5,222         4,810          (157)
         Change in
              Other assets                                                      168          (341)          (47)
              Other liabilities                                                 (74)          (43)          107
                                                                         ----------    ----------    ----------
                  Net cash from operating activities                          7,271         5,944           267

CASH FLOWS FROM INVESTING ACTIVITIES
     Purchase of securities available-for-sale                               (9,600)      (11,652)      (13,638)
     Proceeds from sale of securities available-for-sale                        759         1,001        (2,997)
     Proceeds from maturities and calls of securities
       available-for-sale                                                     8,185         4,988        (3,149)
     Proceeds from maturities and calls of securities
       held-to-maturity                                                       1,000         2,149             -
     Investment in PBI Development Corporation                               (2,622)            -             -
     Payment received on ESOP loan                                              142           142           180
                                                                         ----------    ----------    ----------
         Net cash from investing activities                                  (2,136)       (3,372)      (19,604)

CASH FLOWS FROM FINANCING ACTIVITIES
     Purchase of treasury stock                                              (4,040)       (6,395)            -
     Issuance of common stock                                                     -             -        23,903
                                                                         ----------    ----------    ----------
         Net cash from financing activities                                  (4,040)       (6,395)       23,903
                                                                         ----------    ----------    ----------

Net change in cash and cash equivalents                                       1,095        (3,823)        4,566

Cash and cash equivalents at beginning of period                                743         4,566             -
                                                                         ----------    ----------    ----------

CASH AND CASH EQUIVALENTS AT END OF PERIOD                               $    1,838    $      743    $    4,566
                                                                         ==========    ==========    ==========
</TABLE>

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

                                   (Continued)


                                      F-33
<PAGE>



                       PARK BANCORP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 1998, 1997, and 1996
          (Table amounts in thousands, except share and per share data)

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

NOTE 15 - QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

<TABLE>
<CAPTION>

1998
----                                                  ----------------------Three Months Ended------------------
                                                                            ------------------
                                                       March 31        June 30     September 30      December 31
                                                       --------        -------     ------------      -----------
<S>                                                  <C>             <C>            <C>            <C>
Interest income                                      $     3,443     $     3,490    $     3,502    $     3,357
Interest expense                                           1,781           1,818          1,864          1,947
                                                     -----------     -----------    -----------    -----------


NET INTEREST INCOME                                        1,662           1,672          1,638          1,410

Provision for loan losses                                      -               -              -              -
Other income                                                 281             288            300            282
Other expense                                              1,079           1,123          1,103            947
                                                     -----------      ----------      ---------    -----------


INCOME BEFORE INCOME TAXES                                   864             837            835            745

Income tax expense                                           295             306            278            251
                                                     -----------     -----------    -----------    -----------


NET INCOME                                           $       569     $       531    $       557    $       494
                                                     ===========     ===========    ===========    ===========

Basic earnings per share                             $       .26     $       .25    $       .27    $       .25
Diluted earnings per share                                   .26             .24            .26            .25

<CAPTION>

1997
----                                                 ----------------------Three Months Ended------------------
                                                                           ------------------
                                                       March 31        June 30     September 30      December 31
                                                       --------        -------     ------------      -----------

Interest income                                      $     3,150     $     3,130    $     3,118    $     3,066
Interest expense                                           1,569           1,602          1,603          1,616
                                                     -----------     -----------    -----------    -----------


NET INTEREST INCOME                                        1,581           1,528          1,515          1,450

Provision for loan losses                                      -               -              -              -
Other income                                                  88             216            189             92
Other expense                                                925           1,050          1,029          1,257
                                                     -----------     -----------      ---------      ---------


INCOME BEFORE INCOME TAXES                                   744             694            675            285

Income tax expense                                           253             234            226            142
                                                     -----------     -----------    -----------    -----------


NET INCOME                                           $       491     $       460    $       449    $       143
                                                     ===========     ===========    ===========    ===========

Basic earnings per share                             $       .20     $       .20    $       .20    $       .07
Diluted earnings per share                                   .20             .20            .20            .07
</TABLE>



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

                                   (Continued)


                                      F-34