U.S. SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C.
20549 FORM 10-KSB/A
X
    Annual report under Section 13 or 15(d) of the
Securities Exchange Act of 1934

For the fiscal year ended September 30, 1998

OR

Transition report under Section 13 or 15(d) of the
Securities and Exchange Act of 1934

Commission File No.: 333-17227

                   VERMILION BANCORP, INC.
 (Name of Small Business Issuer in Its Charter)


          Delaware                          37-1363755
(State of Other Jurisdiction of           (I.R.S. Employer
Incorporation or Organization)              Identification
Number)


714 North Vermilion Street,
Danville, Illinois         61832
(Address of Principal    (ZIP Code)
    Executive Offices)

Issuer's Telephone Number, Including Area Code: (217) 442--
0207

Securities registered under Section 12(b) of the Exchange
Act: Not Applicable

Securities registered under Section 12(g) of the Exchange
Act:

Common Stock (par value $.01 per share)
(Title of Class)

Check whether the issuer: (1) filed all reports required to
be filed by Section 13 or 15(d) of the Exchange Act during
the past 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.

1)Yes   X    No
2)Yes   x    No

Check if disclosure of delinquent filers in response to Item
405 of Regulation S-B is not contained in this form, and no
disclosure will be contained, to the best of Registrant's
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or
any amendment to this Form 10-KSB.   X

Issuer's revenues for its most recent fiscal year:
$3,124,228.

As of December 1, 1998, the aggregate value of the
291,010 shares of Common Stock of the Registrant issued
and outstanding on such date, which excludes 105,740
shares held by all directors and executives officers of the
Registrant and the Registrant's Employee Stock Ownership
Plan ("ESOP") as a group,
was approximately $3.06 million.  This figure is
based on the closing bid price of $10.50  per share
of the Registrant's Common Stock on December 1, 1998.
Although directors and executive officers and the ESOP were
assumed to be "affiliates" of the Registrant for purposes of
this calculation, the classification is not to be
interpreted as an admission of such status.

Number of shares of Common Stock outstanding as of December
1, 1998: 396,750
Transitional Small Business Disclosure Format:  Yes ________
No X


         DOCUMENTS INCORPORATED BY REFERENCE

     The following documents are incorporated by reference:

     (1) Portions of the Annual Report to shareholders for the year ended
September 30, 1998, are incorporated into Part II, Items 5-7 and Part III,
Item 13 on this Form 10-KSB/A.

     (2) Portions of the Definitive Proxy Statement for the 1998 annual meeting
of shareholders are incorporated into Part III, Items 9-12 of this 
form 10-KSB/A.


PART I

Item 1. Business

General

Vermilion Bancorp, Inc. (the "Company)" is a
Delaware incorporated bank holding company and the sole
stockholder of American Savings Bank of Danville (the
"Savings Bank").  The only significant asset of the Company
is the capital stock of the Savings Bank. The business of
the Company currently consists of the business of the
Savings Bank.  At September 30, 1998, the Company had
consolidated total assets of $43.22 million, total
consolidated liabilities of $36.90 million, and total
consolidated stockholders' equity of $6.32 million.


The Company had net income of $244,000 for fiscal 1998, as 
compared to $252,000 in fiscal 1997. The Company had a net
income of ($71,000) in fiscal 1996.  Fiscal 1996 
included a one-time special SAIF assessment in the pre-tax 
amount of $206,000, resulting in an after-tax charge to earn-
ings for fiscal 1996 of approximately $155,000.  The 
Company's operating results are derived almost entirely from 
the Bank's results of operations.

The Company's earnings depend primarily on the difference be-
tween the yield earned on its loan and investment securities
portfolios and its cost of funds, consisting primarily of the 
interest paid on deposits and, to a lesser extent, on borrowings
("interest rate spread").  During the fiscal year 1998 the Company's
interest rate spread averaged 2.48% compared to 2.20% and 2.17% in fiscal years 
1997 and 1996 respectively. Net interest income, after provision for loan 
losses, increased from $1.05 million to $1.18 million from 1997 to 1998, or
12.6% compared to an increase of $269,000 or 34.7% from 1996 to 1997. The 
increase in net interest income from 1997 to 1998 was due primarily to a 
$300,000 increase in interest income from loans, offset by a $13,000 decrease in
interest income from deposits with financial institutions, and a $20,000 
decrease in interest income from investment securities. During the same period 
deposit interest expense declined by $56,000, interest expense on Federal Home 
Loan borrowings increased by $132,000, and provision for loan losses increased 
$58,000. The increase in net interest income after provision for loan losses of
$269,000 from 1996 to 1997 was due primarily to a $206,000 increase 
in interest income from loans, a $33,000 increase in interest income 
from deposits with financial institutions, offset by a $70,000 decrease 
in interest income from investment securities.  During the same period 
deposit interest expense declined by $53,000, interest expense
on Federal Home Loan Bank borrowings increased by $16,000, off-
set by a $63,000 decrease in provision for loan losses.  

Total noninterest income increased by $13,000 in 1998 to $55,000 as compared
to 1997, while total noninterest expense increased $82,000 to $843,000. The
increase in total noninterest income for 1998 was due primarily to an increase
of $11,000 in loan fees, and a $3,000 increase in other income, somewhat offset
by a decrease in net realized gains on sales of available for sale securities
of $1,000. The increase in total noninterest expense was primarily due to a
$56,000 increase in legal and professional fees, a $4,000 increase in other 
expenses, a $19,000 increase in director and committee fees, a $11,000 increase
in data processing fees, somewhat offset by a decrease of $18,000 in salaries
and employee benefits. Total noninterest income declined by $3,000 in 1997 to 
$42,000 as compared to 1996, while total noninterest expense declined by
$128,000 to $761,000.  The decline in noninterest income during fiscal 1997
was due primarily to an $11,000 decline in loan fees offset by a
$7,000 increase in other income.  The decline in noninterest 
expense during fiscal year 1997 was due primarily to a decline of 
$262,000 in deposit insurance expense, offset by a $104,000 
increase in salaries and employee benefits and $41,000 in other 
expenses.  

The Company's assets totaled $43.22 million at September 30, 1998 as compared
with $37.82 million at September 30, 1997. The $5.40 million increase in assets
was primarily due to a $4.81 million increase in net loans, an $896,000 increase
in premises and equipment, an increase of $604,000 in cash and cash equivalents,
offset by a decrease of $1.02 million in total investment securities.
The increase in assets was funded primarily by an increase in FHLB borrowings of
$3.8 million and an increase in deposits of $947,000. 
The Company's assets totaled $37.82 million 
at September 30, 1997, as compared with $35.46 million at September 30, 1996.  
The $2.36 million increase in assets was primarily due to receipt and 
investment of proceeds of the conversion of the Bank from the mutual to 
stock form of ownership that was completed on March 27, 1997 offset
by a reduction in deposits used to purchase stock in the conversion.  
Loans increased by $2.48 million to $29.56 million at September 30, 1997, 
as compared to $27.08 million at September 30, 1996.  Interest bearing 
demand deposits held at other financial institutions increased by 
$654,000 to $1.08 million, offset by a $305,000 decrease in cash and 
due from banks.  Total investment securities decreased to $6.12 million 
at September 30,1997, compared to $6.56 million at September 30, 1996.


The Savings Bank is a Illinois-chartered stock savings bank
which was originally founded in 1888 as an Illinois-
chartered mutual building and loan association.  The Savings Bank
converted from an Illinois chartered mutual savings
association to an Illinois-chartered mutual savings bank in
1994.  In March 1997, the Savings Bank converted from an
Illinois-chartered mutual savings bank to an Illinois-
chartered stock savings bank and was acquired by the
Company. The Savings Bank conducts business from a single
office located in Danville, Illinois.  The Savings Bank's
deposits are insured by the Savings Association Insurance
Fund ("SAIF") of the Federal Deposit Insurance Corporation
("FDIC") to the maximum extent permitted by law.



The Savings Bank is primarily engaged in attracting deposits
from the general public through its offices and using those
and other available sources of funds to originate loans
secured by single family residences as well as other loans.
In addition to its lending activities, the Bank also has a
securities portfolio consisting of mortgage-backed
securities and other investment securities.


The Savings Bank is a community-oriented financial
institution which emphasizes customer services and
convenience.  As part of this strategy, the Savings Bank has
sought to develop a wide variety of products and services
which meet the needs of its retail customers.  The Savings
Bank generally has sought to achieve long-term financial
strength and stability by increasing the amount and
stability of its net interest income.


The Bank is subject to examination and comprehensive regulation 
by the office of Banks and Real Estate of the State of Illinois
("Commissioner"), which is the Bank's chartering authority and
primary regulator.  The Bank is also subject to regulation by 
the FDIC, as the administrator of the SAIF, and to certain re-
serve requirements established by the Federal Reserve Board.
The Bank is a member of the Federal Home Loan Bank of Chicago,
which is one of the 12 regional banks comprising the FHLB System,
and is subject to regulations applicapable to members of the FHLB
of Chicago.


The main office of the Savings Bank is located at 714 North
Vermilion Street, Danville, Illinois 61832, and its
telephone number is (217) 442-0270.


Lending Activities

General.  At September 30, 1998, the Company's total loan
portfolio amounted to $34.23 million, or 79.2 % of total
assets at that date.  The Company has traditionally
concentrated its lending activities on conventional first
mortgage loans secured by single-family residential
properties and, to a lesser extent, multifamily mortgage
loans and consumer loans.  Consistent with its lending
orientation, as of September 30, 1998, $28.18 million or
82.20% of the Company's total loan portfolio consisted of
one-to-four family residential loans, $1.58 million or 4.61% 
consisted of commercial real estate loans, $1.92 million or 5.61%
of the Company's total loan portfolio consisted of consumer
loans and $882,000 or 2.57% of the Company's total loan
portfolio consisted of multi-family mortgage loans.
Substantially all of the Company's total loan portfolio
consists of conventional loans, which are loans that are
neither insured by the Federal Housing Administration nor
partially guaranteed by the Department of Veteran Affairs.
Historically, the Company's lending activities have been
concentrated in its primary market area of Danville,
Illinois and Vermilion County, Illinois.  The Company
estimates that a substantial portion of its mortgage loans
are secured by properties located in its primary market
area, and that substantially all of its non-mortgage loan
portfolio consists of loans made to residents and businesses
located in such primary market area.
Loan Portfolio Composition.  The following table sets forth
the composition of the Company's loan portfolio by type of
loan at the dates indicated.



                                      At September 30,
                                     1998           1997
                                         Percent           Percent
                                Balance  of Total Balance of Total
                                      (Dollars in Thousands)
 Type of Loan:
 Real estate mortgage loans:
   One-to-four family           $28,182   82.20%  $24,871   84.29% 
   Multi-family                     882    2.57     1,083    3.67  
   Commercial real estate         1,581    4.61     1,090    3.69  
 R.E. sold on contract              227     .66       300    1.02  
 R.E. construction loans            492    1.44       116    0.39  
 Commercial business loans          997    2.91       480    1.63  
 Consumer loans                   1,922    5.61     1,568    5.31  
Total loans                      34,283  100.00%   29,508  100.00% 
Plus:
 Deferred loan costs                 97                73     
Less:
 Undisbursed portion of loans        --                18
 Allowance for loan losses          154               152    
 Unearned interest                   --                --
Total loans, net                $34,226           $29,411     



Contractual Principal Repayments and Interest Rates.
The following table sets forth certain information at
September 30, 1998 regarding the dollar amount of
loans maturing in the Bank's total loan portfolio,
based on the contractual terms to maturity, before
giving effect to net items.  Loans having no stated
schedule of repayments and no stated maturity are
reported as due in one year or less.


                                          Over One
                                One Year  Through Five  Over Five
                                Or less      Years        Years    Total
                                          (In Thousands)
Real estate mortgage loans:
 One-to-four family             $ 4,561   $ 2,094         $21,527  $28,182
 Multi-family                        44        --             838      882
 Commercial real estate             456       391             734    1,581
Real estate sold on contract         19        --             208      227
Real estate construction loans      492        --              --      492
Commercial business loans           694        38             265      997
Consumer Loans                      512     1,220             190    1,922
  Total loans                   $ 6,778   $ 3,743         $23,762  $34,283


The following table sets forth the dollar amount of
all loans, before net items, due one year or more
after September 30, 1998 which have fixed interest
rates or which have floating or adjustable interest
rates.  For purposes of the table, all of the Bank's
balloon loans were deemed to have floating or
adjustable rates.


                                          Floating
                                 Fixed  Or Adjustable
                                 Rates      Rates     Total
                                       (In Thousands)
Real estate mortgage loans:
 One-to-four family            $22,693    $   928     $23,621
 Multi-family                      838         --         838
 Commercial real estate          1,125         --       1,125
Real estate sold on contract       138         70         208
Real estate construction loans      --         --          --
Commercial business loans          303         --         303
Consumer loans                   1,410         --       1,410
   Total loans                 $26,507    $   998     $27,505
                          
                          
Scheduled contractual amortization of loans does not
reflect the expected term of the Bank's loan
portfolio.  The average life of loans is
substantially less than their contractual terms
because of prepayments and due-on-sale clauses, which
give the Bank the right to declare a conventional
loan immediately due and payable in the event, among
other things, that the borrower sells the real
property subject to the mortgage and the loan is not
repaid. The average life of mortgage loans tends to
increase when current mortgage loan rates are higher
than rates on existing mortgage loans and,
conversely, decrease when rates on existing mortgage
loans are lower than current mortgage loan rates (due
to refinancings of adjustable-rate and fixed-rate
loans at lower rates).  Under the latter
circumstances, the weighted average yield on loans
decreases as higher-yielding loans are repaid or
refinanced at lower rates.


Loan Origination. The following table shows total loans
originated and repaid during the periods indicated.
During the periods indicated, no loans were purchased
or sold.



                                Years Ended September30,
                                      (In Thousands)
                                     1998      1997       
Net loans, beginning balance       $29,411   $26,936    
Loan originations:
Real estate mortgage loans:
 One-to-four family                  8,331     7,227      
 Multi-family                          347       --       
 Commercial real estate                739       492      
Real estate construction loans         889       664      
Commercial business loans              424       117      
Consumer loans                       1,233     1,238      
Total loan originations             11,963     9,738      

Loan principal reductions            7,188     7,297     
Increase (decrease) due to
Other items, net(1)                     40        34          

Net increase in loan portfolio       4,815     2,475     
Loan receivable, net end of period $34,226   $29,411     

(1)  Includes changes in undisbursed portion of
loans, allowance for loan losses, deferred loan fees
and unearned interest.


The lending activities of the Bank are subject to
written underwriting standards and loan origination
procedures established by the Bank's Board of
Directors and management. Applications for
residential mortgage loans are taken by one of the
Bank's officers at the Bank's office or submitted to
the Bank by mail.  The process of underwriting loans
and obtaining appropriate documentation, such as
credit reports, appraisals, employment verification
and other documentation is undertaken by the Bank's
loan department.  The Bank generally requires that a
property appraisal be obtained in connection with all
new mortgage loans.  Property appraisals generally
are performed by an independent appraiser from a list
approved by the Bank's Board of Directors.  American
requires that title insurance (or receipt of an abstract opinion)
and hazard insurance be maintained on all security
properties and that flood insurance be maintained if
the property is within a designated flood plain.


Residential mortgage loan applications are primarily
developed from advertising, referrals from real
estate brokers and builders, existing customers and
walk-in customers.  Commercial real estate and
commercial business loan applications are obtained
primarily from previous borrowers, direct
solicitations by Bank personnel, as well as
referrals.  Consumer loans originated by the Bank are
obtained primarily through existing customers.  In
addition, the Bank uses a small group of pre approved
dealers to assist it in the generation of home
improvement loans.


Most loan approvals are considered by the Bank's loan
committee (the "Loan Committee"), consisting of the
Bank's president, assistant vice president and each
of the outside members of the Bank's board of
directors.  Generally, real estate mortgage loans of
$100,000 or less may be reviewed and approved by at
least two members of the Loan Committee.  All other
real estate loans require the approval of a majority
of the Bank's Board of Directors.  Any non-real
estate loan in an amount up to $10,000 may be
approved by one Loan Committee member and any one
loan officer or assistant loan officer.  Share loans
may be approved by any elected Bank officer, loan
officer or Loan Committee member and all other loans
within the Loan Committee lending limits must be
approved by at least two Loan Committee members.
Loans exceeding the Loan Committee limitations must
be reviewed and approved by the full Board of
Directors of the Bank.  The Bank also has established
aggregate loan limitations which generally apply to
larger loans and groups of loans made to one
borrower.  No loan or group of loans to any one
borrower may (1) exceed $500,000 or (2) excluding
first mortgage and share loans, exceed $100,000 (with
such loans in excess of $20,000 required to be
secured).


One-to-four Family Residential Loans.  Substantially
all of the Bank's one-to-four family residential
mortgage loans consist of conventional loans.
Conventional loans are loans that are neither insured
by the FHA or partially guaranteed by the Department
of Veterans Affairs ("VA").  Virtually all of the
Bank's one-to-four family residential mortgage loans
are secured by properties and are originated under
terms and documentation which permit their sale to
the Federal Home Loan Mortgage Corporation ("FHLMC"),
or the Federal National Mortgage Association
("FNMA").  Sales of residential mortgage loans have
been insignificant to date.  As of September 30,
1998, $28.18 million, or 82.20%, of the Bank's total
loans consisted of one to four family residential
mortgage loans.


The Bank's one-to-four family mortgage loans are generally
either fixed rate loans or shorter-term balloon
loans.  The Bank does not offer adjustable-rate one-
to-four family residential mortgage loans. Fixed-rate
loans generally have maturities ranging from 10 to 20
years and are fully amortizing with monthly loan
payments sufficient to repay the total amount of the
loan with interest by the end of the loan term.  At
September 30, 1998, $22.17 million, or 77.89%, of the
Bank's one-to-four family residential mortgage loans
were fixed-rate loans with original terms of from 10 to 30 years.
At September 30, 1998, the weighted average remaining term to
maturity of the Bank's fixed rate, 1-to-4 family
residential mortgage loans was approximately 12 years.
Substantially all of the Bank's fixed
rate, one-to-four family residential mortgage loans
contain due on sale clauses, which permit the Bank to
declare the unpaid balance to be due and payable upon
the sale or transfer of any interest
in the property securing the loan.  The Bank
generally enforces such due-on-sale clauses, but may
waive the clause in certain circumstances.

The balloon loans currently offered by the Bank have
terms of one or three years, but an amortization
schedule of up to 30 years. At the end of a balloon
loan's term, the entire balance of the loan is due.
The borrower has the option of repaying the loan on
the due date or, subject to satisfying the Bank's
underwriting criteria, accepting the renewed loan
rate which is then offered by the Bank for such
loans.  In the latter case, the renewed loan is a new
balloon loan with the same term as the initial
balloon loan.  The Bank has generally offered rates
on such renewed loans at 1/4 of 1% to 1/2 of 1%
higher than rates then offered on its new balloon
residential real estate loans. Modified loans are
amortized over the remaining life of the original
amortization period.  At September 30, 1998, $4.87
million or 17.28% of the Bank's one-to-four family
residential mortgage loans were balloon loans.

Balloon loans decrease the risks associated with
changes in interest rates but involve other risks. If
a borrower renews the loan at a higher interest rate,
the loan payment by the borrower increases, thereby
increasing the potential for default.  As with fixed-
rate loans, as interest rates increase, the
marketability of the underlying collateral property
may be adversely affected by higher interest rates.
The Bank believes the ability to adjust the rates of
these loans to reflect either a rising or falling
interest rate environment more than compensates for
risks associated with changing customer payments.

For one-to-four family residential first mortgage
loans the Bank's maximum loan-to-value ("LTV") ratio
generally is 80%, and is based on the lesser of sales
price or appraised value.  On such loans with a LTV
ratio of over 85%, private mortgage insurance ("PMI")
is required on the amount of the loan in excess of
80% of value.  The amount of an owner-occupied
residential first mortgage loan is limited to
$300,000 and the amount of an investment residential
first mortgage loan is $250,000.

The Bank offers home equity loans secured by second
mortgages. These second mortgage loans have been made
to borrowers who have first mortgages held by the
Bank or customers with substantial other business
with the Bank.  The Bank placed second mortgages on
many properties to comply with FHA insurance
requirements which currently require such a lien for
loans of over $7,500. For most of the Bank's second
mortgage loans, the Bank either holds the first
mortgage or the second mortgage is FHA insured. The
Bank holds the first mortgage on approximately 90% of
the properties securing its second mortgage portfolio
which are not FHA-insured loans.  A second mortgage
loan generally has a fixed rate of interest and a
term of six months.

Multi-Family Residential and Commercial Real Estate
Loans.  At September 30, 1998, the Bank had $2.46
million in outstanding loans secured by multi-family
residences or commercial real estate.  Such loans
comprised 7.18% of the Bank's total loan portfolio at September 30,
1998 and all have either fixed rates of interest
or are balloon loans.  Generally, fees of 50 basis points to 1% of the
principal loan balances are charged to the borrower upon closing.
The Bank also obtains personal guarantees of the principals as 
additional security for any multi-family residential or commercial real
estate loan.

At September 30, 1998, the Bank had $882,000 in
outstanding loans secured by multi-family residences,
all of which were apartment buildings.  The Bank's
underwriting standards generally provide for terms of
up to 20 years with amortization of principal over
the term of the loan and LTV ratios of not more than
75%.  At September 30, 1998, the Bank had 13 loans
secured by multi-family residences with an
average balance of $68,000.  As of that date none of
the multi family loans were non-performing loans.

At September 30, 1998, the Bank had $1.58 million in
outstanding loans secured by commercial real estate,
primarily retail office and farmland.  The Bank's
underwriting standards generally provide for terms of
up to ten years with amortization of principal over
the term of the loans and LTV ratios of not more than
70%.  At September 30, 1998, the Bank had 29 loans
secured by commercial real estate with an average
balance of $55,000.  As of that date, none of the
Bank's commercial real estate loans were non-
performing loans.

The Bank evaluates various aspects of multi-family
residential and commercial real estate loan
transactions in an effort to mitigate risk to the
extent possible.  In underwriting these loans,
consideration is given to the stability of the
property's cash flow history, future operating
projections, current and projected occupancy,
position in the market, location and physical
condition.  The underwriting analysis also includes
credit checks and a review of the financial condition
of the borrower and guarantor, if applicable.  An
appraisal report is prepared by a state-licensed or
certified appraiser commissioned by the Bank to
substantiate property values for every multifamily
and commercial real estate loan transaction.  All
appraisal reports are reviewed by the Bank prior to
the closing of the loan.

Multi-family residential and commercial real estate
lending entails different and significant risks when
compared to one-to four family residential lending
because such loans often involve large loan balances
to single borrowers and because the payment
experience on such loans is typically dependent on
the successful operation of the rental units or
business.  These risks can also be significantly
affected by supply and demand conditions in the local
market for apartments, offices or other commercial
space. The Bank attempts to minimize its risk
exposure by limiting such lending to experienced
businessmen, only considering properties with
existing operating performance which can be analyzed,
requiring conservative debt coverage ratios and
periodically monitoring the operation and physical
condition of the collateral.  In most cases
commercial real estate loans are made to business
people who are also operating the tenant businesses.

Construction Loans.  As of September 30, 1998, the
Bank's construction loans amounted to $492,000, or 1.44%
of the Bank's total loan portfolio.  The Bank
originated $889,000 of single-family construction
loans to individuals during the year ended September 30, 1998.  A
substantial majority of the Bank's construction loans
have consisted of loans to construct single-family
residences although the Bank will also consider
construction loans for small apartment buildings.

The Bank makes construction loans to individuals and,
on rare occasions, to developers for one-to-four
family residences. Normally these loans are
construction/permanent loans which require no
payments of principal during the construction period.
Interest on the construction loan is normally paid
during or at the close of construction period.
Following the construction period (which is typically
no longer than 6 months), the loan converts to a
permanent loan with monthly amortization of principal
and interest.  Construction loans to individuals for
single-family residential properties generally have
the same LTV ratio requirements as applicable to
loans for one-to-four family residences. Loans to
developers are limited to no more than two active
projects.  Disbursements of funds during construction
are conditioned upon the completion of a specified
percentage of construction.

Construction financing is generally considered to
involve a higher degree of risk of loss than long-
term financing on improved, owner-occupied real
estate.  Risk of loss on a construction loan is
dependent largely upon the accuracy of the initial
estimate of the property's value at completion of
construction or development and the estimated cost
(including interest) of construction.  During the
construction phase, a number of factors could result
in delays and cost overruns.  If the estimate of
value proves to be inaccurate, the Bank may be
confronted, at or prior to the maturity of the loan,
with a project, when completed, having a value which
is insufficient to assure full repayment.  Loans on
lots may run the risk of adverse zoning changes,
environmental or other restrictions on future use.
As of September 30, 1998, none of the Bank's
construction loans were considered non-performing.

Consumer Loans.  The Bank offers consumer loans in
order to provide a full range of retail financial
services to its customers.  However, substantially
all of such loans are either home improvement,
automobile or share loans.  At September 30, 1998,
$1.92 million, or 5.61%, of the Bank's
total loan portfolio was comprised of consumer loans.
The Bank originates substantially all of such loans
in its primary market area.  Originations of consumer
loans by the Bank amounted to $1.2 million in 1998.

For loans secured by vehicles either new or less than
two model years old, the Bank's maximum LTV ratio is
the lower of 90% of the purchase price or 100% of the
balance due after trade-in allowances and the maximum
loan amount is $30,000.  For loans secured by
vehicles at least two but less than six model years
old, the amount of the loan may not exceed the lowest
of 75% of the purchase price, 100% of the maximum
NADA Official Used Car Guide value or 100% of the
balance due after trade-in and allowances.  However,
loans on such vehicles may not in any case exceed
$20,000.  The Board has granted management the
authority to exceed LTV ratios and other terms on
vehicle loans if they are noted in subsequent monthly
reports to the Board.  As of September 30, 1998, the
Bank had $685,000 of loans secured by vehicles.

Share loans are secured by the balance in the
borrower's account with the Bank.  These loans
generally have interest rates 2% above the rate paid
on the account balance and the principal of the loan
may not exceed 90% of the account balance.  As of
September 30, 1998, the Bank had $250,000 of share
loans.

Consumer finance loans generally involve more credit
risk than mortgage loans because of the type and
nature of the collateral and, in certain cases, the
absence of collateral.  In addition,
consumer lending collections are dependent on the
borrower's continuing financial stability, and thus
are more likely to be adversely affected by job loss,
divorce, illness and personal bankruptcy.  In many
cases, any repossessed collateral for a defaulted
consumer financial loan will not provide an adequate
source of repayment of the outstanding loan balance
because of improper repair and maintenance or
depreciation of the underlying security.  The
remaining deficiency often does not warrant further
substantial collection efforts against the borrower.
As of September 30, 1998, $46,000 or
2.4% of the Bank's consumer loans were
considered non-performing.

Commercial Business Loans.  The Bank began offering
commercial business loans in March 1995.  At
September 30, 1998, the Bank's commercial business
loans amounted to $997,000 or 2.91% of the Bank's total 
loan portfolio.  The Bank's commercial business loans are 
generally made to its current customers on a secured or unsecured 
basis and involve a wide range of business purposes.  These
loans generally have terms of between six months to
one year.  Notes either require a single payment at
the end of their term or have amortizing payments of
principal and interest for periods of up to five
years.  Any two loan committee members may approve a
loan of this type in an amount up to $20,000.  Any
unsecured loan in excess of $20,000 must be approved
by the Board of Directors.  The Bank generally
obtains personal guarantees from the principals of
the borrower with respect to all commercial loans.
The Bank had 23 commercial business loans as of
September 30, 1998 with an average loan balance on
that date of $43,000.  As of September 30, 1998, none of 
the Bank's commercial business loans was non-performing.

Commercial business lending generally entails
significantly greater risk than the risks involved
with more traditional real estate lending.  The
repayment of commercial business loans typically is
dependent on the successful operation and income
stream of the borrower.  Such risks can be
significantly affected by economic conditions.

Loans-to-One Borrower Limitations.  The Illinois
Savings Bank Act imposes limitations on the aggregate
amount of loans that an Illinois chartered savings
bank can make to any one borrower. Under the Illinois
Savings Bank Act the permissible amount of loans-to-
one borrower is the greater of $500,000 (for a
savings bank meeting its minimum capital
requirements) or 20% of a savings bank's total
capital plus general loan loss reserves.  In
addition, a savings bank may make loans in an amount
equal to an additional 10% of the savings bank's
capital plus general loan loss reserves if the loans
are 100% secured by readily marketable collateral.
Under Illinois law, a savings bank's capital consists
of capital stock and noncumulative perpetual
preferred stock, related paid-in capital, retained
earnings and other forms of capital deemed to be
qualifying capital by the FDIC.  At September 30,
1998, the Bank's limit on loans-to-one borrower under
the Illinois Savings Bank Act was $1,041,000.  At
September 30, 1998, the Bank's five largest groups of
loans-to one borrower ranged from $323,000 to
$499,000, with the largest single loan in such groups being a
$249,000 loan secured by a commercial property.
Each of the five largest groups of borrowers has
several loans from the Bank, generally a combination of loans secured by
investment properties and a residence as well as
smaller secured and unsecured personal loans.  A
substantial portion of each large group of loans is
secured by real estate.  At September 30, 1998, all
of such loans were performing in accordance with their
terms.

Asset Quality

General.  As a part of the Bank's efforts to improve
its asset quality, it has developed and implemented
an asset classification system.  All of the Bank's
assets are subject to periodic review under the
classification system and assets with classifications
of above normal risk of collection are reported to
and reviewed by the Board monthly.  Quarterly reports
to the Board classify the totals of all loan assets
by risk classification.

When a borrower fails to make a required payment on a
loan, the Bank attempts to cure the deficiency by
contacting the borrower and seeking payment.
Contacts are generally made by mail within ten days
after a payment is due.  In most cases, deficiencies
are cured promptly.  If a delinquency continues, late
charges are assessed and additional efforts are made
to collect the loan. While the Bank generally prefers
to work with borrowers to resolve such problems, when
the account becomes 120 days delinquent, the Bank
institutes foreclosure or other proceedings, as
necessary, to minimize any potential loss.

As a matter of policy the Bank evaluates individual
loans past due 90 days or more to determine if
current payments being collected or underlying
collateral security justifies the accrual of
additional interest.

Real estate acquired by the Bank as a result of
foreclosure or by deed-in-lieu of foreclosure and
loans deemed to be in-substance foreclosed under GAAP
are classified as real estate owned until sold.
Pursuant to SOP 92-3 issued by the AICPA in April
1992, which provides guidance on determining the
balance sheet treatment of foreclosed assets in
annual financial statements for periods ending on or
after December 15, 1992, there is a rebuttable
presumption that foreclosed assets are held for sale
and such assets are recommended to be carried at the
lower of fair value minus estimated costs to sell the
property, or cost (generally the balance of the loan
on the property at the date of acquisition).  After
the date of acquisition, all costs incurred in
maintaining the property are expensed and costs
incurred for the improvement or development of such
property are capitalized up to the extent of their
net realizable value.  As of September 30,
1998, the Bank had $87,000 real estate owned. It is the Bank's
policy to comply with the guidance set forth in SOP
92-3.

Under GAAP, the Bank is required to account for
certain loan modifications or restructurings as
"troubled debt restructurings."  In general, the
modification or restructuring of a debt constitutes a
troubled debt restructuring if the Bank for economic
or legal reasons related to the borrower's financial
difficulties grants a concession to the borrower that
the Bank would not otherwise consider under current
market conditions. Debt restructurings or loan
modifications for a borrower do not necessarily
always constitute troubled debt restructurings,
however, and troubled debt restructurings do not
necessarily result in non-accrual loans.  As of
September 30, 1998, the Bank had no loans deemed to
be troubled debt restructurings.  See the table below
under "- Non-Performing Assets."

Delinquent Loans.  The following table sets forth
information concerning delinquent loans at the dates
indicated in dollar amounts and as a percentage of
each category of the Bank's loan portfolio.  The
amounts presented represent the total outstanding
principal balances of the related loans, rather than
the actual payment amounts which are past due.


                                 September 30, 1998
                                     30-89
                                     Days
                                 Amount    Percent of
                                           Loan Category
                               (Dollars in Thousands) 
Real estate mortgage loans:
 One-to-four family              $ 283       1.00%
 Multi-family                       46       5.22
 Commercial real estate            144       9.11
Construction                        --        --
Commercial business loans            5        .50
Consumer loans                      69       3.59
   Total                         $ 547       1.60%


                                 September 30, 1998
                                   90 Days or more
                                 Amount       Percent of
                                             Loan Category
                                 (Dollars in Thousands) 
Real estate mortgage loans:
 One-to-four family              $ 256        .91%
 Multi-family                       --        --
 Commercial real estate             --        --
Construction                        --        --
Commercial business loans           --        --
Consumer loans                      46       2.39
   Total                         $ 302       0.88%


Non-Performing Assets. The following table sets forth
the amounts and categories of the Bank's non-
performing assets at the dates indicated.  The Bank
did not have any troubled debt restructuring at any
of the dates presented.


                                 At September 30,
                                  1998     1997     
                              (Dollars in Thousands) 
Non accruing loans:
Real estate mortgage loans:
 One-to-four family                $ --    $ --       
 Multi-family                        --      --     
 Commercial real estate              --      --     
Real estate construction loans       --      --     
Commercial business loans            --      --     
Consumer loans                       --      --     
Total non-accruing loans             --      --       
Accruing loans greater than 90
                days delinquent:
Real estate mortgage loans:
 One-to-four family                 256      454       
 Multi-family                        --      --      
 Commercial real estate              --      --      
Real estate construction loans       --      --      
Commercial business loans            --      --      
Consumer loans                       46       31         
Total accruing loans greater than
               90 days delinquent   302      485       
Total non-performing loans          302      485        
Real estate owned                    87       --        
Total non-performing assets        $389     $485        
Total non-performing loans as a
  percentage of total loans        1.13%    1.64%       
Total non-performing assets as a
 percentage of total assets        0.90%    1.28% 

                          
                          
Management believes that it is substantially secured with
respect to non-performing assets and that the institution is 
adequately reserved.

Other Classified Assets.  Federal regulations require
that the Bank classify its assets on a regular basis.
In addition, in connection with examinations of
insured institutions, federal examiners have
authority to identify problem assets and, if
appropriate, classify them in their reports of
examination. There are three classifications for problem assets:
"substandard," "doubtful" and "loss."  Substandard
assets have one or more defined weaknesses and are
characterized by the distinct possibility that the
insured institution will sustain some loss if the
deficiencies are not corrected.  Doubtful assets have
the weaknesses of substandard assets with the
additional characteristic that the weaknesses make
collection or liquidation in full, on the basis of
currently existing facts, conditions and values
questionable, and there is a high possibility of
loss.  An asset classified loss is considered
uncollectible and of such little value that
continuance as an asset of the institution is not
warranted.

At September 30, 1998, the Bank had $438,000 of
assets classified substandard, $22,000 of assets classified
doubtful and none classified as loss.  At such
date, the aggregate of the Bank's classified assets
amounted to 1.06% of total assets.

Allowance for Loan Losses.  The Bank's policy is to
establish reserves to absorb losses on loans based on
management's continuing review and evaluation of the
portfolio and its judgment as to the impact of
economic conditions on the portfolio.  The allowance
for losses on loans is maintained at a level believed
adequate by management to absorb potential losses in
the portfolio.  Management's determination of the
adequacy of the allowance is based on an evaluation
of the past loss experience, changes in the
composition of the portfolio and the current
conditions and amount of loans outstanding.  The
allowance is increased by provisions for loan losses
which are charged against income.  As shown in the
table below, at September 30, 1998, the Bank's
allowance for loan losses amounted to 39.59% and
0.45% of the Bank's non-performing
loans and total loans receivable, respectively.

On November 24, 1998, the Securities and Exchange Commission, Federal Deposit
Insurance Corporation, Federal Reserve Board, Office of the Comptroller of the 
Currency, and Office of Thrift Supervision issued a Joint Interagency Statement 
on Loan Loss Allowances.  The Statement was designed to better ensure the 
consistent application of loan loss accounting policy and to improve the
transparency of financial statements.  The statement noted that the agencies
recognized the importance of meaningful financial statements and disclosure for 
both the benefit of investors and a safe and sound financial system and the 
importance of depository institutions having prudent, conservative, but not
excessive loan loss allowances that fall within an acceptable range of estimated
losses. Referring to previously issued documents, the agencies noted that the 
allowance for loan losses should reflect estimated credit losses for
specifically identified loans, as well as esitimated probable credit losses in
the remainder of the loan portfolio at the balance sheet date.  When determining
the appropriate level for the allowance,the agencies said, management should
always ensure that the overall allowance appropriately reflects a margin for the
imprecision inherent in the most recent estimates of expected credit losses. 
Management's judgement should be exercised in a disciplined manner that is based
on and reflective of adequate detailed analyses of the loan portfolio.

The agencies further indicated that although management's process for 
determining allowance adequacy is judgemental and results in a range of 
estimated losses, it must not be used to manipulate earnings or mislead 
investors, funds providers regulators or other affected parties. Management's 
process must be based on a comprehensive, adequately documented, and 
consistently applied analysis of the institution's loan portfolio. The 
depository institution must ensure that its allowance is supportable in light of
the accompanying disclosures made to investors, including those made in 
management's discussion and analysis and financial footnotes, with respect to 
the underlying economics and trends in the portfolio and any other factors
that significantly affect the collectibilty of loans. Management of the company 
believes its allowances for loan and lease losses meets these standards.




The following table describes the activity related to
the Bank's allowance for possible loan losses for the
periods indicated.


                                         Year Ended September 30, 
                                            
                                                1998    1997       
                                           (Dollars in Thousands) 
Balance at beginning of period                  $152    $143      
Charge-offs:
  One-to-four family real estate loans           (25)     (7)    
  Consumer loans                                 (53)     (2)    
Recoveries:  one-to-four family real estate        5       1         
Net charge-offs                                  (75)     (8)     
Provision for losses on loans                     75      17       
Balance at end of period                        $154    $152       
Allowance for loan losses as a percentage
         of total loans outstanding             0.45%   0.52%    
Allowance for loan losses as a percentage
         of total non-performing loans         39.59%  31.34%   
Ratio of net charge-offs to
         average loans outstanding              0.24%   0.03%     



The following table presents an allocation of the
allowance for loan losses by the categories indicated
and the percentage that loans in each category bear
to total loans.  This allocation is used by
management to assist in its evaluation of the Bank's
loan portfolio.  It should be noted that allocations
are no more than estimates and are subject to
revisions as conditions change. Based upon historical
loss experience and the Bank's assessment of its loan
portfolio, all of the Bank's allowance for loan
losses have been allocated to the categories of loans
indicated. Allocations of these loans are based
primarily on the creditworthiness of each borrower.
In addition, general allocations are also made to
each category based upon, among other things, the
current and future impact of economic conditions on
the loan portfolio taken as a whole.  Losses on loans
made to consumers are reasonably predictable based on
the prior loss experience and a review of current
economic conditions.


                                        At September 30,
                                   1998                  1997
                              Amount  Percent       Amount  Percent
                                      of Loans              of loans
                                      in Each               in Each
                                      Category to           Category to 
                                      Total Loans           Total Loans
                                             (Dollars in Thousands)
Real estate mortgage loans:
 One-to-four family            $101      82.20%      $105      84.29%
 Multi-family                    --       2.57         --       3.67
 Commercial real estate          --       4.61         --       3.69  
Real estate sold on Contract      3        .66          4       1.02          
Real estate construction         --       1.44         --        .39
Commercial business loans         5       2.91          3       1.63          
Consumer loans                   45       5.61         40       5.31        
       Total                   $154     100.00%      $152     100.00%




Management of the Bank presently believes that its
allowance for loan losses is adequate to cover any
potential losses in the Bank's loan portfolio.
However, future adjustments to this allowance may be
necessary, and the Bank's results of operations could
be adversely affected if circumstances differ
substantially from the assumptions used by management
in making its determinations in this regard.

Investment Activities

General.  Interest income from mortgage-backed
securities and investment securities generally
provides the second largest source of income to the
Bank after interest on loans.  The Bank's Board of
Directors has authorized investment in U.S.
Government and agency securities, obligations of the
FHLB, and mortgage backed securities issued by FNMA,
FHLMC and the Government National Mortgage
Association ("GNMA") as well as by certain state,
county and municipal securities.  The Bank's
objective is to use such investments to reduce
interest rate risk, enhance yields on assets and
provide liquidity.  On September 30, 1998, the Bank's
investment securities portfolio amounted to
$5.10 million, including a net unrealized gain of
$40,000, with respect to its securities available for
sale.

Mortgage-Backed Securities.  As of September 30,
1998, the Bank's mortgage-backed securities amounted
to $1.95 million, or 4.51% of total assets.  The Bank's 
mortgage-backed securities portfolio provides a means of 
investing in housing related mortgage instruments without the
costs associated with originating mortgage loans for
portfolio retention and with limited credit risk of
default which arises in holding a portfolio of loans
to maturity.  Mortgage-backed securities (which also
are known as mortgage participation certificates or
pass-through certificates) represent a participation
interest in a pool of single-family or multi-family
mortgages.  The principal and interest payments on
mortgage-backed securities are passed from the
mortgage originators, as servicer, through
intermediaries (generally U.S. Government agencies
and government sponsored enterprises) that pool and
repackage the participation interests in the form of
securities, to investors such as the Bank.  Such U.S. 
Government agencies and government sponsored enterprises, 
which guarantee the payment of principal and interest to 
investors, primarily include the FHLMC, the FNMA and the GNMA.

The FHLMC is a public corporation chartered by the
U.S. Government and owned by the 12 FHLBs and
federally insured savings institutions.  The FHLMC
issues participation certificates backed principally
by conventional mortgage loans. The FHLMC guarantees
the timely payment of interest and the ultimate
return of principal on participation certificates.
The FNMA is a private corporation chartered by the
U.S. Congress with a mandate to establish a secondary
market for mortgage loans. The FNMA guarantees the timely 
payment of principal and interest on FNMA securities.  FHLMC and FNMA
securities are not backed by the full faith and
credit of the United States, but because the FHLMC
and the FNMA are U.S. Government-sponsored
enterprises, these securities are considered to be
among the highest quality investments with minimal
credit risks.  The GNMA is a government agency within
the Department of Housing and Urban Development which
is intended to help finance government-assisted
housing programs.  GNMA securities are backed by FHA-
insured and VA guaranteed loans, and the timely
payment of principal and interest on GNMA securities
are guaranteed by the GNMA and backed by the full
faith and credit of the U.S. Government.  Because the
FHLMC, the FNMA and the GNMA were established to
provide support for low- and middle-income housing,
there are limits to the maximum size of loans that
qualify for these programs, which limit currently is
$207,000.

Mortgage-backed securities typically are issued with
stated principal amounts, and the securities are
backed by pools of mortgages that have loans with
interest rates that are within a range and have
varying maturities.  The underlying pool of mortgages
can be composed of either fixed-rate or adjustable-
rate loans.  As a result, the risk characteristics of
the underlying pool of mortgages, (i.e., fixed rate
or adjustable rate) as well as prepayment risk, are
passed on to the certificate holder.  The life of a
mortgage-backed pass-through security thus
approximates the life of the underlying mortgages.
The Bank's mortgage-backed securities portfolio
includes investments in mortgage-backed securities
backed by ARMs or securities which otherwise have an
adjustable rate feature.

Mortgage-backed securities generally yield less than
the loans which underlie such securities because of
their payment guarantees or credit enhancements which
offer nominal credit risk.  In addition, mortgage-
backed and related securities are more liquid than
individual mortgage loans and may be used to
collateralize borrowings of the Bank in the event
that the Bank determined to utilize borrowings as a
source of funds.  Mortgage backed securities issued
or guaranteed by the FNMA or the FHLMC (except
interest-only securities or the residual interests in
CMOs) are weighted at no more than 20.0% for risk-
based capital purposes, compared to a weight of 50.0%
to 100.0% for residential loans.  

As of September 30, 1998, all of the Bank's $1.95
million of mortgage-backed securities were classified
as held to maturity.

At September 30, 1998, the weighted average
contractual maturity of the Bank's fixed-rate
mortgage-backed securities was approximately 1.9
years.  The actual maturity of a mortgage backed
security may be less than its stated maturity due to
prepayments of the underlying mortgages. 
Prepayments that are faster than anticipated may
shorten the life of the security and adversely affect
its yield to maturity.  The yield is based upon the
interest income and the amortization of any premium
or discount related to the mortgage-backed security.
In accordance with GAAP, premiums and discounts are
amortized over the estimated lives of the loans,
which decrease and increase interest income,
respectively.  The prepayment assumptions used to
determine the amortization period for premiums and
discounts can significantly affect the yield of the
mortgage-backed security, and these assumptions are
reviewed periodically to reflect actual prepayments.
Although prepayments of underlying mortgages depend
on many factors, including the type of mortgages, the
coupon rate, the age of mortgages, the geographical
location of the underlying real estate
collateralizing the mortgages and general levels of
market interest rates, the difference between the
interest rates on the underlying mortgages and the
prevailing mortgage interest rates generally is the
most significant determinant of the rate of
prepayments. 

During periods of rising mortgage interest rates, if
the coupon rates of the underlying mortgages are less
than the prevailing market interest rates offered for
mortgage loans, refinancings generally decrease and
slow the prepayment of the underlying mortgages and
the related securities.  Conversely, during periods
of falling mortgage interest rates, if the coupon
rates of the underlying mortgages exceed the
prevailing market interest rates offered for mortgage
loans, refinancing generally increases and
accelerates the prepayment of the underlying
mortgages and the related securities.  Under such
circumstances, the Bank may be subject to
reinvestment risk because to the extent that the
Bank's mortgage-related securities amortize or prepay
faster than anticipated, the Bank may not be able to
reinvest the proceeds of such repayments and
prepayments at a comparable rate.

Securities.  The Bank's investments in investment
securities other than mortgage-backed securities
consist primarily of securities issued by the U.S.
Treasury and federal government agency obligations
except for $363,000 of securities all of which are
general obligations of Illinois municipalities.  As
of September 30, 1998, $2.78 million of such
securities portfolio were classified available for sale.  The
remaining $363,000 of the Bank's investment
securities portfolio, which do not include the mortgage 
backed securities, were classified as held to
maturity.  The Bank attempts to maintain a high
degree of liquidity in its investment securities
portfolio and generally does not invest in securities
with terms to maturity exceeding ten years.  As of
September 30, 1998, the estimated weighted average
life of the Bank's investment securities portfolio
was 2.98 years.

The following table sets forth certain information
regarding the Bank's investment securities at the
dates indicated.


                       
                                      September 30,
                                 1998                1997       
                         Amortized  Market   Amortized  Market
                            Cost    Value       Cost    Value
                                   (In Thousands) 
Available for sale:(1)
  U.S. Treasury           $1,745     $1,784   $1,741     $1,759  
  Federal agencies         1,000      1,001    1,365      1,357    
Total available for sale  $2,745     $2,785   $3,106     $3,116 

Held to maturity:(1)
   Federal agencies       $  --      $  --    $  --      $  -- 
   State and municipal       363        374      362        369    
Mortgage-backed Securities 1,949      1,984    2,638      2,689
Total held to maturity    $2,312     $2,359   $3,000     $3,058   


(1)  The Bank adopted the provisions set forth in
SFAS No. 115 on October 1, 1994, which requires
entities to carry securities that are available for sale 
at their market value while continuing to carry securities 
that are held to maturity at their amortized cost.


The following table sets forth certain information
regarding the maturities of the Bank's investment
securities at September 30, 1998.

                                        Contractually Maturing
                                           Weighted         Weighted
                               Under 1     Average    1-5   Average
                                Year        Yield    Years   Yield
                                          (Dollars in Thousands) 
Available for sale:
 U.S. Treasury                 $ 758       6.25%    $1,026    6.00%
 Federal agencies                 --         --      1,001    5.50
Total available for sale         758       6.25      1,510    5.63

Held to maturity:
 Federal agencies                 --         --        --      --
 State and municipal(1)           --         --        --      --
 Mortgage-backed securities      466       6.50        --      --
  Total held to maturity         466       6.50        --      --
  Total investment securities  1,224       6.35      1,510    5.63


                                        Contractually Maturing
                                          Weighted          Weighted
                                 6-10     Average   Over 10 Average
                                 Years     Yield     Years   Yield     Total
                                        (Dollars in
Thousands) Available for sale:
 U.S. Treasury                 $   --      -- %     $  --     -- %    $1,784
 Federal agencies                  --      --          --     --       1,001
Total available for sale           --      --          --     --       2,785

Held to maturity:
 Federal agencies                  --      --          --     --         --
 State and municipal(1)           165     4.65         198   4.85        363
 Mortgage-backed securities        22     8.25       1,461   6.95      1,949
  Total held to maturity          187     5.07       1,659   6.12      2,312
  Total investment securities   1,411     6.17       3.169   5.89      5,097

(1)  Yields on tax-exempt investments have not been computed on a tax-
equivalent basis.


In addition, as a member of the FHLB of Chicago the
Bank is required to maintain an investment in stock
of the FHLB of Chicago equal to the greater of 1% of
the Bank's outstanding home mortgage
related assets or 5% of its outstanding advances from
the FHLB of Chicago.  As of September 30, 1998, the
Bank's investment in stock of the FHLB of Chicago amounted
to $350,000. During the year ended September 30,
1998, the Bank received $19,000 in dividends on its
FHLB stock.  No ready market exists for such stock,
which is carried at par value.

Sources of Funds

General.  The Bank's principal source of funds for
use in lending and for other general business
purposes has traditionally come from deposits
obtained through the Bank's single retail office. The
Bank also derives funds from amortization and
prepayments of outstanding loans and mortgage-related
securities, and from maturing investment securities.
Loan repayments are a relatively stable source of
funds, while deposit inflows and outflows are
significantly influenced by general interest rates
and money market conditions.  The Bank has made
limited use of borrowings to supplement its deposits
as a source of funds.

Deposits.  The Bank's current deposit products
include savings accounts, retirement savings
accounts, NOW accounts, MMIA, certificates ranging in
terms from six months to five years and non-interest-
bearing personal and business checking accounts.

The Bank's deposits are obtained primarily from
residents in its Primary Market Area.  The Bank
attracts local deposit accounts by offering a wide
variety of accounts, competitive interest rates and a
convenient location and convenient service hours.
The Bank utilizes traditional marketing methods to
attract new customers and savings deposits, including
print and broadcast advertising and direct mailings.
However, the Bank does not solicit funds through
deposit brokers nor does it pay any brokerage fees if
it accepts such deposits.

The Bank has been competitive in the types of
accounts and in interest rates it has offered on its
deposit products but does not necessarily seek to
match the highest rates paid by competing
institutions.  With the decline in interest rates
paid on deposit products, the Bank in recent years
has experienced limited disintermediation of deposits
into competing investment products.
The following table sets forth certain information
relating to the Bank's deposits by type, as of the dates indicated.



                                           September 30,
                                1998              1997        
                                    Percent          Percent  
                                    Of Total         of Total 
                           Amount   Deposits  Amount Deposits 
                                         (Dollars in Thousands) 
Transaction accounts:
 NOW accounts              $1,268    4.40%   $  786    2.84%   
 Money market investment      753    2.50       896    3.08    
 Savings and retirement     5,296   17.45     5,067   17.28     
Total transaction accounts  7,317   24.35     6,749   23.20    
Certificates of deposit:
 Within 1 year             14,944   49.74    14,406   49.51     
 1-2 years                  5,991   19.94     6,668   22.92     
 2-3 years                  1,430    4.76       637    2.19     
 3-4 years                     81    0.27       442    1.52     
 4-5 years                    281    0.94       196    0.66     
Total certificates         22,727   75.65    22,349   76.80    
Total deposits            $30,044  100.00%  $29,098  100.00%  







The following table sets forth information relating
to the Bank's deposit flows during the periods shown:


                                At or For the Year Ended September 30,
                                       1998          1997         
                                                (In Thousands)

Net deposits (withdrawals)
        before interest credited      $  (283)    $(2,875)      

Interest credited                       1,229       1,249         

Total increase (decrease)in deposits      946     $(1,626)     



The following table shows the interest rate and maturity information
for the Bank's certificates at September 30, 1998.


                                             Maturity Date
                      One Year  Over 1-2  Over 2-3  Over 3-4  Over 4-5
                      or less     Years     Years     Years     Years
                                        (In Thousands)
Interest Rate
4.50 to 4.99%         $   116    $   --    $   --    $   --    $    --
5.00 to 5.99%           7,786      4,255     1,020        34        238
6.00 to 6.99%           7,619      1,264       226       127         42

Total                 $15,521    $ 5,519   $ 1,246   $   161   $    280



The following table sets for the maturities of the
Bank's certificates having principal amounts of
$100,000 or more at September 30, 1998.


                  Maturity Period                  Amount
                                              (In Thousands)
   Three months or less                         $    849
   Over three through six months                     729
   Over six through twelve months                  1,180
   Over twelve months                                577
   Total certificates of deposit
        with balances of $100,00 or more        $  3,335


Borrowings.  The Bank may obtain advances from the
FHLB of Chicago upon the security of the common stock
it owns in that bank and certain of its residential
mortgage loans and securities held to maturity,
provided certain standards related to
creditworthiness have been met.  Such advances are
made pursuant to several credit programs, each of
which has its own interest rate and range of
maturities.  Prior to fiscal 1996, the Bank had not
used such borrowings during the most recent five-year
period.

The following table sets forth the amounts of the
Bank's borrowings and the weighted average rates for
the year ended September 30,  1998.


                                  For the Year Ended September 30, 
                                                   1998     1997      
                                                 (Dollars in Thousands)
FHLB advances:
Average balance outstanding during the period(1)   $4,754  $2,100  
Maximum amount outstanding 
at any month-end during the period                 $7,000  $2,600     
Balance outstanding at end of period               $6,400  $2,600     
Weighted average interest rate during the period    5.37%   5.85%      
Weighted average interest rate at the end of period 5.14%   5.88%      

(1)  The average balance was computed using an
average of monthly balances during the year.

Subsidiaries

The Bank currently has one subsidiary, G.B.W. Service
Corporation ("GBW").  GBW's primary activities are
the collection of premiums on credit life and credit
disability insurance policies and the collection of
interest on certain real estate sales contracts. The
Bank's investment in its subsidiary totaled $117,000
as of September 30, 1998.


Legal Proceedings

The Bank is involved in routine legal proceedings
occurring in the ordinary course of business which,
in the aggregate except as noted below, are believed
by management to be immaterial to the financial
condition of the Bank.  On December 30, 1992,
Rosemary Frobose, a former officer of the Bank, filed
a lawsuit against the Bank in the United States
District Court, Central District of Illinois,
(subsequently transferred to the Central District of
Illinois, Peoria Division) alleging that she was the
victim of a retaliatory discharge based on common law
rights and the federal "whistleblower statute," 12
USC ' 1831j(a).  The plaintiff seeks compensatory and
punitive damages against the Bank based upon her loss
of income and employment for at least a ten-year
period. She has not sought a specific dollar amount in her
complaint but at one point made a demand of $900,000.
The Court entered a summary judgment in
favor of the Bank on each count. The employee appealed
the judgement on several counts to the Seventh Circuit Federal Court of Appeals 
in Chicago. Oral argument was heard on December 12, 1997. 
Recently, the court of appeals reversed the district court's entry of summary
judgement in favor of the Bank on plaintiff's claims of retaliation under
the whistleblower statute, a state retaliatory discharge claim, and
a quantum merit claim for directors' fees. The seventh circuit affirmred summary
judgement in favor of the Bank on plaintiff's false light and defamation claims.
See Frobose v. American Savings & Loan Association of Danville, Case Number
97-1432 (Seventh Cir., July 31, 1998). The Bank's attorneys have advised that
they are unable to express an opinion as to the ultimate disposition of the
claim. 

Competition

The Bank faces strong competition both in attracting
deposits and making real estate loans.  Its most
direct competition for deposits has historically come
from other savings institutions, credit unions and
commercial banks located in its market area including
many large financial institutions which have greater
financial and marketing resources available to them.
In addition, during times of high interest rates, the Bank 
has faced significant competition for
investors' funds from short-term money market
securities, mutual funds and other corporate and
government securities.  The ability of the Bank to
attract and retain savings deposits depends on its
ability to generally provide a rate of return,
liquidity and risk comparable to that offered by
competing investment opportunities.

The Bank experiences strong competition for real
estate loans principally from other savings
institutions, commercial banks and mortgage banking
companies. The Bank competes for loans principally
through the interest rates and loan fees it charges,
the efficiency and quality of services it provides
borrowers and the convenient location of its main
office.  Competition may increase as a result of the
continuing reduction of restrictions on the
interstate operations of financial institutions.

Employees

The Bank had ten full-time employees and two
part-time employees as of September 30, 1998.  None
of these employees is represented by a collective
bargaining agreement.  The Bank believes that it
enjoys excellent relations with its personnel.

REGULATION

Set forth below is a brief description of certain
laws and regulations which together with the
descriptions of laws and regulation contained
elsewhere herein, are deemed material to an
investor's understanding of the extent to which the
Company and the Savings Bank are regulated.  The
description of these laws and regulations, as well as
descriptions of laws and regulations contained
elsewhere herein, does not purport to be complete and
is qualified in its entirety by reference to
applicable laws and regulations.


The Company

General.  The Company is the sole stockholder of the
Bank.  As such, the Company is a bank holding
company.  As a bank holding company, the Company is
required to register with, and is subject to
regulation by, the Federal Reserve Board under the
Bank Holding Company Act ("BHCA").  In accordance with Federal
Reserve Board policy, the Company will be expected to
act as a source of financial strength to the Bank and
to commit resources to support the Bank in
circumstances where the Company might not do so
absent such policy.  Under the BHCA, the Company is
subject to periodic examination by the Federal
Reserve Board and is required to file periodic
reports of its operations and such additional
information as the Federal Reserve Board may require.
Because the Bank is chartered under Illinois law, the
Company is also subject to registration with,
and regulation by, the Commissioner under the ISBA.

The BHCA requires prior Federal Reserve Board
approval for, among other things, the acquisition by
a bank holding company of direct or indirect
ownership or control of more than five percent of the
voting shares or substantially all the assets of any
bank, or for a merger or consolidation of a bank
holding company with another bank holding company.
With certain exceptions, the BHCA prohibits a bank
holding company from acquiring direct or indirect
ownership or control of voting shares of any company
which is not a bank or bank holding company and from
engaging directly or indirectly in any activity other
than banking or managing or controlling banks or
performing services for its authorized subsidiaries.
A bank holding company may, however,
engage in or acquire an interest in a company that
engages in activities which the Federal Reserve Board
has determined by regulation or order to be so
closely related to banking or managing or controlling
banks as to be a proper incident thereto.

A bank holding company is a legal entity separate and
distinct from its subsidiary bank or banks.
Normally, the major source of a holding company's
revenue is dividends a holding company receives from
its subsidiary banks.  The right of a bank holding
company to participate as a stockholder in any
distribution of assets of its subsidiary banks upon
their liquidation or reorganization or otherwise is
subject to the prior claims of creditors of such
subsidiary banks.  The subsidiary banks are subject
to claims by creditors for long-term and short-term
debt obligations, including substantial obligations
for federal funds purchased and securities sold under
repurchase agreements, as well as deposit
liabilities.  Under the Financial Institutions
Reform, Recovery and Enforcement Act of 1989, in the
event of a loss suffered by the FDIC in connection
with a banking subsidiary of a bank holding company
(whether due to a default or the provision of FDIC
assistance), other banking subsidiaries of the
holding company could be assessed for such loss.

Federal laws limit the transfer of funds by a
subsidiary bank to its holding company in the form of
loans or extensions of credit, investments or
purchases of assets.  Transfers of this kind are
limited to ten percent of a bank's capital and
surplus with respect to each affiliate and to twenty
percent to all affiliates in the aggregate, and are
also subject to certain collateral requirements.
These transactions, as well as other transactions
between a subsidiary bank and its holding company,
must also be on terms substantially the same as, or
at least as favorable as, those prevailing at the
time for comparable transactions with non affiliated
companies or, in the absence of comparable
transactions, on terms or under circumstances,
including credit standards, that would be offered to,
or would apply to, non affiliated companies.

Capital Requirements.  The Federal Reserve Board has
adopted capital adequacy guidelines for bank holding
companies (on a consolidated basis) substantially
similar to those of the FDIC for the Bank described
below.  At September 30, 1998, the Company's Tier 1
and total capital significantly exceeded the Federal
Reserve Board's capital adequacy requirements.

The Bank

General.  The Bank is an Illinois-chartered savings
bank, the deposit accounts of which are insured by
the SAIF of the FDIC. As a SAIF-insured, Illinois-
chartered savings bank, the Bank is subject to the
examination, supervision, reporting and enforcement
requirements of the Commissioner, as the chartering
authority for Illinois savings banks, and the FDIC,
as administrator of the SAIF, and to the statutes and
regulations administered by the Commissioner and the
FDIC governing such matters as capital standards,
mergers, establishment of branch offices, subsidiary
investments and activities and general investment
authority.  The Bank is required to file reports with
the Commissioner and the FDIC concerning its
activities and financial condition and will be
required to obtain regulatory approvals prior to
entering into certain transactions, including mergers
with, or acquisitions of, other financial institutions.

The Commissioner and the FDIC have extensive
enforcement authority over Illinois-chartered savings
banks, such as the Bank.  This enforcement authority
includes, among other things, the ability to issue
cease-and-desist or removal orders, to assess civil 
money penalties and to initiate injunctive actions.
In general, these enforcement actions may be
initiated for violations of laws and regulations and
unsafe and unsound practices.

The Commissioner has established a schedule for the
assessment of "supervisory fees" upon all Illinois
savings banks to fund the operations of the
Commissioner.  These supervisory fees are computed on
the basis of each savings bank's total assets
(including consolidated subsidiaries) and are payable
at the end of each calendar quarter.  A schedule of
fees has also been established for certain filings
made by Illinois savings banks with the Commissioner.
The Commissioner also assesses fees for examinations
conducted by the Commissioner's staff, based upon the
number of hours spent by the Commissioner's staff
performing the examination.  During the fiscal year
ended September 30, 1998, the Bank paid approximately
$6,000 in supervisory fees and expenses.

The system of regulation and supervision applicable
to the Bank establishes a comprehensive framework for
its operations and is intended primarily for the
protection of the FDIC's deposit insurance funds and
the depositors of the Bank.  Changes in the
regulatory framework could have a material adverse
effect on the Bank and its operations which, in turn,
could have a material adverse effect on the Holding Company.

Capital Requirements.  Under the Illinois Savings
Bank Act ("ISBA") and the regulations of the
Commissioner, an Illinois savings bank must maintain
a minimum level of total capital equal to the higher
of 3% of total assets or the amount required to
maintain insurance of deposits by the FDIC.  The
Commissioner has the authority to require an Illinois
savings bank to maintain a higher level of capital if
the Commissioner deems such higher level necessary
based on the savings bank's financial condition,
history, management or earnings prospects.

FDIC-insured institutions are required to follow
certain capital adequacy guidelines which prescribe
minimum levels of capital and require that
institutions meet certain risk-based and leverage
capital requirements.  Under the FDIC capital
regulations, an FDIC-insured institution is required
to meet the following capital standards: (i) "Tier 1
capital", for all but the most highly rated
institutions in an amount not less than 4% of total
assets; (ii) "Tier 1 capital" in an amount not less
than 4% of risk-weighted assets; and (iii) "total
capital" in an amount not less than 8% of risk-weighted assets.

FDIC-insured institutions in the strongest financial
and managerial condition (with a composite rating of
"1" under the Uniform Financial Institutions Rating
System established by the Federal Financial
Institutions Examination Council) are required to
maintain "Tier 1 capital" equal to at least 3% of
total assets ( the "leverage limit" requirement).
For all other FDIC-insured institutions, the minimum
leverage limit requirement is 3% of total assets plus
at least an additional 100 to 200 basis points.
 Tier 1 capital is defined to include the sum of
common stockholders' equity, non-cumulative perpetual
preferred stock (including any related surplus), and
minority interests in consolidated subsidiaries,
minus all intangible assets (other than qualifying
servicing rights, qualifying purchased creditcard
relationships and qualifying supervisory goodwill),
certain identified losses (as defined in the FDIC's
regulations) and investments in certain subsidiaries.

FDIC-insured institutions also are required to adhere
to certain risk-based capital guidelines which are
designed to provide a measure of capital more
sensitive to the risk profiles of individual banks.
Under the risk-based capital guidelines, capital is
divided into two tiers: core (Tier 1) capital, as
defined above, and supplementary (Tier 2) capital.
Tier 2 capital is limited to 100% of core capital and
includes cumulative perpetual preferred stock,
perpetual preferred stock for which the dividend rate
is reset periodically based on current credit
standing, regardless of whether dividends are
cumulative or non-cumulative, mandatory convertible
debt securities, term subordinated debt, intermediate-
term preferred stock and the allowance for possible
loan and lease losses.  The allowance for possible
loan and lease losses includable in Tier 2 capital is
limited to a maximum of 1.25% of risk-weighted
assets. Total capital is the sum of Tier 1 and Tier 2
capital.  The risk based capital framework assigns
balance sheet assets to one of four broad risk
categories which are assigned risk weights ranging
from 0% to 100% based primarily on the degree of
credit risk associated with the obligor.  Off balance
sheet items are converted to an on-balance sheet
"credit equivalent" amount utilizing certain
conversion factors.  The sum of the four risk
weighted categories equals risk-weighted assets.  At
September 30, 1998 the Bank met each of its capital requirements.

Dividends.  Under the ISBA, dividends may only be
declared when the total capital of the Bank is
greater than that required by Illinois law.
Dividends may be paid by the Bank out of its net
profits (i.e., earnings from current operations, plus
actual recoveries on loans, investments, and other
assets after deducting all current expenses,
including dividends or interest on deposit accounts,
additions to reserves as may be required by the
Illinois Commissioner, actual losses, accrued
dividends on preferred stock, if any, and all State
and federal taxes).  The written approval of the
Commissioner must be obtained, however, before a
savings bank having total capital of less than 6% of
total assets may declare dividends in any year in an
amount in excess of 50% of its net profits for that
year.  A savings bank may not declare dividends in
excess of its net profits in any year without the
approval of the Commissioner.  In addition, before
declaring a dividend on its capital stock, the Bank
must transfer no less than one-half of its net
profits of the preceding half year to its paid-in
surplus until it shall have paid-in surplus equal to
20% of its capital stock.  Finally, the Bank will be
unable to pay dividends in an amount which would
reduce its capital below the greater of (i) the
amount required by the FDIC, (ii) the amount required
by the Commissioner or (iii) the amount required for
the liquidation account to be established by the Bank
in connection with the Conversion.  The Commissioner
and the FDIC also have the authority to prohibit the
payment of any dividends by the Bank if the
Commissioner or the FDIC determines that the
distribution would constitute an unsafe or unsound
practice.  For the year ended September 30, 1998, the
Bank's capital was greater than that required by the 
FDIC and higher than 3% of total assets.  Based upon
the Illinois definition of "net profits", the Bank 
could pay a maximum of $499,000 in dividends 
under Illinois Law, and the Bank does not intend to 
pay dividends in excess of this amount.

Federal Home Loan Bank System.  The Bank is a member
of the FHLB System which consists of 12 FHLBs under
the jurisdiction of the Federal Housing Finance Board
("FHFB").  As a member of the FHLB System, the Bank
is required to acquire and hold shares of capital
stock of the FHLB of Chicago in an amount equal to
the greater of (i) 1.0% of the aggregate outstanding
principal amount of the Bank's aggregate unpaid loan
principal, or (ii) 0.3% of the Bank's total assets.
The Bank's holdings of FHLB capital
stock will be reviewed annually by the FHLB of
Chicago using calendar year-end financial data to
ensure that the Bank is holding the minimum required
amount of FHLB capital stock. If the minimum amount
required is decreased, the FHLB-Chicago may in its
discretion and upon application of the Bank, retire
excess shares of capital stock held by the Bank.  The
Bank is in compliance with this requirement with an
investment in FHLB capital stock of $350,000 at
September 30, 1998.

The FHLBs provide a central credit facility primarily
for member institutions.  FHLBs make advances to
member banks in accordance with each Federal Home
Loan Bank's policies and procedures established by
the FHFB and the Board of Directors of such FHLB.
 All long-term advances by a Federal Home Loan Bank
(advances having an original term to maturity greater
than five years) must be made only for the purpose of
providing funds for residential housing finance.
Advances are made upon the note or obligation of a
member bank, must be fully secured and bear interest
at a rate established by the FHFB.  At September 30,
1998, the Bank had $6,400,000 in advances outstanding
from the FHLB of Chicago.  The Bank's aggregate outstanding 
advances from the FHLB of Chicago may at no time exceed 20
times the amounts paid in by the Bank for its holding
of FHLB capital stock.

Lending Limitations.  Under the ISBA, the Bank is
prohibited from making secured or unsecured loans for
business, corporate, commercial or agricultural
purposes representing in the aggregate an amount in
excess of 15% of its total assets, unless the
Commissioner authorizes in writing a higher
percentage limit for such loans upon the request of
an institution.  In addition, the regulations of the
Commissioner prohibit the Bank from making
educational loans in excess of 5% of its total assets.

The Bank is also subject to a loans-to-one borrower
limitation. Under the ISBA, the total loans and
extensions of credit, both direct and indirect, by
the Bank to any person (other than the United States
or its agencies, the state of Illinois or its
agencies, and any municipal corporation for money
borrowed) outstanding at one time must not exceed the
greater of $500,000 or 20% of the Bank's total
capital plus general loan loss reserves.  In addition
to the above, the total loans and extensions of
credit, both direct and indirect, by the Bank to any
person outstanding at one time and at least 100%
secured by readily marketable collateral must not
exceed the greater of $500,000 or 10% of the Bank's
total capital plus general loan loss reserves.

Brokered Deposits; Regulation of Deposit Rates.
Under applicable laws and regulations, an insured
depository institution may be restricted in
obtaining,  directly or indirectly, funds by or
through any "deposit broker,"  as defined, for
deposit into one or more deposit accounts at the
institution.  The term "deposit broker" generally
includes any  person engaged in the business of
placing deposits, or facilitating  the placement of
deposits, of third parties with insured depository
institutions or the business of placing deposits with
insured  depository institutions for the purpose of
selling interests in  those deposits to third
parties.  Under FDIC regulations,  well capitalized
institutions are subject to no brokered deposit
limitations, while adequately capitalized
institutions are able to accept, renew or roll over
brokered deposits only (i) with a waiver  from the
FDIC and (ii) subject to the limitation that they do
not  pay an effective yield on any such deposit which
exceeds by more  than (a) 75 basis points the
effective yield paid on deposits of  comparable size
and maturity in such institution's normal market
area for deposits accepted in its
normal market area or (b) by 120%  for retail
deposits and 130% for wholesale deposits,
respectively,  of the current yield on comparable
maturity U.S. Treasury  obligations for deposits
accepted outside the institution's normal  market
area. Undercapitalized institutions are not permitted
to accept brokered deposits and may not solicit
deposits by offering  an effective yield that exceeds
by more than 75 basis points the prevailing effective
yields on insured deposits of comparable maturity in
the institution's normal market area or in the market
area in which such deposits are being solicited. At
September 30, 1998,  the Bank is a well
capitalized institution which was not subject to
restrictions on brokered deposits within the meaning
of these regulations and had no brokered deposits. See
footnotes to Consolidated Financial Statements.

An institution that is not well-capitalized, even if
meeting minimum capital requirements, may not solicit
deposits by offering interest rates that are
significantly higher than the relevant local or
national rate as determined under the regulations.

Community Reinvestment Act Requirements.  The FDIC,
the Federal Reserve Board, the OTS and the OCC have
jointly issued a final rule (the "Final Rule") under
the Community Reinvestment Act (the "CRA").  The
Final Rule eliminates the existing CRA regulation's
twelve assessment factors and substitutes a
performance based evaluation system.  The Final Rule
will be phased in over a period of time and became
fully effective on July 1, 1997.  Under the Final
Rule, an institution's performance in meeting the
credit needs of its entire community, including low-
and moderate income areas, as required by the CRA,
will generally be evaluated under three tests: the
"lending test," the "investment test," and the
"service test."  A "small bank," defined to include
one with less than $250 million in assets, is subject
to a special test, involving consideration of loan to
deposit ratio, the percentage of loans located in the
institution's "assessment area", the degree of
lending to persons of different income levels and to
business and farms of different sizes, geographic
distribution of loans, and responsiveness to
complaints about its performance in meeting local
credit needs.  As an alternative, institutions may
submit a "strategic plan" approved by the FDIC.
 These tests and standards are applied in a
"performance context."  The performance context
includes information on income levels, housing stock
and costs in the local area, any information about
lending, investment and service opportunities in the
area, the association's product offerings and
business strategy, the institution's capacity and
constraints, past performance and performance of
similarly situated lenders, and written comments
placed in the association's public file. Institutions
receive a rating of "outstanding", "satisfactory",
"needs to improve" or "substantial noncompliance."
These ratings are made publicly available and are
used when applications are filed with the agency to
branch, relocate an office, merge with or acquire
other institutions, among other transactions.  Based
upon a review of the Final Rule, management of the
Company does not anticipate that the CRA
regulations will adversely affect the Bank.

Other Regulations

FDICIA.  The Federal Deposit Insurance Corporation
Improvement Act of 1991 ("FDICIA") was enacted on
December 19, 1991.  In addition to providing for the
recapitalization of BIF, FDICIA represents a
comprehensive and fundamental change to banking
supervision.  FDICIA imposes relatively detailed
standards and mandates the development of additional
regulations governing nearly every aspect of the
operations, management and supervision
of banks and bank holding companies like the Company
and the Bank.

As required by FDICIA, and subsequently amended by
the Riegle Community Development and Regulatory
Improvement Act of 1994 (the "CDR Act"), the federal
banking regulators have adopted (effective August 9,
1995) interagency guidelines establishing standards
for safety and soundness for depository institutions
on matters such as internal controls, loan
documentation, credit underwriting, interest-rate
risk exposure, asset growth, and compensation and
other benefits (the "Guidelines").  In addition, the
federal banking regulators have proposed asset
quality and earnings standards to be added to the
Guidelines.  The agencies expect to request a
compliance plan from an institution whose failure to
meet one or more of the standards is of such severity
that it could threaten the safe and sound operation
of the institution.  FDIC regulations enacted under
FDICIA also require all depository institutions to be
examined annually by the banking regulators and
depository institutions having $500 million or more
in total assets to have an annual independent audit,
an audit committee comprised solely of outside
directors, and to hire outside auditors to evaluate
the institution's internal control structure and
procedures and compliance with laws and regulations
relating to safety and soundness.  The FDIC, in
adopting the regulations, reiterated its belief that
every depository institution, regardless of size,
should have an annual independent audit and an
independent audit committee.

FDICIA requires the banking regulators to take prompt
corrective action with respect to depository
institutions that fall below certain capital levels
and prohibits any depository institution from making
any capital distribution that would cause it to be
considered undercapitalized.  Regulations
establishing five capital categories of well
capitalized, adequately capitalized,
undercapitalized,  significantly undercapitalized and
critically undercapitalized became effective December
19, 1992. Institutions that are not adequately capitalized may
be subjected to a broad range of restrictions on
their activities and will be required to submit a
capital restoration plan which, to be accepted by the
regulators, must be guaranteed in part by any company
having control of the institution.  Only well
capitalized institutions and adequately capitalized
institutions receiving a waiver from the FDIC are
permitted to accept brokered deposits, and only those
institutions eligible to accept brokered deposits may
provide pass-through deposit insurance for
participants in employee benefit plans.  In other
respects, FDICIA provides for enhanced supervisory
authority, including greater authority for the
appointment of a conservator or receiver for
undercapitalized institutions.

A range of other regulations adopted as a result of
FDICIA include requirements applicable to closure of
branches; additional disclosures to depositors with
respect to terms and interest rates applicable to
deposit accounts; requirements for the banking
agencies to adopt uniform regulations for extensions
of credit secured by real estate; modification of
accounting standards to conform to generally accepted
accounting principles including the reporting of off-
balance sheet items and supplemental disclosure of
estimated fair market value of assets and liabilities
in financial statements filed with the banking
regulators; increased penalties in making or failing
to file assessment reports with the FDIC; greater
restrictions on extensions of credit to directors,
officers and principal stockholders; and increased
reporting requirements on agricultural loans and
loans to small businesses.

As required by FDICIA, the FDIC has established a
risk-based assessment system for the deposit
insurance provided to depositors at depository
institutions whereby assessments to each institution
are calculated upon the probability that the
insurance fund will incur a loss with respect to the
institution, the likely amount of such loss, and the
revenue needs of the insurance fund. Under the
system, deposit insurance premiums are based upon an
institution's assignment to one of three capital
categories and a further assignment to one of three
supervisory subcategories within each capital
category.  The result is a nine category assessment
system with initial assessment rates ranging from
twenty-three cents to thirty-one cents per one
hundred dollars of deposits in an institution.  The
classification of an institution into a category will
depend, among other things, on the results of off-
site surveillance systems, capital ratio, and CAMELS
rating (a supervisory rating of capital, asset
quality, management, earnings, liquidity, and sensitivity 
to market risk).

The CDR Act.  On September 23, 1994, the CDR Act was
enacted. The CDR Act includes more than 50 regulatory relief
provisions designed to streamline the regulatory
process for banks and thrifts and to eliminate
certain duplicative regulations and paperwork
requirements established after, and largely as a
result of, the savings and loan debacle.  Well run
community banks with less than $250 million in assets
will be examined every 18 months rather than
annually.  The application process for forming a bank
holding company has been greatly reduced.  Also, the
requirement that call report data be published in
local newspapers has been eliminated.

The CDR Act establishes dual programs and provides
funding in the amount of $382 million to provide for
development services, lending and investment in
distressed urban and rural areas by community
development financial institutions and banks.  In
addition, the CDR Act includes provisions relating to
flood insurance reform, money laundering, regulation
of high-cost mortgages, and small business and
commercial real estate loan securitization.

The Branching Act.  On September 29, 1994, the Riegle-
Neal Interstate Banking and Branching Efficiency Act
of 1994 (the "Branching Act") was enacted.  Under the
Branching Act, beginning September 29, 1995,
adequately capitalized and adequately managed bank
holding companies will be allowed to acquire banks
across state lines, without regard to whether the
transaction is prohibited by state law; however, they
will be required to maintain the acquired
institutions as separately chartered institutions.
Any state law relating to the minimum age of target
banks (not to exceed five years) will be preserved.
Under the Branching Act, the Federal Reserve Board
will not be permitted to approve any acquisition if,
after the acquisition, the bank holding company would
control more than 10% of the deposits of insured
depository institutions nationwide or 30% or more of
the deposits in the state where the target bank is
located.  The Federal Reserve Board could approve an
acquisition, notwithstanding the 30% limit, if the
state waives the limit either by statute, regulation
or order of the appropriate state official.

In addition, under the Branching Act beginning on
June 1, 1997, banks were permitted to merge with one
another across state lines and thereby create a main
bank with branches in separate states.
 After establishing branches in a state through an
interstate merger transaction, the bank could
establish and acquire additional branches at any
location in the state where any bank involved in the
merger could have established or acquired
branches under applicable federal or state law.

The responsible federal agency will not be permitted
to approve any merger if, after the merger, the
resulting entity would control more than 10% of the
deposits of insured depository institutions
nationwide or 30% or more of the deposits in any
state affected by the merger.  The responsible agency
could approve a merger, notwithstanding the 30%
limit, if the home state waives the limit either by
statute, regulation or order of the appropriate state
official.

Under the Branching Act, states may adopt legislation
permitting interstate mergers before June 1, 1997.
In contrast, states may adopt legislation before June
1, 1997, subject to certain conditions, opting out of
interstate branching.  If a state opts out of
interstate branching, no out-of-state bank may
establish a branch in that state through an
acquisition or de novo, and a bank whose home state
opts out may not participate in an interstate merger
transaction.  Illinois has adopted legislation
permitting interstate mergers beginning on June 1,
1997.

FDIC Insurance Premiums.  The deposits of the Bank
are currently insured by the SAIF.  Both the SAIF and
the Bank Insurance Fund ("BIF"), the federal deposit
insurance fund that covers commercial bank deposits,
are required by law to attain and thereafter maintain
a reserve ratio of 1.25% of insured deposits. The BIF
fund met its target reserve level in September 1995,
but the SAIF was not expected to meet its target
reserve level until at least 2002.  Consequently, in
late 1995, the FDIC approved a final rule regarding
deposit insurance premiums which, effective with
respect to the semiannual premium assessment
beginning January 1, 1996, reduced deposit insurance
premiums for BIF member institutions to zero basis
points (subject to an annual minimum of $2000) for
institutions in the lowest risk category. Deposit
insurance premiums for SAIF members were maintained
at their existing levels (23 basis points for
institutions in the lowest risk category).

On September 30, 1996 President Clinton signed into
law legislation which eliminated the premium
differential between SAIF-insured institutions and
BIF-insured institutions by recapitalizing the SAIF's
reserves to the required ratio.  The legislation
provided that all SAIF member institutions pay a one
time special assessment to recapitalize the SAIF,
which was sufficient to bring the reserve ratio in
the SAIF to 1.25% of insured deposits.  The
legislation also provides for the merger of the BIF
and the SAIF, with such merger being conditioned upon
the prior elimination of the thrift charter.

Effective October 8, 1996, FDIC regulations imposed a
one-time special assessment of 65.7 basis points on
SAIF-assessable deposits as of March 31, 1995.  The
Bank's one-time special assessment amounted to
$206,000 pre-tax.

On December 24, 1996, the FDIC adopted lower
assessment rates for SAIF members to reduce the
disparity in the assessment rates paid by BIF and
SAIF members.  Beginning October 1, 1996, effective
SAIF rates range from zero basis points to 27 basis
points.  From 1997 through 1999, SAIF members will
pay 6.4 basis points to fund the Financing
Corporation while BIF member institutions will pay
approximately 1.3 basis points.

The FDIC may terminate the deposit insurance of any
insured depository institution, including the Savings
Bank, if it determines after a hearing that the
institution has engaged or is engaging in unsafe or
unsound practices, is in an unsafe or
unsound condition to continue operations, or has
violated any applicable law, regulation, order or any
condition imposed by an agreement with the FDIC.  It
also may suspend deposit insurance temporarily during
the hearing process for the permanent termination of
insurance, if the institution has no tangible
capital.  If insurance of accounts is terminated, the
accounts at the institution at the time of the
termination, less subsequent withdrawals, shall
continue to be insured for a period of six months to
two years, as determined by the FDIC.  Management is
aware of no existing circumstances which would result
in termination of the Savings Bank's deposit
insurance.

Regulatory Enforcement Authority.  Applicable banking
laws include substantial enforcement powers available
to federal banking regulators.  This enforcement
authority includes, among other things, the ability
to assess civil money penalties, to issue cease-and-
desist or removal orders and to initiate injunctive
actions against banking organizations and institution
affiliated parties, as defined.  In general, these
enforcement actions may be initiated for violations
of laws and regulations and unsafe or unsound
practices.  Other actions or inactions may provide
the basis for enforcement action, including
misleading or untimely reports filed with regulatory
authorities.

FEDERAL AND STATE TAXATION

Federal Taxation

General.  The Company and the Bank are subject to the
corporate tax provisions of the Code, as well as
certain additional provisions of the Code which apply
to thrift and other types of financial institutions.
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 Company and the Bank.

Fiscal Year.  The Company and its subsidiaries file a
consolidated federal income tax return on a September
30 year end basis.

Method of Accounting.  The Savings Bank maintains its
books and records for federal income tax purposes
using the accrual method of accounting.  The accrual
method of accounting generally requires that items of
income be recognized when all events have occurred
that establish the right to receive the income and
the amount of income can be determined with
reasonable accuracy, and that items of expense be
deducted at the later of (i) the time when all events
have occurred that establish the liability to pay the
expense and the amount of such liability can be
determined with reasonable accuracy or (ii) the time
when economic performance with respect to the item of
expense has occurred.

Bad Debt Reserves. The Bank is subject to the rules and regulations
of Internal Revenue Code Section 585 for deducting it bad debt for
tax purposes. Section 585 is the reserve method of bad debts whereby
the Bank can establish a tax bad debt reserve utilizing its experience
method or its base year reserve level.  

Under the experience method, the deductible annual
addition to the institution's bad debt reserves is
the amount necessary to increase the balance of the
reserve at the close of the taxable year to the
greater of (a) the amount which bears the same ratio
to loans outstanding at the close of the taxable year
as the total net bad debts sustained during the
current and five preceding taxable years bear to the
sum of the loans outstanding at the close of the six
years, or (b) the lower of (i) the balance of the
reserve account at the close of the Bank's "base
year," which was its tax year ended December 31,
1987, or (ii) if the amount of loans outstanding at
the close of the taxable year is less than the amount
of loans outstanding at the close of the base year,
the amount which bears the same ratio to loans
outstanding at the close of the taxable year as the
balance of the reserve at the close of the base year
bears to the amount of loans outstanding at the close
of the base year.


At September 30, 1998, the Federal income tax
reserve of the Bank included $1.0 million for which
no Federal income tax has been provided.  Because of
these Federal income tax reserves and the liquidation
account to be established for the benefit of certain
depositors of the Bank in connection with the conversion
of the Bank to stock form, the retained earnings of the
Bank are substantially restricted.

Pursuant to certain legislation which was recently
enacted and which is effective for tax years
beginning after 1995, a small thrift institution (one
with an adjusted basis of assets of less than $500
million), such as the Bank, no longer is permitted to
make additions to its tax bad debt reserve under the
percentage of taxable income method.  Such
institutions are permitted to use the experience
method in lieu of deducting bad debts only as they
occur.  Such legislation requires the Bank to realize
increased tax liability over a period of at least six
years, beginning in 1996.  Specifically, the
legislation requires a small thrift institution to
recapture (i.e., take into income) over a multi year
period the balance of its bad debt reserves in excess
of the lesser of (i) the balance of such reserves as
of the end of its last taxable year ending before
1988 or (ii) an amount that would have been the
balance of such reserves had the institution always
computed its additions to its reserves using the
experience method.  The recapture requirement is
suspended for each of two successive taxable years
beginning January 1, 1996 in which the Bank
originates an amount of certain kinds of residential
loans which in the aggregate are equal to or greater
than the average of the principal amounts of such
loans made by the Bank during its six taxable years
preceding 1996.  It is anticipated that any recapture
of the Bank's bad debt reserves accumulated after
1987 would not have a material adverse effect on the
Bank's financial condition and results of operations.
As of September 30, 1998, the Bank's accumulated bad
debt reserves after 1987 amounted to $9,000.

Distributions.  If the Bank were to distribute cash
or property to its sole stockholder, and the
distribution was treated as being from its
accumulated bad debt reserves, the distribution would
cause the Bank to have additional taxable income.  A
distribution is deemed to have been made from
accumulated bad debt reserves to the extent that (a)
the reserves exceed the amount that would have been
accumulated on the basis of actual loss experience,
and (b) the distribution is a "non-qualified
distribution."  A distribution with respect to stock
is a non qualified distribution to the extent that,
for federal income tax purposes, (i) it is in
redemption of shares, (ii) it is pursuant to a
liquidation of the institution, or (iii) in the case
of a current distribution, together with all other
such distributions during the taxable year, it
exceeds the institution's current and post-1951
accumulated earnings and profits.  The amount of
additional taxable income created by a non-qualified
distribution is an amount that when reduced by the
tax attributable to it is equal to the amount of the
distribution.

Minimum Tax.  The Code imposes an alternative minimum
tax at a rate of 20%.  The alternative minimum tax
generally applies to a base of regular taxable income
plus certain tax preferences ("alternative minimum
taxable income" or "AMTI") and is payable to the
extent that tax calculated on AMTI in excess of an
exemption amount exceeds the regular tax liability.
The Code provides that an item of tax preference is
the excess of the bad debt deduction allowable for a
taxable year pursuant to the percentage of taxable
income method over the amount allowable under the
experience method.  Other items of tax preference
that constitute AMTI include (a) tax-exempt interest on
newly issued (generally, issued on or after August 8,
1986) private activity bonds other than certain
qualified bonds and (b) 75% of the excess (if any) of
(i) adjusted current earnings as defined in the Code,
over (ii) AMTI (determined without regard to this
preference and prior to reduction by net operating
losses).

Net Operating Loss Carryovers.  A financial
institution may carry back net operating losses
("NOLs") to the preceding three taxable years and
forward to the succeeding 15 taxable years.  This
provision applies to losses incurred in taxable years
beginning after 1986.  At September 30, 1997, the
Bank had no NOL carryforwards for Federal income tax
purposes.

Audit by the IRS.  The Bank's Federal income tax
returns for taxable years through September 30, 1992
have been closed for the purpose of examination by the 
Internal Revenue Service (the "IRS").

State and Local Taxation

State of Illinois.  The Company and the Bank will
file a combined Illinois income tax return.  For
Illinois income tax purposes, they are taxed at an
effective rate equal to 7.2% 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 obligations).  The exclusion
of income on United States Treasury 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 exempt
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.

Item 2. Properties

At September 30, 1998, the Company conducted its
business from its sole office in Danville, Illinois.
Ground was broke in July 1998 on a branch bank that was
sustantially complete on September 30, 1998.  The facility
was opened for business on November 9, 1998. The branch adds
several services unavailable at the main bank location including
safe deposit boxes and a ATM.

The following tables set forth the net book value
(including leasehold improvement, furnishings and
equipment) and certain other information with respect
to the offices and other properties of the Company at
September 30, 1998.


                                      Net Book Value of
                                          Premises and
                           Owned or       Equipment at     Deposits at
  Location                 Leased     September 30, 1998 September 30, 1998
                                      (In Thousands) 
Main Office:
714 North Vermilion Street  Owned         $  572             $30,044
Danville, Illinois 61832    

Future Branch:
421 S. Gilbert Street                     $  784                --
Danville, Illinois 61832


Item 3. Legal Proceedings

The Company is involved in routine legal proceedings 
occurring in the ordinary course of business which, 
in the aggregate except as noted below, are believed
by management to be immaterial to the financial
conditon of the bank. On December 30, 1992, 
Rosemary Frobose, a former officer of the Bank, filed 
a lawsuit against the Bank in the United States 
District Court, Central District of Illinois,
(subsequently transferred to the Central District of
Illinois, Peoria Division) alleging that she was the
victim of a retaliatory discharge based on common law
rights and the federal "whistleblower statute," 12
USC ' 1831j(a).  The plaintiff seeks compensatory and
punitive damages against the Bank based upon her loss
of income and employment for at least a ten-year
period. She has not sought a specific dollar amount in her
complaint but at one point made a demand of $900,000.
The Court entered a summary judgment in
favor of the Bank on each count. The employee has appealed 
the judgement on several counts to the Seventh Circuit Federal Court of Appeals 
in Chicago. Oral argument was heard on December 12, 1997.
Recently, the court of appeals reversed the district court's
entry of summary In the judgment in favor of the bank on plaintiff's 
claims of retaliation under the whistleblower statute, a state retaliatory
discharge claim, and a quantum merit claim for directors' fees. The Seventh
Circuit affirmed summary judgement in favor of the bank on plaintiff's false
light and defamation claims. See Frobose v American Savings & Loan Association 
of of Danville, Case Number 97-1432 (Seventh Cir., July 31, 1998). The Bank's
attorneys have advised that they are unable to express an opinion as to the
ultimate disposition of the claim.  

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

Not applicable


PART II

Item 5. Market for Common Equity and Related Stockholder Matters

The information required herein is incorporated by reference 
from page 45 of the Company's 1998 Annual Report to Stockholders 
which is included herein as Exhibit 13 ("Annual Report").


Item 6. Management's Discussion and Analysis of
Financial Condition and Results of Operation

The information required herein is incorporated by
reference from pages 6 to 21 of the 1998 Annual Report.


Item 7.  Financial Statements

The information required herein is incorporated by reference from
pages 22 to 43 of the 1998 annual report. 

Item 7a. Quantitative and Qualitative Disclosure About Market Risk

The information required herein is incorporated by reference
from pages 14 to 19 of the 1998 Annual Report. 


Item 8. Changes in and Disagreements With
Accountants on Accounting and Financial Disclosure

Not applicable

PART III


Item 9. Directors, Executive Officers, Promoters and Control Persons;Compliance
with Section 16(a) of the Exchange Act.

The information required herein is incorporated by
reference from page 3 of the Company's definitive Proxy Statement 
dated December 21, 1998.


Item 10. Executive Compensation

The information required herein is incorporated by 
reference from page 10 of the Company's definitive Proxy Statement
dated December 21, 1998.

Item 11. Security Ownership of Certain Beneficial
Owners and Management

The information required herein is incorporated by reference from page 2 of the
Company's definitive Proxy Statement dated December 21, 1998.

Item 12. Certain Relationships and Related Transactions

The information required herein is incorporated by reference from page 12 of the
Company's definitive Proxy Statement dated December 21, 1998.

Item 13. Exhibits, List and Reports on Form 8-K

(a)  The following documents are filed as part of
this report and are incorporated herein by reference
from the Registrant's 1998 Annual Report:

Independent Auditor's Report.

Consolidated Balance Sheet as of September 30, 1998 and 1997.

Consolidated Statement of Income for the Years Ended
September 30, 1998, 1997 and 1996.

Consolidated Statement of Changes in Stockholders'
Equity for the Years Ended September 30, 1998, 1997 and 1996.

Consolidated Statement of Cash Flows for the Years
Ended September 30, 1998, 1997 and 1996.

Notes to Consolidated Financial Statements.

(b) Reports on Form 8-K. None

The following exhibits are filed as part of the Form
10-K, and this list includes the Exhibit Index:

No.   Exhibits

2     Plan of Conversion*

3.1   Certificate of Incorporation of Vermilion Bancorp, Inc.*

3.2   Bylaws of Vermilion Bancorp, Inc.*

4     Stock Certificate of Vermilion Bancorp, Inc.*

10.1  Employment Agreement between American Savings Bank of 
      Danville and Merrill G. Norton*

13    Annual Report to Stockholders for the Year Ended 
      September 30, 1998


21    List of Subsidiaries (See "Business - Subsidiaries" in
      this Form 10-KSB)

27    Financial Data Schedule
________________

*Incorporated herein by reference from the Company's Registration
Statement filed with SEC on December 3, 1996, as subsequently 
amended.
   

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.



VERMILION BANCORP, INC.



By:  /s/ MERRILL G. NORTON
Merrill G. Norton
President, Chief Executive Officer
and Director


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



/s/ MERRILL G. NORTON
Merrill G. Norton
President, Chief Executive Officer and Director     December 23, 1998

/s/ THOMAS B. MEYER
Thomas B. Meyer
Chairman of the Board and Director                  December 23, 1998

/s/ WILLIAM T. INGRAM 
William T. Ingram Director and Secretary            December 23, 1998

/s/ CARL W. BUSBY
Carl W. Busby Director                              December 23, 1998

/s/ ROBERT L. EWBANK 
Robert L. Ewbank Director                           December 23, 1998