SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB

[X]  ANNUAL REPORT  PURSUANT TO SECTION 13 OR 15(d) OF THE  SECURITIES  EXCHANGE
     ACT OF 1934
     For the Fiscal Year Ended June 30, 2002
                                       OR
[ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934


     For the transition period from ________________ to ________________

                         Commission File Number 1-16763

                           ALLIED FIRST BANCORP, INC.
--------------------------------------------------------------------------------
             (Exact Name of Registrant as Specified in its Charter)

         Maryland                                        36-4482786
--------------------------------------------------------------------------------
(State or Other Jurisdiction of                        (I.R.S. Employer
 Incorporation or Organization)                     Identification Number)

387 Shuman Blvd., Suite 120W, Naperville, Illinois          60563
--------------------------------------------------------------------------------
(Address of Principal Executive Offices)                   Zip Code

       Registrant's telephone number, including area code: (630) 778-7700

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

           Securities Registered Pursuant to Section 12(b) of the Act:

                                      None
                                      ----

           Securities Registered Pursuant to Section 12(g) of the Act:

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

         Indicate by check mark whether the Registrant (1) filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding twelve months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
requirements for the past 90 days. YES  X   NO     .
                                       ---     ---

     Indicate by check mark if disclosure of delinquent  filers pursuant to Item
405 of Regulation S-K (ss.229.405 of this chapter) is not contained herein,  and
will not be  contained,  to the best of  Registrant's  knowledge,  in definitive
proxy or information  statements  incorporated  by reference in Part III of this
Form 10-KSB or any amendment to this Form 10-KSB. [X]

     As of September 4, 2002,  the Registrant had 608,350 shares of Common Stock
issued and outstanding.

     The aggregate  market value of the voting stock held by  non-affiliates  of
the Registrant,  computed by reference to the average of the bid and asked price
of such stock as of September 4, 2002 was $5.9 million. (The exclusion from such
amount of the market value of the shares owned by any person shall not be deemed
an  admission  by  the  Registrant  that  such  person  is an  affiliate  of the
Registrant.)

                       DOCUMENTS INCORPORATED BY REFERENCE
      PART II of Form 10-KSB - Annual Report to Stockholders for the fiscal
            year ended June 30, 2002. PART III of Form 10-KSB - Proxy
               Statement for 2002 Annual Meeting of Stockholders.



<PAGE>



                                     PART I

Item 1.   Description of Business

                                    BUSINESS

General.

     "Safe Harbor" Statement under the Private Securities  Litigation Reform Act
of 1995.  A number of the  matters and subject  areas  discussed  in this annual
report  that  are  historical  or  current  facts  deal  with  potential  future
circumstances  and  developments.  The  discussion  of these matters and subject
areas is qualified by the inherent risks and  uncertainties  surrounding  future
expectations  generally,  and also may materially  differ from the actual future
experience  of Allied First  Bancorp,  Inc.  involving  any one or more of these
matters and subject areas. Allied First Bancorp, Inc. has attempted to identify,
in context,  certain of the factors that it currently  believes may cause actual
future  experience  and  results to differ  from Allied  First  Bancorp,  Inc.'s
current expectations  regarding the relevant matter or subject area. These risks
and  uncertainties  include,  but  are  not  limited  to,  changes  in  economic
conditions in Allied First Bancorp,  Inc.'s market area,  changes in policies by
regulatory  agencies,  fluctuations in interest  rates,  and demand for loans in
Allied First Bancorp,  Inc.'s market area and competition,  all or some of which
could cause actual results to differ  materially  from  historical  earnings and
those  presently  anticipated  or projected,  or described  from time to time in
Allied First Bancorp, Inc.'s reports filed with the U.S. Securities and Exchange
Commission and  disseminated  by Allied First Bancorp,  Inc. in press  releases.
This annual report speaks only as of its date,  and Allied First  Bancorp,  Inc.
disclaims any duty to update the information herein.

     The  following  discussion  is  intended  to  assist in  understanding  the
financial condition and results of operations of Allied First Bancorp,  Inc. and
Allied First Bank.  The  discussion  and analysis  does not include any comments
relating to Allied First Bancorp,  Inc., since Allied First Bancorp, Inc. has no
significant operations.

     Allied  First  Bank's  results of  operations  depend  primarily on its net
interest   income,   which  is  the  difference   between   interest  income  on
interest-earning  assets,  which  principally  consist  of loans and  investment
securities,  and  interest  expense  on  interest-bearing   liabilities,   which
principally  consist of deposits and borrowings.  Allied First Bank's results of
operation  also  are  affected  by the  level  of  its  noninterest  income  and
noninterest expenses and income tax expense.

     Allied  First  Bancorp,  Inc.  Allied  First  Bancorp,  Inc.  was formed in
September,  2001, by Allied First Bank. The  acquisition of Allied First Bank by
Allied First Bancorp,  Inc. was  consummated on December 27, 2001, in connection
with Allied First Bank's conversion from the mutual to stock form.

     The  executive  offices of Allied  First  Bancorp,  Inc. are located at 387
Shuman  Boulevard,  Suite 120W,  Naperville,  Illinois 60563,  and its telephone
number at that address is (630) 778- 7700.



                                        2

<PAGE>



     The activities of Allied First Bancorp, Inc. have generally been limited to
investment in the stock of Allied First Bank.  Unless otherwise  indicated,  all
activities discussed below are of Allied First Bank.

     Allied  First Bank.  Allied  First Bank's  predecessor,  the Allied  Pilots
Association  Federal Credit Union, was established in 1994. The credit union was
formed to serve the current and former members of the Allied Pilots  Association
(which consists of pilots of American  Airlines) and their family members.  As a
credit  union,  Allied  Pilots  Association  Federal  Credit  Union was  legally
restricted to serve only customers who shared a "common bond" such as the pilots
and their family members.  Unless the context otherwise requires,  references to
Allied First Bank for the period before  September 1, 2001 shall include  Allied
Pilots Association Federal Credit Union.

     In 1998, the Credit Union  Membership  Access Act was enacted by the United
States  Congress.  This  legislation  imposed  new capital  requirements  on all
federally  insured credit unions by requiring all credit unions to maintain a 7%
net worth  capital  ratio.  Any credit union not meeting  this well  capitalized
standard  is required to allocate a  percentage  of its  earnings to  restricted
capital in each calendar quarter in order to meet the requirement.  In addition,
any credit union with less than 6% is not considered adequately  capitalized and
is required to submit a net worth restoration plan.

     Allied Pilots Association Federal Credit Union did not meet the new capital
requirements due to its recent  organization in 1994,  although it had continued
to increase  its capital  every year since its founding in  accordance  with the
approval conditions imposed by the National Credit Union Administration when its
charter was granted.  As a credit  union,  however,  it could only  increase its
capital ratio through retained  earnings or by reducing assets.  In management's
opinion,  neither of these options  would  provide a capital base  sufficient to
support the long term growth of the  institution.  After reviewing its strategic
options,  including remaining a credit union, the board of directors  determined
that  converting to a mutual  savings bank would be the first step to addressing
the  problem of  capital  inadequacy  since a mutual  savings  bank could  raise
capital by converting to stock form.  Therefore,  after  receiving the necessary
membership  and  regulatory  approvals,  on  September  1, 2001,  Allied  Pilots
Association Federal Credit Union converted to Allied First Bank, sb.

     Our historical  principal  business  consists of attracting retail deposits
from the members of the credit  union and  investing  those funds  primarily  in
consumer loans. Our revenues are derived  principally from interest on loans. We
also generate  revenue from fees and other income.  Allied First Bank now serves
the  general  public  rather  than being  limited to serving  only the pilots of
American Airlines and their family members.

     We offer a variety of  deposit  accounts  having a wide  range of  interest
rates  and  terms,  which  generally  include  savings  accounts,  money  market
accounts, non-interest bearing demand deposit accounts and time deposit accounts
with varied terms ranging from three months to 60 months.  We have  historically
solicited deposits from our members,  the largest  concentration of which reside
in the  States of  California,  Florida,  Illinois  and  Texas,  through  direct
mailings and over the Internet.



                                        3

<PAGE>



Lending Activities.

     Market Area.  As a credit  union with a membership  base not located in any
one geographic area, we did not service any one market area,  although about 10%
of our  members  reside in  Illinois.  We intend to  continue  to  increase  our
community  presence,  as well as to serve the former  members  of Allied  Pilots
Association Federal Credit Union, by offering a variety of financial services to
meet the needs of our customers.  We are headquartered in Naperville,  Illinois,
and have one banking office.

     Historically,  due to the  geographic  dispersion of our customer  base, we
have offered our products and services through such delivery  channels as direct
payroll  deposit,  debit cards,  credit cards,  24 hour telephone  access,  home
banking and access through automated teller machines located  worldwide.  Due to
the  nature of our  historical  customer  base,  we have very  limited  walk- in
traffic and would  expect that to continue in the near future until we establish
a presence in the community.

     General.  Our loans carry either a fixed or an adjustable rate of interest.
We originate a variety of consumer loans including  automobile and  recreational
vehicle loans,  unsecured lines of credit,  signature loans, credit cards loans,
home equity loans and mortgage loans. When we originate a mortgage, we typically
sell the  loans  servicing  released  and  without  recourse  immediately  after
funding. Currently, these loans are sold to one investor and underwritten by the
investor pursuant to Freddie Mac or Fannie Mae guidelines.  However,  during the
2002 fiscal  year we started to retain a portion of the loans in our  portfolio.
We retain loans within our DuPage County market area for Community  Reinvestment
Act  purposes as well as outside our market area where  retention  is needed for
asset/liability  management purposes.  In determining whether to retain loans we
consider,  among other  things,  the interest  rate  environment,  our liquidity
levels, geographical diversity and balance sheet management. The maximum loan to
value  ratio of any  retained  loan will not exceed 95% and loans with a loan to
value ratio in excess of 80% will  require  private  mortgage  insurance.  We do
originate  home equity lines of credit for our portfolio and such loans carry an
adjustable  rate of  interest.  We also  originate  home  equity  loans  for our
portfolio  and such loans carry a fixed rate of  interest.  We do not  originate
commercial  loans  or  commercial  real  estate  loans.   However,  we  do  have
participations in commercial loans that are secured by aircraft.  Mortgage loans
generally have a longer term amortization,  with principal and interest due each
month,  than other  types of loans.  At June 30,  2002,  our net loan  portfolio
totaled $66.9 million, which constituted 76.7% of our total assets.

     As an Illinois savings bank we are generally  entitled to lend up to 25% of
our  unimpaired  capital and surplus to any one borrower at a time.  The maximum
amount which we could have loaned to any one borrower and the borrower's related
entities at June 30, 2002 was $2.5 million. At June 30, 2002, we had no loans or
group of loans to related borrowers with outstanding  balances in excess of this
amount. Our five largest lending relationships at June 30, 2002 were as follows:
(i) a $493,00 fixed rate loan secured by a first mortgage,  (ii) a variable rate
first mortgage with a $480,000 outstanding balance;  (iii) a fixed rate note for
a  watercraft   with  a  $349,000   outstanding   balance;   (iv)  a  commercial
participation  loan secured by an aircraft  with a $338,000  balance;  and (v) a
commercial participation loan secured by an aircraft with a $295,000 outstanding
balance.  At June 30,  2002,  all of these loans  totaling  $2.0  million in the
aggregate were performing in accordance with their terms.


                                        4

<PAGE>



     The following  table presents  information  concerning  the  composition of
Allied First Bank's loan  portfolio in dollar  amounts and in  percentages as of
the dates indicated.

<TABLE>
<CAPTION>

                                                                                        June 30,
                                                         -------------------------------------------------------------------

                                                                          2002                           2001
                                                         -------------------------------------------------------------------

                                                              Amount               Percent    Amount              Percent
                                                                                 (Dollars in Thousands)
<S>                                                          <C>                   <C>       <C>                  <C>
Loans:
   Vehicle..............................................     $ 14,678               21.75%   $  17,140             26.73%
   Airplane.............................................        2,650                3.93%       3,136              4.89
   Boat.................................................        4,304                6.38%       4,833              7.54
   Signature............................................        5,225                7.74%       5,913              9.22
   Lines of credit......................................        9,268               13.73%      11,118             17.34
   Deposit secured......................................          112                0.17%         228               .35
   Home equity..........................................       20,642               30.59%      16,072             25.06
   Commercial participation loans (aircraft)............        2,096                3.11%         ---               ---
   First mortgages......................................        2,939                4.36%         ---               ---
   Credit card..........................................        5,566                8.24%       5,682              8.87
                                                             --------              ------     --------             -----
         Total  Loans...................................       67,480              100.00%      64,122            100.00%
                                                                                   ======                         ======
Less allowance for loan losses..........................         (656)                            (627)
Net deferred loan costs.................................           88                               54
                                                             --------                         --------

         Net Loans                                           $ 66,912                         $ 63,549
                                                             ========                         ========

     The  following  table shows the  composition  of Allied  First  Bank's loan
portfolio by fixed- and adjustable-rate at the dates indicated.

                                                                                        June 30,
                                                         -------------------------------------------------------------------

                                                                          2002                           2001
                                                         -------------------------------------------------------------------

                                                              Amount               Percent    Amount              Percent
                                                                                 (Dollars in Thousands)


Fixed-rate loans:
----------------
Vehicle...........................................           $  14,678              21.75%    $ 17,140             26.73%
Airplane..........................................               2,045               3.03        2,352              3.67
Boat..............................................               2,761               4.09        2,912              4.54
Signature.........................................               5,225               7.74        5,913              9.22
Lines of credit...................................               6,590               9.77        8,733             13.62
Deposit secured...................................                 112               0.17          228              0.35
Home equity.......................................               4,951               7.34        3,935              6.14
Commercial participation loans (aircraft).........               2,096               3.11
First mortgages...................................               2,939               4.36
Credit card.......................................               5,567               8.25        5,682              8.86
                                                             ---------             -------    --------            ------
  Total fixed-rate loans..........................             46,964               69.60       46,895             73.13

Adjustable-rate loans:
Airplane..........................................                605                0.90%         784              1.22
Boat..............................................              1,543                2.29        1,921              3.00
Lines of credit...................................              2,678                3.97        2,385              3.72
Home equity.......................................             15,690               23.25       12,137             18.93
                                                             --------              ------     --------            ------

   Total adjustable-rate loans....................             20,516               30.40       17,227             26.87
                                                             --------              ------     --------            ------
   Total gross  loans.............................             67,480              100.00%      64,122            100.00%
                                                                                   ======                         ======

Net deferred loan costs...........................                 88                               54
Allowance for loan losses.........................               (656)                            (627)
                                                             --------                         --------
   Total loans receivable, net....................           $ 66,912                         $ 63,549
                                                             ========                         ========

</TABLE>


                                       5

<PAGE>


     The following schedule illustrates the contractual maturity of Allied First
Bank's  loan  portfolio  at June 30,  2002.  The  schedule  does not reflect the
effects of possible prepayments or enforcement of due-on-sale clauses.

<TABLE>
<CAPTION>
                                                                      Lines            Home            Partici-
                                                                        of   Deposit  Equity   First    pation   Credit
                                 Vehicle  Airplane   Boat Signature   Credit Secured    (1)  Mortgages   Loans   Card(2)   Total
                                 -------  --------   ---- ---------   ------ -------  ------ --------- --------  -------   -----
                                                                          (In Thousands)
<S>                              <C>       <C>      <C>      <C>      <C>      <C>    <C>       <C>      <C>      <C>     <C>
Amounts due:
One year or less..............   $ 5,753   $  632   $1,071   $2,181   $2,822   $ 36   $ 1,000   $   51   $  250   $5,567  $19,563
Over one year to five years...     8,861    1,623    2,650    2,972    6,401     76     3,052    1,003    1,000      ---   27,638
Over five years...............        64      395      583       72       45    ---    16,589    1,685      846      ---   20,279
                                 -------   ------   ------   ------   ------   ----   -------   ------   ------   ------  -------
Total amount due..............   $14,678   $2,650   $4,304   $5,225   $9,268   $112   $20,641   $2,939   $2,096   $5,567  $67,480
                                 =======   ======   ======   ======   ======   ====   =======   ======   ======   ======  =======

Net deferred loan costs.......                                                                                                 88
                                                                                                                          -------
Allowance for loan losses.....                                                                                               (656)
                                                                                                                          -------

Loans receivable, net.........                                                                                            $66,912
                                                                                                                          =======

Due after one year:
Adjustable rate...............   $   ---   $  506   $1,341   $  ---   $1,195   $---   $15,670   $  712   $  ---   $  ---  $20,144
Fixed rate....................     8,925    1,512    1,892    3,044    4,531     76     3,971    1,976    1,846      ---   27,773
                                 -------   ------   ------   ------   ------   ----   -------   ------   ------   ------  -------

Total.........................   $  8,925  $2,018   $3,233   $3,044   $6,446   $ 76   $19,641   $2,688   $1,846   $  ---  $47,917
                                 ========  ======   ======   ======   ======   ====   =======   ======   ======   ======  =======
<FN>
----------------

(1)  Includes home equity loans of $15.6  million  which  require  interest only
     payments for fifteen years and then converts to a fifteen year amortization
     schedule.
(2)  Credit  card  repayment  terms  require  a minimum  payment  of 2.2% of the
     balance  or  $15,  whichever  is  greater.  Due  to  the  revolving  credit
     arrangement, all amounts shown are due in one year or less.

</FN>
</TABLE>


                                       6

<PAGE>




     Of our total gross loans of $67.5  million at June 30, 2002,  approximately
$47.0 million have fixed rates of interest and approximately  $20.5 million have
adjustable rates of interest.

     Consumer Lending.  Consumer loans generally have shorter terms to maturity,
which reduces our exposure to changes in interest rates,  and carry higher rates
of interest than do one- to four-family  residential mortgage loans. At June 30,
2002,  our total loan  portfolio was composed of consumer  loans  totaling $62.5
million.  We offer a variety of secured and unsecured consumer loans,  including
automobile and recreational vehicle,  recreational boat and airplane loans, home
equity loans,  mortgage loans, lines of credit and signature loans,  credit card
loans, and loans secured by savings deposits.

     A  significant  component  of our  consumer  lending  are loans  secured by
vehicles (automobiles and recreational vehicles),  boats, and airplanes. At June
30, 2002,  our vehicle  loans  totaled  $14.7 million or 21.8% of our gross loan
portfolio,  our boat  loans  totaled  $4.3  million  or 6.4% of our  gross  loan
portfolio, and our airplane loans totaled $4.7 million or 7.0% of our gross loan
portfolio.  Boat and  airplane  loans have a maximum term of six years for fixed
rate loans and 12 years for variable rate loans.  Loan to value ratios for boats
and airplanes are up to 90% of the sales price. Vehicle loans may be written for
up to six years and usually have fixed rates of  interest.  Loan to value ratios
for vehicle  loans are up to 100% of the sales price for new  vehicles and up to
100% of the value on used vehicles,  based on valuation from official guides. We
originate  such loans only on a direct  basis,  where  Allied First Bank extends
credit directly to the borrower. We require the collateral for these loans to be
insured  and Allied  First Bank to be listed as the loss payee on the  insurance
policy.

     Another  significant  component of our consumer lending are our home equity
loans and home  equity  lines of credit.  Home  equity  loans  secured by second
mortgages,  together with all prior liens, may have a loan-to-value  ratio of up
to 125% of the  appraised  value.  These  loans are  limited to amounts of up to
$100,000 in the case of loans with  loan-to-value  ratios in excess of 80%, have
terms of up to 15 years and fixed rates of  interest.  Our home equity  lines of
credit  may have a  loan-to-value  ratio of up to 125% of the  appraised  value.
Generally,  home  equity  lines  of  credit  have a 15 year  draw  period  and a
repayment  period  of 15  years.  Home  equity  lines  of  credit  that  have  a
loan-to-value  ratio of 80% or less have a  variable-rate  of interest  equal to
0.025% below the prime rate of interest as reported in the Wall Street  Journal.
Home  equity  lines of credit that have a  loan-to-value  ratio above 80% have a
variable-rate  of  interest  equal to 2.75%  above the prime rate of interest as
reported  in the Wall  Street  Journal.  Allied  First  Bank does not  require a
borrower to obtain  private  mortgage  insurance  on home  equity  loans or home
equity  lines of credit.  These loans  generally  contain a "due on sale" clause
allowing us to declare  the unpaid  principal  due and payable  upon sale of the
security  property.  At June 30,  2002,  home  equity  loans and lines of credit
totaled $20.6 million or 30.6% of our gross loan portfolio. At June 30, 2002, we
had a  commitment  to fund an  aggregate of $8.3 million in home equity lines of
credit.

     We also  originate  unsecured  revolving  lines  of  credit  and  signature
(personal)  loans.  Unsecured  revolving lines of credit and signature loans are
made to borrowers for a variety of personal needs.  Unsecured revolving lines of
credit are usually  limited to a maximum of three times the  borrower's  monthly
gross income. These loans usually have fixed rates but permit the institution to
increase or decrease the interest rate upon 30 days advance notice. Any increase
or


                                        7

<PAGE>



decrease will apply only if there is a subsequent draw.  Management  reviews the
loan file  periodically  to  determine  whether the line should  remain  active.
Signature  loans are also  unsecured  and are  usually  limited  to a maximum of
$50,000.  Signature  loans may be written for up to five years and usually  have
fixed rates of interest.  At June 30, 2002,  unsecured revolving lines of credit
and signature  loans  totaled $9.3 million or 13.7% of our gross loan  portfolio
and $5.2 million or 7.7% of our gross loan portfolio,  respectively. At June 30,
2002,  we had a commitment  to fund an  aggregate  of $31.8  million in lines of
credit.

     Allied  First  Bank  also   originates   credit  card  loans   through  its
participation  as a Master Card issuer.  The interest rate currently  charged by
Allied  First Bank on its credit card loans  ranges from 12.3% to 14.9%,  and we
are  permitted  to change  the  interest  rate on 30 days  advance  notice.  The
processing of bills and payments is contracted to an outside  service  provider.
At June 30, 2002,  we had a commitment  to fund an aggregate of $18.9 million in
credit card loans, which represented the aggregate credit limit on credit cards,
and had $5.6 million of credit card loans outstanding,  representing 8.3% of our
gross loan portfolio.

     Consumer  loans  may  entail  greater  risk  than do  one-  to  four-family
residential mortgage loans, particularly in the case of consumer loans which are
secured by rapidly  depreciable  assets,  such as  automobile  and  recreational
vehicles, boats and airplanes. In these cases, any repossessed collateral from a
defaulted  loan  may  not  provide  an  adequate  source  of  repayment  of  the
outstanding loan balance.  As a result,  consumer loan collections are dependent
on the borrower's  continuing  financial stability and, thus, are more likely to
be adversely affected by job loss, divorce, illness or personal bankruptcy.

     Loan Originations, Sales and Repayments

     We originate loans through employees located at our office.  Referrals from
our current  customer base and  advertisements  are also an important  source of
loan  originations.  We do not currently use real estate brokers,  mortgage loan
brokers and  builders,  but may do so in the  future.  While we  originate  both
adjustable-rate  and  fixed-rate  loans,  our  ability  to  originate  loans  is
dependent upon customer demand for loans.  Demand is affected by competition and
the interest rate environment.  We occasionally purchase participation interests
in loans with other financial  institutions.  In determining whether to purchase
interests in these loans,  we consider,  among other  things,  the interest rate
envrionment, our liquidity levels and balance sheet management.

                                       8

<PAGE>



     The following table shows the loan origination and repayment  activities of
Allied First Bank for the periods indicated.


                                                              Years Ended
                                                               June 30,
                                                        ------------------------

                                                           2002          2001
                                                        ------------------------
                                                             (In Thousands)

Total loans, beginning of year................            $63,549       $65,211
                                                          -------       -------

Originations by type:
Adjustable rate:
  Home equity.................................              7,377         3,223
  Airplane....................................                198           599
  Boat........................................                521           434
  Lines of credit.............................              2,026             7
  First mortgages.............................                770           ---
                                                          -------       -------
    Total adjustable rate.....................             10,892         4,263
                                                          -------       -------
Fixed rate:
  First mortgages.............................             16,082        25,662
  Vehicle.....................................             10,736         7,795
  Airplane....................................              1,203           544
  Boat........................................              1,860         1,546
  Signature...................................              6,860         6,507
  Lines of credit.............................              6,475           433
  Deposit secured.............................                118           267
  Home equity.................................              3,192         2,397
  Commercial participation loans  (aircraft)..              2,124           ---
  Credit card.................................             34,529        42,262
                                                          -------       -------
    Total fixed-rate..........................             83,179        87,413
                                                          -------       -------
    Total loans originated....................             94,071        91,676

Sales and repayments:
  Principal repayments........................            (76,821)      (67,700)
  First mortgages sold........................            (13,893)      (25,662)
                                                          -------       -------
    Total sales and repayments................            (90,714)      (93,362)
                                                          --------      -------

Changes in net deferred loan costs                             34           (27)

Changes in allowance for loan losses                          (28)           51
                                                          -------       -------

Net loan activity                                           3,363        (1,662)
                                                          -------       -------

  Total loans, end of year....................            $66,912       $63,549
                                                          =======       =======

Asset Quality

     When a borrower  fails to make a payment on a loan on or before the default
date, we mail a delinquency notice to the borrower when the loan is 10 days past
due. When the loan is 20 days past due, we mail a subsequent  delinquent  notice
to the borrower.  All delinquent  accounts are reviewed by loan  personnel,  who
attempt to cure the  delinquency  by contacting the borrower once the loan is 30
days past due. If the loan becomes more than 30 days  delinquent,  the collector
will  generally  contact by phone or send a personal  letter to the  borrower in
order to identify  the reason for the  delinquency.  Once the loan  becomes more
than 30 days  delinquent,  contact  with  the  borrower  is  made  typically  by
requesting payment of the delinquent amount in


                                       9

<PAGE>



full, or the  establishment  of an acceptable  repayment  plan to bring the loan
current.  If an  acceptable  repayment  plan  has not  been  agreed  upon,  loan
personnel will generally refer the account to a collection agency or in the case
of a loan secured by real estate to legal counsel,  with instructions to prepare
a notice of intent to  foreclose.  The notice of intent to foreclose  allows the
borrower a period of time to bring the account current.



                                       10

<PAGE>




     Delinquent  Loans. The following table sets forth our loans delinquent 60 -
89 days  past due and 90 days and over  past  due by type,  number,  amount  and
percentage of type at June 30, 2002.

<TABLE>
<CAPTION>

                                                                    Total Loans Delinquent
                                         60 to 89 days past due      90 days and over past due           60 Days and Over
                                      --------------------------     --------------------------     --------------------------
                                                         Percent                        Percent                        Percent
                                                         of Loan                        of Loan                        of Loan
                                      Number   Amount   Category     Number   Amount   Category     Number   Amount   Category
                                      ------   ------   --------     ------   ------   --------     ------   ------   --------
                                                                      (Dollars in Thousands)
<S>                                    <C>      <C>      <C>          <C>      <C>      <C>         <C>       <C>        <C>
Vehicle.........................         1      $ 4      0.03%        ---      ---      ----%         1       $  4       0.03%
Airplane........................       ---      ---      ----         ---      ---      ----          0       ----       ----
Boat............................       ---      ---      ----         ---      ---      ----          0       ----       ----
Signature.......................       ---      ---      ----           2       61      1.17          2         61       1.17
Lines of credit.................       ---      ---      ----         ---      ---      ----          0       ----       ----
Deposit secured.................       ---      ---      ----         ---      ---      ----          0       ----       ----
Home equity.....................       ---      ---      ----         ---      ---      ----          0       ----       ----
Commercial participation loans
(aircraft)......................       ---      ---      ----         ---      ---      ----          0       ----       ----
First Mortgages.................       ---      ---      ----         ---      ---      ----        ---       ----       ----
Credit card.....................       ---      ---      ----           1       10      0.18          1         10       0.18
                                       ---      ---                   ---      ---                  ---       ----
Total...........................         1      $ 4      0.01%          3      $71      0.11%         4       $ 75       0.11%
                                       ===      ===                   ===      ===                  ---       ====       =====

</TABLE>

                                                                 11

<PAGE>



     Non-Performing   Assets.  The  table  below  sets  forth  the  amounts  and
categories  of non-  performing  assets  in our loan  portfolio.  Non-performing
assets consist of non-accrual  loans,  accruing loans past due 90 days and more,
and  foreclosed  assets.  Loans to a  customer  whose  financial  condition  has
deteriorated are considered for non-accrual status whether or not the loan is 90
days and more  past  due.  Generally,  all  loans  past due 90 days and more are
classified  as  non-accrual.  On  non-accrual  loans,  interest  income  is  not
recognized  until  actually  collected.  At the  time  the  loan  is  placed  on
non-accrual  status,  interest  previously accrued but not collected is reversed
and charged against current income.

     Foreclosed  assets  consist of real estate and other assets which have been
acquired  through  foreclosure on loans. At the time of foreclosure,  assets are
recorded at the lower of their  estimated  fair value less selling  costs or the
loan balance, with any write-down charged against the allowance for loan losses.
At all dates  presented,  we had no troubled debt  restructurings  which involve
forgiving a portion of interest or  principal  on any loans or making loans at a
rate materially less than that of market rates.


                                                               At June 30,
                                                      --------------------------
                                                          2002            2001
                                                      --------------------------
                                                        (Dollars in Thousands)
Non-accruing loans:
   Vehicle......................................      $     ---       $       2
   Airplane.....................................            ---             ---
   Boat.........................................            ---             ---
   Signature....................................             61             ---
   Lines of credit..............................            ---             ---
   Deposit secured..............................            ---             ---
   Home equity..................................            ---             ---
   Commercial participation loans (aircraft)....            ---
   First mortgages..............................            ---
   Credit cards.................................             10               8
                                                      ---------       ---------
     Total......................................             71              10
                                                      ---------       ---------

Accruing loans past due 90 days and over:
   Vehicle......................................            ---             ---
   Airplane.....................................            ---             ---
   Boat.........................................            ---             ---
   Signature....................................            ---             ---
   Lines of credit..............................            ---             ---
   Deposit secured..............................            ---             ---
   Home equity..................................            ---             ---
   Commercial participation loans (aircraft)....            ---             ---
   First mortgages..............................            ---             ---
   Credit cards.................................            ---             ---
     Total......................................      $     ---             ---
                                                      ---------       ---------

Total non-performing loans......................      $      71              10
                                                      ---------       ---------

Foreclosed assets...............................            ---             ---
                                                      ---------       ---------

Total non-performing assets.....................      $      71       $      10
                                                      =========       =========

Allowance for loan losses.......................      $     656       $     627
                                                      =========       =========

Coverage of non-performing loans................         923.94%       6,270.00%
                                                      =========       =========

Non-performing assets as a percentage
          of total assets.......................           0.08%           0.01%
                                                      =========       =========
                                       12

<PAGE>


     Other Loans of Concern. In addition to the non-performing  assets set forth
in the  table  above,  as of June  30,  2002,  there  was also an  aggregate  of
approximately  $26,000 in signature loans, $6,000 in lines of credit and $21,000
in credit  card  balances  with  respect to which  known  information  about the
possible credit problems of the borrowers have caused  management to have doubts
as to the ability of the borrowers to comply with present loan  repayment  terms
and which may result in the future inclusion of such items in the non-performing
asset categories. These loans have been considered in management's determination
of the adequacy of our allowance for loan losses.

     Classified Assets.  Regulations provide for the classification of loans and
other assets, such as debt and equity securities  considered by regulators to be
of  lesser  quality,  as  "substandard,"  "doubtful"  or  "loss."  An  asset  is
considered  "substandard"  if it is  inadequately  protected  by the current net
worth and paying capacity of the obligor or of the collateral  pledged,  if any.
"Substandard"  assets include those characterized by the "distinct  possibility"
that the insured  institution  will sustain "some loss" if the  deficiencies are
not  corrected.  Assets  classified  as  "doubtful"  have all of the  weaknesses
inherent in those classified  "substandard," with the added  characteristic that
the weaknesses present make "collection or liquidation in full," on the basis of
currently  existing facts,  conditions,  and values,  "highly  questionable  and
improbable."  Assets  classified as "loss" are those considered  "uncollectible"
and  of  such  little  value  that  their  continuance  as  assets  without  the
establishment of a specific loss reserve is not warranted.

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

     In  connection  with the filing of our  periodic  reports with the Illinois
Office  of  Banks  and Real  Estate  and the  FDIC  and in  accordance  with our
classification  of assets policy,  we regularly review the problem assets in our
portfolio to determine  whether any assets require  classification in accordance
with applicable regulations.  On the basis of management's review of our assets,
at June 30, 2002, we had ten loans totalling $20,965  classified as substandard;
$92,355 as doubtful and $21,356 as loss.  The total amount of classified  assets
represented  1.34% of our equity  capital and 0.15% of our total  assets at June
30, 2002.

     Allowance  for Loan  Losses.  We maintain an  allowance  for loan losses to
absorb losses inherent in the loan portfolio. The allowance is based on ongoing,
quarterly  assessments of the estimated  losses  inherent in the loan portfolio.
Our methodology for assessing the  appropriateness  of the allowance consists of
several key elements,  which include the ratio analysis and specific  allowances
for  identified  problem  loans.  In addition,  the allowance  incorporates  the
results of measuring impaired loans as provided in SFAS No. 114,  "Accounting by
Creditors for  Impairment of a Loan" and SFAS No. 118,  "Accounting by Creditors
for Impairment of a Loan - Income Recognition and Disclosures." These accounting
standards prescribe the measurement methods,  income recognition and disclosures
related to impaired loans.

                                       13

<PAGE>



     The allowance is calculated by applying loss factors to  outstanding  loans
based on the internal risk evaluation of the loans or pools of loans. Loans past
due 60 days or more are evaluated  individually and loans less than 60 days past
due are evaluated in pools.  Changes in risk  evaluations of both performing and
nonperforming loans affect the amount of the formula allowance. Loss factors are
based  both on our  historical  loss  experience  as well as  factors  that,  in
management's  judgment,  affect the  collectibility  of the  portfolio as of the
evaluation date.

     The  appropriateness  of the  allowance  is  reviewed  and  established  by
management  based upon its  evaluation  of  then-existing  economic and business
conditions affecting our key lending areas and other conditions,  such as credit
quality trends (including trends in nonperforming  loans expected to result from
existing  conditions),  collateral  values,  loan  volumes  and  concentrations,
specific  industry   conditions  within  portfolio   segments  and  recent  loss
experience  in  particular  segments  of the  portfolio  that  existed as of the
balance sheet date and the impact that such conditions were believed to have had
on the collectibility of the loan.  Management reviews these conditions monthly.
To the  extent  that any of these  conditions  is  evidenced  by a  specifically
identifiable  problem  credit or portfolio  segment as of the  evaluation  date,
management's  estimate of the effect of such  condition  may be  reflected  as a
specific allowance applicable to such credit or portfolio segment.  Where any of
these conditions is not evidenced by a specifically  identifiable problem credit
or portfolio segment as of the evaluation date,  management's  evaluation of the
loss related to this condition is reflected in the  unallocated  allowance.  The
evaluation of the inherent loss with respect to these conditions is subject to a
higher  degree of  uncertainty  because they are not  identified  with  specific
problem credits or portfolio segments.

     Management  also  evaluates  the adequacy of the  allowance for loan losses
based on a review of individual  loans,  historical  loan loss  experience,  the
value and adequacy of collateral,  and economic  conditions.  This evaluation is
inherently  subjective as it requires material estimates,  including the amounts
and timing of future cash flows  expected to be received on impaired  loans that
may be susceptible to significant  change.  For all specifically  reviewed loans
for which it is probable  that  Allied  First Bank will be unable to collect all
amounts due  according  to the terms of the loan  agreement,  Allied  First Bank
determines  impairment by computing a fair value either based on discounted cash
flows using the loan's initial interest rate or the fair value of the collateral
if the loan is collateral dependent. Large groups of smaller balance homogeneous
loans that are  collectively  evaluated  for  impairment  and are excluded  from
specific  impairment  evaluation,   and  their  allowance  for  loan  losses  is
calculated  in accordance  with the  allowance for loan losses policy  described
above.

     Because  the  allowance  for loan  losses is based on  estimates  of losses
inherent in the loan portfolio,  actual losses can vary  significantly  from the
estimated amounts.  Our methodology as described permits adjustments to any loss
factor  used  in  the  computation  of  the  allowance  in the  event  that,  in
management's  judgment,  significant  factors which affect the collectibility of
the portfolio as of the  evaluation  date are not reflected in the loss factors.
By assessing the estimated  losses  inherent in the loan  portfolio on a monthly
basis, we are able to adjust specific and inherent loss estimates based upon any
more recent  information that has become  available.  In addition,  management's
determination  as to the amount of our  allowance  for loan losses is subject to
review by the Illinois  Office of Banks and Real Estate and the FDIC,  which may
require the  establishment  of additional  general or specific  allowances based
upon their  judgment of the  information  available to them at the time of their
examination of Allied First Bank.

     At June 30, 2002, our allowance for loan losses was $656,000 or .97% of the
total loan portfolio and  approximately  923.9% of total  non-performing  loans.
Assessing the adequacy of


                                       14

<PAGE>



the  allowance for loan losses is  inherently  subjective as it requires  making
material  estimates,  including  the  amount  and  timing of future  cash  flows
expected  to  be  received  on  impaired  loans,  that  may  be  susceptible  to
significant change. In the opinion of management, the allowance, when taken as a
whole,  is  adequate  to  absorb  probable  incurred  loan  losses  in our  loan
portfolio.

     The  following  table  sets forth an  analysis  of our  allowance  for loan
losses.

<TABLE>
<CAPTION>

                                                                           Years Ended June 30,
                                                                     ---------------------------------
                                                                            2002           2001
                                                                     ----------------- ---------------
                                                                          (Dollars in Thousands)
<S>                                                                        <C>             <C>
Total gross loans outstanding (at end of period)...............            $67,480         $ 64,122
                                                                           =======         ========

Average total loans outstanding................................            $65,845         $ 64,889
                                                                           =======         ========

Allowance for loan losses, beginning of period.................            $   627         $    678

Loan charge-offs:
   Vehicle.....................................................                ---                3
   Airplane....................................................                ---               90
   Boat........................................................                ---              ---
   Signature...................................................                 85              143
   Lines of credit.............................................                103               30
   Credit cards................................................                 56               65
   Home equity.................................................                ---              ---
   Home extra equity...........................................                ---              ---
   First mortgage..............................................                ---              ---
   Deposit secured.............................................                ---              ---
                                                                           -------         --------
        Total loan charge-offs.................................                244              331
                                                                           -------         --------

Loan recoveries:
   Vehicle.....................................................                  3                1
   Airplane....................................................                ---                6
   Boat........................................................                ---              ---
   Signature...................................................                  5               11
   Lines of credit.............................................                 26                2
   Credit cards................................................                  4                4
   Home equity.................................................                ---              ---
   Home extra equity...........................................                ---              ---
   First mortgage..............................................                ---              ---
   Deposit secured.............................................                ---              ---
                                                                           -------         --------
        Total loan recoveries..................................                 38               24
                                                                           -------         --------

Net loan charge-offs...........................................                206              306
Provision charged to operations................................                235              254
                                                                           -------         --------

Allowance for loan losses, end of period.......................            $   656         $    627
                                                                           =======         ========

Ratio of net loan charge-offs during the period
   to average loans outstanding................................               0.31%            0.47%
                                                                           =======         ========

Provision as a percentage of average loans.....................               0.36%            0.39%
                                                                           =======         ========

Allowance as a percentage of total gross loans.................               0.97%            0.98%
                                                                           =======         ========

</TABLE>


                                       15

<PAGE>




     The  distribution  of the  allowance  for  losses  on  loans  at the  dates
indicated is summarized as follows.


<TABLE>
<CAPTION>

                                                                  At June 30,
                                  ----------------------------------------------------------------------
                                               2002                              2001
                                  ----------------------------------------------------------------------

                                                   Percent of                             Percent of
                                                    Loans in                               Loans in
                                                      Each                                   Each
                                                    Category                               Category
                                                    to Total                               to Total
                                      Amount       Gross Loans           Amount           Gross Loans
                                  ----------------------------------------------------------------------
                                                           (Dollars in Thousands)
<S>                                   <C>            <C>                <C>                 <C>
Vehicle..........................     $   15          21.73%            $    17              26.73%

Airplane.........................         85           3.92%                134               4.89%

Boat.............................         15           6.37%                  7               7.54%

Signature........................        206           7.73%                222               9.22%

Lines of credit..................         93          13.72%                 81              17.34%

Credit cards ...................          85           8.24%                 44               8.87%

Home equity......................         85          30.65%                 80              25.06%

First mortgage...................          7           4.37%                ---              -----

Deposit secured..................        ---           0.17%                ---               0.35%

Participation loans..............         52           3.10%                ---                ---

Unallocated......................         13            ---                  42                ---
                                                                        -------

   TOTAL                              $  656         100.00%            $   627             100.00%
                                      ======         ======             =======             ======

</TABLE>


                                       16

<PAGE>



Investment Activities

     Allied  First  Bank is  authorized  to  invest in  various  types of liquid
assets,  including  obligations  of, or  guaranteed  by the United States or the
State of Illinois,  securities of various federal agencies, certain certificates
of  deposit  of  insured  banks  and  savings  institutions,   certain  bankers'
acceptances,  repurchase  agreements  and  federal  funds.  Subject  to  various
restrictions,  Illinois savings banks may also invest their assets in investment
grade  commercial  paper and corporate  debt  securities  and mutual funds whose
assets conform to the  investments  that a federally  chartered  savings bank is
otherwise authorized to make directly.

     The  President  of Allied First Bank has the basic  responsibility  for the
management of our investment portfolio, subject to the direction and guidance of
the executive  committee.  The President  considers  various factors when making
decisions,  including the  marketability,  maturity and tax  consequences of the
proposed  investment.  The maturity structure of investments will be affected by
various market  conditions,  including the current and anticipated  slope of the
yield curve, the level of interest rates, the trend of new deposit inflows,  and
the anticipated  demand for funds via deposit  withdrawals and loan originations
and purchases.

     The  current  objectives  of any future  investment  portfolio  would be to
provide  liquidity when loan demand is high, to assist in  maintaining  earnings
when loan demand is low and to maximize earnings while  satisfactorily  managing
risk, including credit risk, reinvestment risk, liquidity risk and interest rate
risk.

     At June 30,  2002,  we had $1.5 million in Federal Home Loan Bank stock and
$6.3 million in  mortgaged-backed  securities  insured by Fannie Mae and Freddie
Mac.


                                       17

<PAGE>



     The following table sets forth the  contractual  maturities of Allied First
Bancorp,  Inc.'s mortgage-backed  securities based on amortized cost at June 30,
2002.  Not  considered in the  preparation of the table below are the effects of
prepayments, periodic principal repayments and the adjustable-rate nature of the
instruments.

<TABLE>
<CAPTION>



                                                                            At June 30, 2002
                       -------------------------------------------------------------------------------------------------------------
                       One Year or Less   One to Five Years    Five to 10 Years    Beyond 10 Years       Total Investment Securities
                       ----------------   -----------------    ----------------    ---------------       ---------------------------
                               Annualized          Annualized         Annualized           Annualized                     Annualized
                                Weighted            Weighted           Weighted             Weighted            Approximate Weighted
                      Carrying   Average   Carrying  Average Carrying   Average  Carrying    Average   Carrying    Market   Average
                        Value     Yield      Value    Yield    Value     Yield     Value      Yield      Value     Value     Yield
                        -----     -----      -----    -----    -----     -----     -----      -----      -----     -----     -----
<S>                   <C>           <C>   <C>          <C>   <C>          <C>    <C>          <C>       <C>       <C>        <C>
Securities available
 for sale:
Mortgage-backed
 securities....       $     ---     ---   $    ---     ---   $    ---     ---     $6,358       5.13%    $6,358    $6,358     5.13%
                      ---------   -----   --------   -----   --------   -----     ------       ----     ------    ------     ----


</TABLE>


                                                        18

<PAGE>



     Statement  of  Financial  Accounting  Standards  No. 115,  "Accounting  for
Certain Investments in Debt and Equity Securities," requires that investments be
categorized as "held to maturity," "trading securities" or "available for sale,"
based on  management's  intent as to the ultimate  disposition of each security.
Statement of Financial Accounting Standards No. 115 allows debt securities to be
classified  as "held to  maturity"  and  reported  in  financial  statements  at
amortized cost only if the reporting  entity has the positive intent and ability
to hold those securities to maturity.  Securities that might be sold in response
to changes in market interest rates, changes in the security's  prepayment risk,
increases in loan demand, or other similar factors cannot be classified as "held
to maturity." Debt and equity  securities held for current resale are classified
as "trading  securities."  These  securities  are  reported  at fair value,  and
unrealized  gains and losses on the  securities  would be included in  earnings.
Allied First Bank does not currently use or maintain a trading account. Debt and
equity  securities  not  classified  as either  "held to  maturity"  or "trading
securities"  are  classified  as  "available  for sale."  These  securities  are
reported at fair value,  and  unrealized  gains and losses on the securities are
excluded  from  earnings  and  reported,  net of deferred  taxes,  as a separate
component of equity.

Sources of Funds

     General.  Our  sources  of  funds  are  deposits,  borrowings,  payment  of
principal  and  interest on loans,  interest  earned on or  maturation  of other
investments and funds provided from operations.

     Deposits.  We offer a variety of deposit  accounts  to both  consumers  and
businesses having a wide range of interest rates and terms. Our deposits consist
of time deposit accounts,  savings, money market and demand deposit accounts. We
primarily rely on competitive  pricing policies,  marketing and customer service
to attract and retain these deposits. We solicit deposits in our market area and
among our member pilots.

     The flow of  deposits  is  influenced  significantly  by  general  economic
conditions,   changes  in  money  market  and  prevailing   interest  rates  and
competition.  The  variety of  deposit  accounts  we offer has  allowed us to be
competitive  in obtaining  funds and to respond with  flexibility  to changes in
consumer demand.  We have become more susceptible to short-term  fluctuations in
deposit flows as customers have become more interest rate  conscious.  We try to
manage  the  pricing  of  our  deposits  in  keeping  with  our  asset/liability
management,  liquidity  and  profitability  objectives,  subject to  competitive
factors.  Based on our  experience,  we believe that our deposits are relatively
stable  sources of funds.  Despite  this  stability,  our ability to attract and
maintain these deposits and the rates paid on them has been and will continue to
be significantly affected by market conditions.




                                       19

<PAGE>



     The following table sets forth the dollar amount of deposits in the various
types of deposit programs we offered at the dates indicated.


<TABLE>
<CAPTION>


                                                                                        June 30,
                                                     ------------------------------------------------------------------------------

                                                                   2002                              2001
                                                     ------------------------------------------------------------------------------

                                                              Amount               Percent     Amount                Percent
                                                              ------               -------     ------                -------
                                                                                      (Dollars in Thousands)

<S>                                                         <C>                    <C>        <C>                    <C>
Checking accounts..................................         $  8,655                11.28%    $  8,799                11.33%
Savings accounts...................................           12,331                16.07       12,554                16.17
Money market accounts..............................           37,445                48.81       37,486                48.29

Time deposits:

    0.00 to 4.84%..................................            8,210                10.70          165                 0.21
    4.85 to 5.60%..................................              989                 1.29        2,616                 3.37
    5.61 to 6.34%..................................            1,706                 2.22        3,818                 4.92
    6.35 to 7.09%..................................            4,524                 5.90        9,452                12.18
    7.10 to 7.80%..................................            2,859                 3.73        2,744                 3.53
                                                            --------               ------     --------               ------
Total time deposits................................           18,288                23.84       18,795                24.21
                                                            --------               ------     --------               ------
    Total deposits.................................         $ 76,719               100.00%    $ 77,634               100.00%
                                                            ========               ======     ========               ======

</TABLE>





                                                        20

<PAGE>




     The following table shows maturity information for Allied First Bank's time
deposits as of June 30, 2002.

<TABLE>
<CAPTION>

                                                  Amount Due For 12 Month Period Ended June 30,
                              -------------------------------------------------------------------------------------
                                      2003          2004          2005          2006          2007          Total
                                      ----          ----          ----          ----          ----          -----
                                                                    (In Thousands)
Interest Rate
<S>                                 <C>            <C>           <C>            <C>            <C>           <C>
0.00 - 4.84%..................      $  6,231       $   848       $   947        $  172         $  10         $8,210
4.85 - 5.60%..................           195           236           159           ---           400            989
5.61 - 6.34%..................            64           298           165           558            46          1,706
6.35 - 7.09%..................         3,344            89           549           542           ---          4,524
7.10 - 7.80%..................           202         1,255           534           868           ---          2,859
                                     -------         -----        ------        ------        ------          -----
  Total.......................       $10,612        $2,726        $2,353        $2,147          $456        $18,288
                                     =======        ======        ======        ======          ====        =======

</TABLE>

     The  following  table  indicates  the amount of Allied  First  Bank's  time
deposits by time remaining until maturity as of June 30, 2002.

<TABLE>
<CAPTION>

                                                                                 Maturity
                                                    --------------------------------------------------------------------------------
                                                                        Over       Over        Over
                                                         3 Months      3 to 6     6 to 12       12
                                                         or Less       Months     Months      months     Total
                                                    --------------------------------------------------------------------------------
                                                                          (In Thousands)

<S>                                                       <C>          <C>        <C>         <C>      <C>
Certificates of deposit less than $100,000..........      $1,802       $2,774     $3,243      $5,030   $12,849

Certificates of deposit of $100,000 or more.........       1,367        1,119        308       2,645     5,439
                                                          ------        -----     ------      ------     -----

Total certificates of deposit.......................      $3,169       $3,893     $3,551      $7,675   $18,288
                                                          ======       ======     ======      ======   =======
</TABLE>

     Borrowings.  Although  deposits  are our  primary  source of funds,  we may
utilize  borrowings  when they are a less  costly  source  of funds,  and can be
invested at a positive interest rate spread,  when we desire additional capacity
to fund loan demand or when they meet our  asset/liability  management goals. We
have not historically used borrowings as a source of funds.

     We may obtain  advances from the Federal Home Loan Bank of Chicago upon the
security of our  mortgage  loans as well as mortgage  backed  securities.  These
advances may be made  pursuant to several  different  credit  programs,  each of
which has its own interest rate, range of maturities and call features.  We also
have a $4.0 million line of credit with LaSalle  National Bank. At June 30, 2002
we had no borrowings from any source.




                                       21

<PAGE>



Subsidiary and Other Activities

     At June 30, 2002,  Allied  First  Bancorp,  Inc.  had a single  subsidiary,
Allied First Bank.

Competition

     We face strong  competition in  originating  real estate and consumer loans
and in attracting  deposits.  Competition in originating real estate loans comes
primarily from other savings  institutions,  commercial banks, credit unions and
mortgage bankers.  Other savings  institutions,  commercial banks, credit unions
and finance companies provide vigorous competition in consumer lending.

     We attract all of our deposits through our single location. Competition for
those deposits is principally from other savings institutions,  commercial banks
and credit unions  located in the same  community as well as where our customers
reside in other parts of the United  States,  as well as mutual  funds and other
alternative  investments.  We compete for these  deposits  by offering  superior
service  and a variety  of  deposit  accounts  at  competitive  rates.  We offer
products and services  through a variety of delivery  channels  including direct
payroll  deposit,  debit cards,  credit cards,  24 hour telephone  access,  home
banking and access through  automated teller machines located  worldwide.  As of
June 30, 2002, we held less than 1% of the deposits in our primary market area.

Employees

     At June 30, 2002, we had a total of 21 employees,  including five part-time
employees. Our employees are not represented by any collective bargaining group.
Management considers its employee relations to be good.


                                   REGULATION

General

     Allied First Bank,  as an Illinois  chartered  savings  bank, is subject to
extensive  regulation  and  oversight by the  Illinois  Office of Banks and Real
Estate and the FDIC as its primary Federal  regulator,  extending to all aspects
of its operations.  Allied First Bank also is subject to examination by the FDIC
which insures the deposits of Allied First Bank to the maximum extent  permitted
by law. It is also subject to  requirements  established by the Federal  Reserve
Board.  State chartered savings banks are required to file periodic reports with
the  Illinois  Office of Banks and Real  Estate and the FDIC and are  subject to
periodic  examinations  by the Illinois  Office of Banks and Real Estate and the
FDIC. The  investment  and lending  authority of savings banks are prescribed by
state and federal laws and  regulations,  and such  institutions  are prohibited
from engaging in any activities not permitted by such laws and regulations. Such
regulation  and  supervision   primarily  is  intended  for  the  protection  of
depositors and not for the purpose of protecting shareholders.

Allied First Bancorp, Inc.

     Allied First Bancorp,  Inc, is a bank holding  company with the powers of a
financial  holding  company.  A bank holding company must obtain Federal Reserve
Board approval before;


                                       22

<PAGE>



(i) acquiring, directly or indirectly, ownership of control of any voting shares
of another bank or bank holding company if, after such acquisition, it would own
or control  more than 5% of such shares  (unless it already owns or controls the
majority of such shares);  (ii) acquiring all or substantially all of the assets
of another bank or bank holding company;  or (iii) merging or consolidating with
another bank holding company.

     Additionally,  a bank holding  company may not,  with  certain  exceptions,
acquire  direct or indirect  ownership  or control of more than 5% of the voting
shares of any company which is not a bank or a bank holding  company,  or engage
directly or indirectly in  activities  other than those of banking,  managing or
controlling  banks, or providing  services for its  subsidiaries.  The principal
exceptions to these prohibitions  involve certain non-bank  activities which, by
statute  or by  Federal  Reserve  Board  regulation,  have  been  identified  as
activities closely related to the business of banking or managing or controlling
banks.  The list of activities  permitted by the Federal Reserve Board includes,
among other things,  operating a savings institution,  mortgage company, finance
company,  credit card  company or  factoring  company,  performing  certain data
processing  operations;  providing certain  investment and financial advice, and
leasing property on a full- payout,  non-operating basis. As a financial holding
company,  Allied  First  Bancorp may also  engage in  insurance  and  securities
underwriting.  Allied  First  Bancorp  has no  current  plans to engage in these
activities, but may do so in the future.

     Further,  under Federal  Reserve Board policy,  a bank holding company must
serve as a source of strength for its subsidiary banks.  Under this policy,  the
Federal Reserve Board may require,  and has required in the past, a bank holding
company to contribute additional capital to an undercapitalized subsidiary bank.

     The Federal Reserve Board has  established  capital  requirements  for bank
holding  companies that  generally  parallel the capital  requirements  for FDIC
insured  depository   institutions   banks.  For  bank  holding  companies  with
consolidated  assets of less that $150  million,  such as Allied First  Bancorp,
Inc., compliance is measured on a bank-only basis.

Allied First Bank

     The Illinois  Office of Banks and Real Estate has extensive  authority over
the operations of Illinois  savings  banks.  As part of this  authority,  Allied
First Bank is required to file  periodic  reports  with the  Illinois  Office of
Banks and Real Estate and is subject to  periodic  examination  by the  Illinois
Office of Banks and Real  Estate and the FDIC,  as its Federal  regulator.  When
these examinations are conducted by the Illinois Office of Banks and Real Estate
and the FDIC,  the examiners may require Allied First Bank to provide for higher
general or specific loan loss reserves.  All savings institutions are subject to
an annual  assessment,  based upon the savings bank's total assets,  to fund the
operations of the Illinois Office of Banks and Real Estate.

     The  Illinois  Office  of Banks  and Real  Estate  and the FDIC  also  have
extensive  enforcement  authority  over all Illinois  savings  banks,  including
Allied First Bank. 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. 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 the agencies. Except
under certain  circumstances,  public disclosure of final enforcement actions by
the FDIC is required.


                                       23

<PAGE>



     In addition,  the  investment,  lending and  branching  authority of Allied
First Bank is prescribed by Illinois and federal laws and it is prohibited  from
engaging in any activities  not permitted by such laws.  Allied First Bank is in
compliance with the noted restrictions.

     Allied   First   Bank's    general    permissible    lending    limit   for
loans-to-one-borrower  is equal to 25% of unimpaired capital and surplus (except
for loans fully secured by certain readily marketable collateral,  in which case
this limit is increased to 30% of unimpaired  capital and surplus).  At June 30,
2002, Allied First Bank's lending limit under this restriction was $2.5 million.
Allied First Bank is in compliance with the loans-to-one-borrower limitation.

     The FDIC,  as well as the  other  federal  banking  agencies,  has  adopted
guidelines  establishing  safety and soundness standards on such matters as loan
underwriting and  documentation,  asset quality,  earnings  standards,  internal
controls and audit  systems,  interest rate risk exposure and  compensation  and
other  employee  benefits.  Any  institution  which  fails to comply  with these
standards must submit a compliance plan.

Insurance of Accounts and Regulation by the FDIC

     Allied  First  Bank is a  member  of the  Bank  Insurance  Fund,  which  is
administered  by the FDIC.  Deposits are insured up to the applicable  limits by
the FDIC and such insurance is backed by the full faith and credit of the United
States Government.  As insurer,  the FDIC imposes deposit insurance premiums and
is  authorized  to  conduct   examinations  of  and  to  require   reporting  by
FDIC-insured  institutions.  It also may prohibit any  FDIC-insured  institution
from engaging in any activity the FDIC determines by regulation or order to pose
a serious risk to the Savings  Association  Insurance Fund or the Bank Insurance
Fund.

     The FDIC's  deposit  insurance  premiums are assessed  through a risk-based
system under which all insured  depository  institutions  are placed into one of
nine  categories  and  assessed  insurance  premiums  based upon their  level of
capital and supervisory evaluation. Under the system, institutions classified as
well  capitalized  (i.e., a core capital ratio of at least 5%, a ratio of Tier 1
or core capital to  risk-weighted  assets  ("Tier 1  risk-based  capital") of at
least 6% and a risk-based  capital ratio of at least 10%) and considered healthy
pay the  lowest  premium  while  institutions  that  are  less  than  adequately
capitalized (i.e., core or Tier 1 risk-based capital ratios of less than 4% or a
risk-based  capital  ratio  of less  than  8%)  and  considered  of  substantial
supervisory concern pay the highest premium.  Risk classification of all insured
institutions is made by the FDIC for each semi-annual assessment period.

     The FDIC is  authorized  to increase  assessment  rates,  on a  semi-annual
basis,  if it determines  that the reserve ratio of the Bank Insurance Fund will
be less  than the  designated  reserve  ratio of  1.25% of Bank  Insurance  Fund
insured deposits. In setting these increased assessments,  the FDIC must seek to
restore the  reserve  ratio to that  designated  reserve  level,  or such higher
reserve ratio as established by the FDIC.

     Since January 1, 1997,  the premium  schedule for Bank  Insurance  Fund and
Savings Association  Insurance Fund insured institutions has ranged from 0 to 27
basis points.  However,  Savings  Association  Insurance Fund and Bank Insurance
Fund  insured   institutions  are  required  to  pay  a  Financing   Corporation
assessment,  in order to fund the  interest  on bonds  issued to resolve  thrift
failures in the 1980s,  equal to  approximately  2 basis points for each $100 in
domestic


                                       24

<PAGE>



deposits.  These assessments,  which may be revised based upon the level of Bank
Insurance Fund and Savings  Association  Insurance Fund deposits,  will continue
until the bonds mature in the year 2017.

Regulatory Capital Requirements

     Federally insured savings banks, such as Allied First Bank, are required to
maintain a minimum level of  regulatory  capital under Federal law. The FDIC has
established  capital  standards,  including  a leverage  ratio or Tier 1 capital
requirement,  a Tier 1 risked-based capital requirement and a risk-based capital
requirement  applicable to its regulated  banks.  The FDIC is also authorized to
impose  capital   requirements  in  excess  of  these  standards  on  individual
institutions on a case-by-case basis.

     The  capital  standards  require  Tier 1 capital  equal to at least 4.0% of
adjusted  total assets unless its  supervisory  condition is such to allow it to
maintain a 3.0% ratio.  Tier 1 capital generally  includes common  stockholders'
equity and retained income, and certain noncumulative  perpetual preferred stock
and related income.  In addition,  all intangible  assets,  other than a limited
amount  of  purchased  mortgage  servicing  rights  and  purchased  credit  card
relationships,  must be deducted from Tier 1 capital for calculating  compliance
with the  requirement.  At June 30, 2002,  Allied  First Bank had no  intangible
assets.

     At June 30,  2002,  Allied  First  Bank had  Tier 1  capital  equal to $9.7
million,  or 11.9% of adjusted  total  assets,  which is $3.3 million  above the
minimum requirement of 4.0% in effect on that date.

     The FDIC also requires its regulated  banks to maintain a Tier 1 risk-based
capital  ratio of 4%. At June 30,  2002,  Allied  First Bank had a Tier 1 risked
based capital  ratio of 13.6%,  which was $6.9 million above the 4%  requirement
in effect on that date.

     The FDIC also requires its regulated  banks to maintain total capital of at
least 8.0% of risk-weighted  assets.  Total capital consists of core capital, as
defined above,  and  supplementary  capital.  Supplementary  capital consists of
certain  permanent and maturing capital  instruments that do not qualify as core
capital and general  valuation loan and lease loss allowances up to a maximum of
1.25% of risk-weighted assets.  Supplementary capital may be used to satisfy the
risk-based  requirement  only to the  extent of core  capital.  The FDIC is also
authorized to require a savings  institution to maintain an additional amount of
total  capital  to  account  for  concentration  of credit  risk and the risk of
non-traditional activities.

     In determining the amount of risk-weighted  assets,  all assets,  including
certain  off-balance sheet items,  will be multiplied by a risk weight,  ranging
from 0% to 100%, based on the risk inherent in the type of asset. For example, a
50% risk  weight has been  assigned  prudently  underwritten  permanent  one- to
four-family  first  lien  mortgage  loans not more than 90 days  delinquent  and
having a loan-to-value  ratio of not more than 80% at origination unless insured
to such ratio by an insurer approved by Fannie Mae or Freddie Mac.

     On June 30, 2002,  Allied First Bank had total risk-based  capital of $10.4
million and risk- weighted assets of $77 million;  or total capital of 14.53% of
risk-weighted  assets.  This amount was $4.7 million above the 8% requirement in
effect on that date.

                                       25

<PAGE>



     The FDIC is authorized and, under certain  circumstances,  required to take
certain   actions  against  savings  banks  that  fail  to  meet  their  capital
requirements.  The FDIC is  generally  required to take  action to restrict  the
activities of an  "undercapitalized  institution,"  which is an institution with
less than either a 4% core capital ratio, a 4% Tier 1 risked-based capital ratio
or an 8.0% risk-based  capital ratio. Any such institution must submit a capital
restoration  plan and until such plan is approved  by the FDIC may not  increase
its assets, acquire another institution, establish a branch or engage in any new
activities,  and  generally  may not  make  capital  distributions.  The FDIC is
authorized  to  impose  the  additional  restrictions  that  are  applicable  to
significantly undercapitalized institutions.

     As a condition to the approval of the capital restoration plan, any company
controlling an undercapitalized institution must agree that it will enter into a
limited  capital  maintenance   guarantee  with  respect  to  the  institution's
achievement of its capital requirements.

     Any savings  bank that fails to comply with its capital  plan or has Tier 1
risk-based  or core  capital  ratios of less than 3.0% or a  risk-based  capital
ratio of less than 6.0% and is considered "significantly  undercapitalized" must
be made  subject  to one or more  additional  specified  actions  and  operating
restrictions  which may cover all  aspects of its  operations  and may include a
forced merger or acquisition  of the  institution.  An institution  that becomes
"critically undercapitalized" because it has a tangible capital ratio of 2.0% or
less is subject to further mandatory  restrictions on its activities in addition
to those applicable to significantly undercapitalized institutions. In addition,
the FDIC must be appointed as a receiver,  or  conservator,  for a savings bank,
with  certain  limited  exceptions,  within 90 days after it becomes  critically
undercapitalized.

     The FDIC is also generally  authorized to reclassify an institution  into a
lower capital category and impose the  restrictions  applicable to such category
if the institution is engaged in unsafe or unsound  practices or is in an unsafe
or unsound condition.

     The imposition by the Illinois  Office of Banks and Real Estate or the FDIC
of any of these  measures on Allied  First Bank may have a  substantial  adverse
effect on its operations and profitability.

Limitations on Dividends and Other Capital Distributions

     Under  Illinois  law,  a  savings  bank  may pay  dividends  without  prior
regulatory  approval  in an amount  not  exceeding  its net  profits  in any one
calendar  year.  Dividends  in excess of such  amount  require  approval  of the
Illinois Office of Banks and Real Estate. The savings bank may not pay dividends
if it is under capitalized.

Community Reinvestment Act

     Under the Community Reinvestment Act, every FDIC-insured  institution has a
continuing and  affirmative  obligation  consistent  with safe and sound banking
practices to help meet the credit needs of its entire  community,  including low
and moderate  income  neighborhoods.  The  Community  Reinvestment  Act does not
establish specific lending  requirements or programs for financial  institutions
nor does it limit an  institution's  discretion to develop the types of products
and  services  that it  believes  are best suited to its  particular  community,
consistent with the Community  Reinvestment Act. The Community  Reinvestment Act
requires the FDIC, in connection  with the  examination of Allied First Bank, to
assess the institution's record of meeting the credit needs of its community and
to take such record into account in its evaluation of certain


                                       26

<PAGE>



applications, such as a merger or the establishment of a branch, by Allied First
Bank.  An  unsatisfactory  rating  may be used as the basis for the denial of an
application  by the  FDIC.  Allied  First  Bank  has not yet been  examined  for
Community  Reinvestment  Act  compliance.  Allied  First  Bank has  submitted  a
strategic  CRA plan with the FDIC and has not yet  received  approval as of June
30, 2002.

Transactions with Affiliates

     Generally,  transactions  between a savings institution or its subsidiaries
and its affiliates  are required to be on terms as favorable to the  institution
as transactions with non-affiliates. In addition, certain of these transactions,
such  as  loans  to  an  affiliate,  are  restricted  to  a  percentage  of  the
institution's  capital.  Affiliates  of Allied First Bank  include  Allied First
Bancorp,  Inc. and any company  which is under common  control with Allied First
Bank. In addition,  a savings  institution may not lend to any affiliate engaged
in  activities  not  permissible  for a bank  holding  company  or  acquire  the
securities of most affiliates.

     Certain  transactions with directors,  officers or controlling  persons are
also  subject to conflict of interest  regulations  enforced by the FDIC.  These
conflict of interest  regulations and other statutes also impose restrictions on
loans to such persons and their  related  interests.  Among other  things,  such
loans must  generally  be made on terms  substantially  the same as for loans to
unaffiliated individuals.

Federal Securities Law

     The stock of Allied First  Bancorp,  Inc. is registered  with the SEC under
the Securities Exchange Act of 1934, as amended. Allied First Bancorp, Inc. will
be subject to the information, proxy solicitation,  insider trading restrictions
and other requirements of the SEC under the Securities Exchange Act of 1934.

     Allied First  Bancorp,  Inc.  stock held by persons who are  affiliates  of
Allied First Bancorp, Inc. may not be resold without registration unless sold in
accordance with certain resale restrictions. Affiliates are generally considered
to be officers,  directors and principal stockholders.  If Allied First Bancorp,
Inc. meets specified current public information requirements,  each affiliate of
Allied First Bancorp,  Inc. will be able to sell in the public  market,  without
registration, a limited number of shares in any three-month period.

Federal Reserve System

     The Federal Reserve Board requires all depository  institutions to maintain
non-interest  bearing  reserves at specified  levels  against their  transaction
accounts,  primarily checking,  NOW and Super NOW checking accounts. At June 30,
2002,  Allied  First Bank was in  compliance  with these  reserve  requirements.
Savings  institutions  are  authorized  to borrow from the Federal  Reserve Bank
"discount window," but Federal Reserve Board regulations require institutions to
exhaust other reasonable  alternative  sources of funds,  including Federal Home
Loan Bank borrowings, before borrowing from the Federal Reserve Bank.


                                       27

<PAGE>



Federal Home Loan Bank System

     Allied First Bank is a member of the Federal Home Loan Bank of Chicago.  It
is one of 12  regional  Federal  Home  Loan  Banks  that  administers  the  home
financing credit function of savings  institutions.  Each Federal Home Loan Bank
serves as a reserve or central bank for its members within its assigned  region.
It is funded  primarily  from  proceeds  derived  from the sale of  consolidated
obligations of the Federal Home Loan Bank System.  It makes loans or advances to
members in accordance with policies and procedures,  established by the board of
directors of the Federal Home Loan Bank,  which are subject to the  oversight of
the Federal Housing Finance Board.  All advances from the Federal Home Loan Bank
are required to be fully secured by  sufficient  collateral as determined by the
Federal Home Loan Bank.  In  addition,  all  long-term  advances are required to
provide funds for residential home financing.

     As a member,  Allied First Bank is required to purchase and maintain  stock
in the Federal Home Loan Bank of Chicago.  At June 30,  2002,  Allied First Bank
had $1.5 million in Federal Home Loan Bank stock,  which was in compliance  with
this  requirement.  For fiscal year ended June 30,  2002,  such  dividends  have
averaged 5.68%.

     Under federal law the Federal Home Loan Banks are required to provide funds
for the resolution of troubled  savings  institutions  and to contribute to low-
and  moderately  priced  housing  programs  through  direct  loans  or  interest
subsidies  on  advances   targeted  for  community   investment   and  low-  and
moderate-income  housing projects.  These  contributions have adversely affected
the level of Federal Home Loan Bank  dividends  paid and could continue to do so
in the  future.  These  contributions  could also have an adverse  effect on the
value of Federal  Home Loan Bank stock in the future.  A  reduction  in value of
Allied First Bank's  Federal Home Loan Bank stock may result in a  corresponding
reduction in Allied First Bank's capital.

     For the fiscal year ended June 30, 2002, Allied First Bank recorded $62,000
in dividends paid by the Federal Home Loan Bank of Chicago.

Federal Taxation

     General.  Allied First  Bancorp,  Inc. and Allied First Bank are subject to
federal income taxation in the same general manner as other  corporations,  with
some exceptions discussed below. The following discussion of federal taxation is
intended  only to summarize  pertinent  federal  income tax matters and is not a
comprehensive  description of the tax rules  applicable to Allied First Bancorp,
Inc. or Allied  First Bank.  On  September 1, 2001,  Allied  Pilots  Association
Federal Credit Union  converted its credit union charter to a state savings bank
charter.  Prior to the  conversion,  the  institution  was described in Internal
Revenue  Code  Section  501(c)(14)  and was not  generally  subject to corporate
income  taxation.  Subsequent  to the charter  conversion,  the  institution  is
considered a financial  institution  described in Internal  Revenue Code Section
581 and is  subject to federal  (generally  34%)  corporate  income  taxes.  The
institution  will compute  certain items  differently in calculating its taxable
income  than it will for  computing  income for  financial  statement  purposes.
Common  differences for a financial  institution  include but are not limited to
the  computation  of bad debts,  depreciation,  accretion  income and loan fees.
Allied First Bank may also be subject to the corporate  alternative  minimum tax
which is assessed at a 20% rate. For federal  income tax purposes,  Allied First
Bank will report its income and expenses on the accrual method of accounting and
use a fiscal  year ending on June 30 for  purposes of filing its federal  income
tax return.



                                       28

<PAGE>



     Allied First  Bancorp,  Inc.  anticipates  that it will file a consolidated
federal  income tax return  with  Allied  First Bank  commencing  with the first
taxable  year  after  completion  of the stock  conversion.  Accordingly,  it is
anticipated that any cash  distributions  made by Allied First Bancorp,  Inc. to
its  stockholders  would be  considered  to be  taxable  dividends  and not as a
non-taxable  return  of  capital  to  stockholders  for  federal  and  state tax
purposes.

     Minimum Tax. The Internal  Revenue Code imposes an alternative  minimum tax
at a  rate  of  20% on a  base  of  regular  taxable  income  plus  certain  tax
preferences,  called alternative minimum taxable income. The alternative minimum
tax is payable to the  extent  such  alternative  minimum  taxable  income is in
excess of an exemption amount.  Net operating losses can offset no more than 90%
of alternative  minimum taxable income.  Certain payments of alternative minimum
tax may be used as credits  against  regular tax  liabilities  in future  years.
Allied First Bank has not been subject to the alternative minimum tax, nor do we
have any such amounts available as credits for carryover.

     Corporate  Dividends-Received  Deduction.  Allied First  Bancorp,  Inc. may
eliminate from its income dividends  received from Allied First Bank as a wholly
owned  subsidiary  of  Allied  First  Bancorp,  Inc.  if it  elects  to  file  a
consolidated  return with Allied First Bank.  The  corporate  dividends-received
deduction is 100% or 80%, in the case of dividends  received  from  corporations
with  which a  corporate  recipient  does not file a  consolidated  tax  return,
depending  on the  level  of  stock  ownership  of the  payor  of the  dividend.
Corporations which own less than 20% of the stock of a corporation  distributing
a dividend may deduct 70% of dividends received or accrued on their behalf.

State Taxation

     For Illinois  income tax purposes,  the Bank is taxed at an effective  rate
equal to 7.18% of Illinois taxable income. For these purposes, "Illinois Taxable
Income" generally means federal taxable income,  subject to certain  adjustments
(including  the addition of interest  income on state and municipal  obligations
and the exclusion of interest income on United States Treasury obligations).

Item 2. Description of Properties
        -------------------------

     At June 30, 2002, Allied First Bancorp,  Inc. had one office,  5,200 square
feet,  which it  leases.  The net book  value of Allied  First  Bancorp,  Inc.'s
investment  in  equipment  and  fixtures,   excluding  computer  equipment,  was
approximately $16,000 at June 30, 2002.

     Allied  First  Bancorp,  Inc.  believes  that its  current  facilities  are
adequate to meet the present and immediately  foreseeable  needs of Allied First
Bank and Allied First Bancorp, Inc.

     Allied  First  Bancorp,  Inc.  utilizes a third party  service  provider to
maintain its data base of depositor and borrower customer  information.  The net
book value of the data  processing  and  computer  equipment  utilized by Allied
First Bancorp, Inc. at June 30, 2002 was approximately $52,000.


                                       29

<PAGE>



Item 3.           Legal Proceedings
                  -----------------

     From time to time Allied  First  Bancorp,  Inc. is involved as plaintiff or
defendant in various  legal  actions  arising in the normal  course of business.
Allied First Bancorp,  Inc. does not anticipate incurring any material liability
as a result of such litigation.

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

     No  matter  was  submitted  to a vote  of  security  holders,  through  the
solicitation of proxies or otherwise, during the quarter ended June 30, 2002.

                                     PART II

Item 5.           Market for Registrant's Common Equity and
                  Related Stockholder Matters
                  -----------------------------------------

     Page 41 of the Annual  Report to  Stockholders  is herein  incorporated  by
reference.

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

     Pages  4  through  18 of the  Annual  Report  to  Stockholders  are  herein
incorporated by reference.

Item 7.           Financial Statements
                  --------------------

     The following information appearing in Allied First Bancorp,  Inc.'s Annual
Report to Stockholders is incorporated by reference.

<TABLE>
<CAPTION>

                                                                                                           Pages in
                                                                                                            Annual
Annual Report Section                                                                                       Report
---------------------                                                                                      -------
<S>                                                                                                          <C>
Independent Auditors' Report...........................................................................       19
Consolidated Balance Sheets as of June 30, 2002 and 2001...............................................       20
Consolidated Statements of Income for the Years Ended June 30, 2002 and 2001...........................       21
Consolidated Statements of Changes in Stockholders' Equity for
   Years Ended June 30, 2002 and 2001..................................................................       22
Consolidated Statements of Cash Flows for Years Ended June 30, 2002
   and 2001............................................................................................       23
Notes to Consolidated Financial Statements.............................................................      24-30

</TABLE>

     With the exception of the aforementioned information, Allied First Bancorp,
Inc.'s  Annual Report to  Stockholders  for the year ended June 30, 2002, is not
deemed filed as part of this Annual Report on Form 10-KSB.


                                       30

<PAGE>



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

     There have been no changes in or  disagreements  with Allied First Bancorp,
Inc.'s accountants on accounting or financial disclosure matters.

                                    PART III

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

Directors
---------

     Information   concerning  Directors  of  Allied  First  Bancorp,   Inc.  is
incorporated herein by reference from the Proxy Statement for the Annual Meeting
of Stockholders to be held in 2002, a copy of which will be filed not later than
120 days after the close of the fiscal year.

Executive Officers
------------------

     Information  concerning Executive Officers of Allied First Bancorp, Inc. is
incorporated herein by reference from the Proxy Statement for the Annual Meeting
of Stockholders to be held in 2002, a copy of which will be filed not later than
120 days after the close of the fiscal year.

Compliance with Section 16(a)
-----------------------------

     Section 16(a) of the Securities  Exchange Act of 1934 requires Allied First
Bancorp,  Inc.'s directors and executive officers, and persons who own more than
10% of a registered class of the Allied First Bancorp, Inc.'s equity securities,
to file with the SEC  initial  reports of  ownership  and  reports of changes in
ownership of Common Stock and other equity  securities of Allied First  Bancorp,
Inc.. Officers,  directors and greater than 10% stockholders are required by SEC
regulation  to furnish  Allied First  Bancorp,  Inc.  with copies of all Section
16(a) forms they file.

     To Allied First Bancorp, Inc.'s knowledge,  based solely on a review of the
copies of such  reports  furnished  to Allied  First  Bancorp,  Inc. and written
representations  that no other  reports  were  required,  during the fiscal year
ended June 30, 2002,  all Section  16(a) filing  requirements  applicable to its
officers,  directors and greater than 10 percent beneficial owners were complied
with.

Item 10.          Executive Compensation
                  ----------------------

     Information  concerning  executive  compensation is incorporated  herein by
reference from the Proxy  Statement for the Annual Meeting of Stockholders to be
held in 2002,  a copy of which  will be filed not later  than 120 days after the
close of the fiscal year.

                                       31

<PAGE>



Item 11.          Security Ownership of Certain Beneficial
                  Owners and Management
                  ----------------------------------------

     Information  concerning security ownership of certain beneficial owners and
management is incorporated  herein by reference from the Proxy Statement for the
Annual Meeting of Stockholders to be held in 2002, a copy of which will be filed
not later than 120 days after the close of the fiscal year.

     During the fiscal year ended June 30, 2002, Allied First Bancorp,  Inc. did
not have any compensation  plans or individual  compensation  arrangements under
which equity  securities  of Allied First  Bancorp,  Inc.  were  authorized  for
issuance to employees or non-employees.

Item 12.          Certain Relationships and Related Transactions
                  ----------------------------------------------

     Information  concerning certain  relationships and related  transactions is
incorporated herein by reference from the Proxy Statement for the Annual Meeting
of Stockholders to be held in 2002, a copy of which will be filed not later than
120 days after the close of the fiscal year.

Item 13.          Exhibits and Reports on Form 8-K
                  --------------------------------
<TABLE>
<CAPTION>

                  (a) Exhibits

        Regulation                                                                                    Reference to
            S-B                                                                                     Prior Filing or
          Exhibit                                                                                    Exhibit Number
          Number                                        Document                                    Attached Hereto
         --------                                      ----------                                  ----------------
<S>        <C>              <C>                                                                           <C>
           3(i)             Articles of Incorporation                                                      *

           3(ii)            Bylaws                                                                         *

             4              Instruments defining the rights of security holders,                           *
                            including debentures

            10              Material Contracts                                                             10
                            (a)  Employment Contract between
                                  Kenneth L. Bertrand and Allied First Bank
                            (b)  Deferred Compensation Plan No. 1                                          10.1
                                  Employment Agreement Deferring a Portion of Employee's Compensation

            13              Annual Report to Stockholders                                                  13

            21              Subsidiaries of Registrant                                                     21

            23              Consents of Experts and Counsel                                                23

            99              Section 906 Certifications Under the Sarbanes-Oxley                            99
                            Act of 2002
<FN>
---------------

*    Filed as exhibits to the Company's Form SB-2  registration  statement filed
     on September 18, 2001 (File No.  333-69570) of the  Securities Act of 1933.
     All of such previously  filed documents are hereby  incorporated  herein by
     reference in accordance with Item 601 of Regulation S-B.

**   Filed as an exhibit to the Company's Form SB-2/A filed on November 11, 2001
     (File No. 333- 69570) of the Securities Act of 1933. All of such previously
     filed  documents are hereby  incorporated  by reference in accordance  with
     Item 601 of Regulation B.

</FN>
</TABLE>



                                       32

<PAGE>





         (b) Reports on Form 8-K

         Allied First Bancorp, Inc. filed no reports on Form 8-K during the last
quarter of the period covered by this Form 10-KSB.

Item 14.          Controls and Procedures
                  -----------------------

     Pages 17  through  18 of the  Annual  Report  to  Stockholders  are  herein
incorporated by reference.


                                       33

<PAGE>



                                   SIGNATURES

         In accordance with Section 13 of 15(d) of the Exchange Act, the Issuer
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.


Date:     September 27, 2002           ALLIED FIRST BANCORP, INC.


                                       By:      /s/ Kenneth L. Bertrand
                                                --------------------------------
                                                Kenneth L. Bertrand
                                                (Duly Authorized Representative)



         In accordance with the Exchange Act, this report has been signed below
by the following persons on behalf of the Issuer and in the capacities and on
the dates indicated.


By:  /s/ Kenneth L. Bertrand             By:  /s/ Brian K. Weiss
     ------------------------------           ----------------------------------
     Kenneth L. Bertrand, President           Brian K. Weiss
     and Chief Executive Officer              Vice President and Chief Financial
     (Principal Executive and Operating       Officer
     Officer)                                 (Chief Financial Officer and
                                              Accounting Officer)

Date:    September 27, 2002               Date:    September 27, 2002

By:      /s/ John G. Maxwell, Jr.         By:      /s/ William G. McKeown
         -------------------------                 --------------------------
         John G. Maxwell, Jr.                      William G. McKeown
         Chairman of the Board                     Director

Date:    September 27, 2002               Date:    September 27, 2002

By:      /s/ Frank K. Voris               By:      /s/ Brien J. Nagle
         --------------------------                --------------------------
         Frank K. Voris                            Brien J. Nagle
         Director                                  Director

Date:    September 27, 2002               Date:    September 27, 2002

By:      /s/ Paul F. Renneisen
         --------------------------
         Paul F. Renneisen
         Director

Date:    September 27, 2002



                                       34




<PAGE>



                              ALLIED FIRST BANCORP, INC.
                      CHIEF EXECUTIVE OFFICER CERTIFICATION

I, Kenneth L. Bertrand, certify that:

1.   I have reviewed this annual report on Form 10-KSB of Allied First  Bancorp,
     Inc.;

2.   Based on my  knowledge,  this  annual  report  does not  contain any untrue
     statement of a material fact or omit to state a material fact  necessary to
     make the statements  made, in light of the  circumstances  under which such
     statements  were made, not misleading with respect to the period covered by
     this annual report;

3.   Based on my  knowledge,  the  financial  statements,  and  other  financial
     information included in this annual report,  fairly present in all material
     respects the financial  condition,  results of operations and cash flows of
     the registrant as of, and for, the periods presented in this annual report;

4.   The  registrant's  other  certifying  officers  and I are  responsible  for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

     a)   designed  such  disclosure  controls  and  procedures  to ensure  that
          material  information  relating  to  the  registrant,   including  its
          consolidated subsidiaries,  is made known to us by others within those
          entities, particularly during th period in which this annual report is
          being prepared;

     b)   evaluated the  effectiveness of the registrant's  disclosure  controls
          and  procedures as of a date within 90 days prior to the filing dat of
          this annual report (the "Evaluation Date"); and

     c)   presented   in  this   annual   report  our   conclusions   about  the
          effectiveness  of the disclosure  controls and procedures based on our
          evaluation as of the Evaluation Date;

5.   The registrant's other certifying  officers and I have disclosed,  based on
     our most recent  evaluation,  to the  registrant's  auditors  and the audit
     committee of  registrant's  board of directors (or persons  performing  the
     equivalent function):

     a)   all  significant  deficiencies  in the design or operation of internal
          controls  which could  adversely  affect the  registrant's  ability to
          record,  process,   summarize  and  report  financial  data  and  have
          identified for the  registrant's  auditors any material  weaknesses in
          internal controls; and

     b)   any fraud, whether or not material,  that involves management or other
          employees who have a  significant  role in the  registrant's  internal
          controls; and

6.   The  registrant's  other  certifying  officers and I have indicated in this
     annual  report  whether or not there were  significant  changes in internal
     controls  or in other  factors  that could  significantly  affect  internal
     controls  subsequent to the date of our most recent  evaluation,  including
     any corrective actions with regard to significant deficiencies and material
     weaknesses.

Date: September 27, 2002                   /s/ Kenneth L. Bertrand
                                           -------------------------------------
                                           Kenneth L. Bertrand
                                           President and Chief Executive Officer



                                       35

<PAGE>



                              ALLIED FIRST BANCORP, INC.
                      CHIEF FINANCIAL OFFICER CERTIFICATION

I, Brian Weiss, certify that:

1.   I have reviewed this annual report on Form 10-KSB of Allied First  Bancorp,
     Inc.;

2.   Based on my  knowledge,  this  annual  report  does not  contain any untrue
     statement of a material fact or omit to state a material fact  necessary to
     make the statements  made, in light of the  circumstances  under which such
     statements  were made, not misleading with respect to the period covered by
     this annual report;

3.   Based on my  knowledge,  the  financial  statements,  and  other  financial
     information included in this annual report,  fairly present in all material
     respects the financial  condition,  results of operations and cash flows of
     the registrant as of, and for, the periods presented in this annual report;

4.   The  registrant's  other  certifying  officers  and I are  responsible  for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

     c)   designed  such  disclosure  controls  and  procedures  to ensure  that
          material  information  relating  to  the  registrant,   including  its
          consolidated subsidiaries,  is made known to us by others within those
          entities, particularly during th period in which this annual report is
          being prepared;

     d)   evaluated the  effectiveness of the registrant's  disclosure  controls
          and  procedures as of a date within 90 days prior to the filing dat of
          this annual report (the "Evaluation Date"); and

     e)   presented   in  this   annual   report  our   conclusions   about  the
          effectiveness  of the disclosure  controls and procedures based on our
          evaluation as of the Evaluation Date;

5.   The registrant's other certifying  officers and I have disclosed,  based on
     our most recent  evaluation,  to the  registrant's  auditors  and the audit
     committee of  registrant's  board of directors (or persons  performing  the
     equivalent function):

     a)   all  significant  deficiencies  in the design or operation of internal
          controls  which could  adversely  affect the  registrant's  ability to
          record,  process,   summarize  and  report  financial  data  and  have
          identified for the  registrant's  auditors any material  weaknesses in
          internal controls; and

     b)   any fraud, whether or not material,  that involves management or other
          employees who have a  significant  role in the  registrant's  internal
          controls; and

6.   The  registrant's  other  certifying  officers and I have indicated in this
     annual  report  whether or not there were  significant  changes in internal
     controls  or in other  factors  that could  significantly  affect  internal
     controls  subsequent to the date of our most recent  evaluation,  including
     any corrective actions with regard to significant deficiencies and material
     weaknesses.

Date:  September 27, 2002                          /s/ Brian Weiss
                                                   -----------------------------
                                                   Brian Weiss
                                                   Chief Financial Officer


                                       36