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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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FORM 10-Q



(Mark one)

|x |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- |  | ---------------------------------------------------------------------------------------



For the quarter ended March 31, 2003



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 0-18121



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MAF BANCORP, INC.

(Exact name of registrant as specified in its charter)



|Delaware                                 |  | 36-3664868         
|---------------------------------------- |  | -------------------
|(State of Incorporation)                 |  | (I.R.S. Employer   
|                                         |  | Identification No.)
|                                        
|55th Street & Holmes Avenue              |  |                    
|Clarendon Hills, Illinois                |  | 60514              
|(Address of Principal Executive Offices) |  | (Zip Code)         



Registrants
telephone number: (630) 325-7300



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



Indicate by checkmark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).    Yes  þNo   ̈



The number of shares outstanding of the issuers common stock, par value $.01 per share, was 23,316,374 at May 9, 2003.



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1



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##### Table of Contents



MAF BANCORP, INC. AND SUBSIDIARIES



FORM 10-Q



|Part I.  |  | Financial Information                                                                                           |  | Page
|-------- |  | --------------------------------------------------------------------------------------------------------------- |  | ----
|        
|Item 1.  |  | Financial Statements                                                                                            |  |     
|        
|         |  | Consolidated Statements of Financial Condition as of March 31, 2003 and December 31, 2002 (unaudited)           |  | 3   
|        
|         |  | Consolidated Statements of Operations for the Three Months Ended March 31, 2003 and 2002 (unaudited)            |  | 4   
|        
|         |  | Consolidated Statement of Changes in Stockholders Equity for the Three Months Ended March 31, 2003 (unaudited) |  | 5   
|        
|         |  | Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2003 and 2002 (unaudited)            |  | 6   
|        
|         |  | Notes to Unaudited Consolidated Financial Statements (unaudited)                                                |  | 8   
|        
|Item 2.  |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                           |  | 12  
|        
|Item 3.  |  | Quantitative and Qualitative Disclosures About Market Risk                                                      |  | 29  
|        
|Item 4.  |  | Controls and Procedures                                                                                         |  | 29  
|        
|Part II. |  | Other Information                                                                                               |  |     
|        
|Item 1.  |  | Legal Proceedings                                                                                               |  | 30  
|        
|Item 2.  |  | Changes in Securities                                                                                           |  | 30  
|        
|Item 3.  |  | Defaults Upon Senior Securities                                                                                 |  | 30  
|        
|Item 4.  |  | Submission of Matters to a Vote of Security Holders                                                             |  | 30  
|        
|Item 5.  |  | Other Information                                                                                               |  | 30  
|        
|Item 6.  |  | Exhibits and Reports on Form 8-K                                                                                |  | 30  
|        
|         |  | Signature Page                                                                                                  |  | 32  
|        
|         |  | Certifications for Principal Financial Officer and Principal Executive Officer                                  |  | 33  



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##### Table of Contents



Part I. Financial
Information



Item 1. Financial Statements



MAF BANCORP, INC. AND SUBSIDIARIES



Consolidated Statements of Financial Condition

(Dollars in thousands)

(Unaudited)



|                                                                                                                                   |  | March 31, 2003 |           |   | December 31, 2002 |          
|---------------------------------------------------------------------------------------------------------------------------------- |  | -------------- | --------- | - | ----------------- | ---------
|Assets                                                                                                                             |  |                |           |   |                   |          
|Cash and due from banks                                                                                                            |  | $              | 96,452    |   |                   | 134,265  
|Interest-bearing deposits                                                                                                          |  |                | 200,059   |   |                   | 28,210   
|Federal funds sold                                                                                                                 |  |                | 196,812   |   |                   | 100,205  
|                                                                                                                                   |  |                |           |   |                   |          
|Total cash and cash equivalents                                                                                                    |  |                | 493,323   |   |                   | 262,680  
|                                                                                                                                   |  |                |           |   |                   |          
|Investment securities available for sale, at fair value                                                                            |  |                | 289,004   |   |                   | 308,235  
|Stock in Federal Home Loan Bank of Chicago, at cost                                                                                |  |                | 204,413   |   |                   | 169,708  
|Mortgage-backed securities available for sale, at fair value                                                                       |  |                | 304,966   |   |                   | 365,638  
|Loans receivable held for sale                                                                                                     |  |                | 68,076    |   |                   | 167,780  
|Loans receivable, net of allowance for losses of $19,471 and $19,483                                                               |  |                | 4,327,498 |   |                   | 4,363,152
|Accrued interest receivable                                                                                                        |  |                | 22,630    |   |                   | 27,513   
|Foreclosed real estate                                                                                                             |  |                | 2,127     |   |                   | 2,366    
|Real estate held for development or sale                                                                                           |  |                | 20,451    |   |                   | 14,938   
|Premises and equipment, net                                                                                                        |  |                | 74,449    |   |                   | 72,492   
|Other assets                                                                                                                       |  |                | 60,891    |   |                   | 67,753   
|Goodwill                                                                                                                           |  |                | 95,346    |   |                   | 94,796   
|Intangibles                                                                                                                        |  |                | 21,756    |   |                   | 20,130   
|                                                                                                                                   |  |                |           |   |                   |          
|                                                                                                                                   |  | $              | 5,984,930 |   |                   | 5,937,181
|                                                                                                                                   |  |                |           |   |                   |          
|Liabilities and Stockholders Equity                                                                                               |  |                |           |   |                   |          
|Liabilities:                                                                                                                       |  |                |           |   |                   |          
|Deposits                                                                                                                           |  | $              | 3,814,744 |   |                   | 3,751,237
|Borrowed funds                                                                                                                     |  |                | 1,501,500 |   |                   | 1,556,500
|Advances by borrowers for taxes and insurance                                                                                      |  |                | 38,152    |   |                   | 37,700   
|Accrued expenses and other liabilities                                                                                             |  |                | 113,516   |   |                   | 90,286   
|                                                                                                                                   |  |                |           |   |                   |          
|Total liabilities                                                                                                                  |  |                | 5,467,912 |   |                   | 5,435,723
|                                                                                                                                   |  |                |           |   |                   |          
|Stockholders equity:                                                                                                              |  |                |           |   |                   |          
|Preferred stock, $.01 par value; authorized 5,000,000 shares; none outstanding                                                     |  |                |          |   |                   |         
|Common stock, $.01 par value; authorized 80,000,000 shares; 25,420,650 shares issued; 23,310,396
and 23,252,815 shares outstanding |  |                | 254       |   |                   | 254      
|Additional paid-in capital                                                                                                         |  |                | 204,839   |   |                   | 204,710  
|Retained earnings, substantially restricted                                                                                        |  |                | 357,841   |   |                   | 342,790  
|Accumulated other compensative income                                                                                              |  |                | 3,865     |   |                   | 4,819    
|Stock in gain deferral plan; 237,431 and 236,401 shares                                                                            |  |                | 887       |   |                   | 851      
|Treasury stock, at cost; 2,110,254 and 2,167,835 shares                                                                            |  |                | (50,668   | ) |                   | (51,966  
|                                                                                                                                   |  |                |           |   |                   |          
|Total stockholders equity                                                                                                         |  |                | 517,018   |   |                   | 501,458  
|                                                                                                                                   |  |                |           |   |                   |          
|                                                                                                                                   |  | $              | 5,984,930 |   |                   | 5,937,181
|                                                                                                                                   |  |                |           |   |                   |          



See accompanying notes to unaudited consolidated financial statements.



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MAF BANCORP, INC. AND SUBSIDIARIES



Consolidated Statements of Operations

(Dollars in thousands, except per share data)

(Unaudited)



|                                                    |  | Three Months Ended March 31, |       
|--------------------------------------------------- |  | ---------------------------- | ------
|                                                    |  | 2003                         |       
|Interest income:                                    |  |                              |       
|Loans receivable                                    |  | $                            | 66,985
|Mortgage-backed securities available for sale       |  |                              | 3,523 
|Investment securities available for sale            |  |                              | 5,345 
|Interest-bearing deposits and federal funds sold    |  |                              | 1,173 
|                                                    |  |                              |       
|Total interest income                               |  |                              | 77,026
|                                                    |  |                              |       
|Interest expense:                                   |  |                              |       
|Deposits                                            |  |                              | 16,962
|Borrowed funds                                      |  |                              | 19,009
|                                                    |  |                              |       
|Total interest expense                              |  |                              | 35,971
|                                                    |  |                              |       
|Net interest income                                 |  |                              | 41,055
|Provision for loan losses                           |  |                              |      
|                                                    |  |                              |       
|Net interest income after provision for loan losses |  |                              | 41,055
|Non-interest income:                                |  |                              |       
|Gain (loss) on sale or writedown of:                |  |                              |       
|Loans receivable held for sale                      |  |                              | 7,548 
|Mortgage-backed securities                          |  |                              | 5,352 
|Investment securities                               |  |                              | (5,712
|Foreclosed real estate                              |  |                              | (69   
|Income from real estate operations                  |  |                              | 1,635 
|Deposit account service charges                     |  |                              | 5,439 
|Loan servicing fee expense, net                     |  |                              | (1,376
|Brokerage commissions                               |  |                              | 731   
|Other                                               |  |                              | 2,466 
|                                                    |  |                              |       
|Total non-interest income                           |  |                              | 16,014
|                                                    |  |                              |       
|Non-interest expense:                               |  |                              |       
|Compensation and benefits                           |  |                              | 15,638
|Office occupancy and equipment                      |  |                              | 3,531 
|Advertising and promotion                           |  |                              | 1,321 
|Data processing                                     |  |                              | 973   
|Other                                               |  |                              | 4,832 
|Amortization of core deposit intangibles            |  |                              | 379   
|                                                    |  |                              |       
|Total non-interest expense                          |  |                              | 26,674
|                                                    |  |                              |       
|Income before income taxes                          |  |                              | 30,395
|Income tax expense                                  |  |                              | 11,107
|                                                    |  |                              |       
|Net income                                          |  | $                            | 19,288
|                                                    |  |                              |       
|Basic earnings per share                            |  | $                            | .83   
|                                                    |  |                              |       
|Diluted earnings per share                          |  | $                            | .81   
|                                                    |  |                              |       



See accompanying notes to unaudited consolidated financial statements.



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MAF BANCORP, INC. AND SUBSIDIARIES



Consolidated Statement of Changes in Stockholders Equity

(Dollars in thousands)

(Unaudited)



|                                                                   |  | Three Months Ended March 31, 2003 |    
|------------------------------------------------------------------ |  | --------------------------------- | ---
|                                                                   |  | Common stock                      |    
|Balance at December 31, 2002                                       |  | $                                 | 254
|                                                                   |  |                                   |    
|Comprehensive income:                                              |  |                                   |    
|Net income                                                         |  |                                   |   
|Other comprehensive income, net of tax:                            |  |                                   |    
|Unrealized holding loss during the period                          |  |                                   |   
|Less: reclassification adjustment of loss included in net income   |  |                                   |   
|                                                                   |  |                                   |    
|Total comprehensive income                                         |  |                                   |   
|                                                                   |  |                                   |    
|Exercise of 26,716 stock options and reissuance of treasury stock  |  |                                   |   
|Transfer of 33,896 treasury shares into deferred compensation plan |  |                                   |   
|Tax benefits from stock-related compensation                       |  |                                   |   
|Cash dividends declared ($.18 per share)                           |  |                                   |   
|Dividends paid to gain deferral plan                               |  |                                   |   
|                                                                   |  |                                   |    
|Balance at March 31, 2003                                          |  | $                                 | 254
|                                                                   |  |                                   |    



See accompanying notes to unaudited consolidated financial statements.



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MAF BANCORP, INC. AND SUBSIDIARIES



Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)



|                                                                                  |  | Three Months Ended March 31, |         
|--------------------------------------------------------------------------------- |  | ---------------------------- | --------
|                                                                                  |  | 2003                         |         
|Operating activities:                                                             |  |                              |         
|Net income                                                                        |  | $                            | 19,288  
|Adjustments to reconcile net income to net cash provided by operating activities: |  |                              |         
|Depreciation and amortization                                                     |  |                              | 1,805   
|FHLB of Chicago stock dividend                                                    |  |                              | (4,705  
|Deferred income tax benefit                                                       |  |                              | (3,337  
|Amortization of core deposit intangibles                                          |  |                              | 379     
|Amortization of premiums, discounts, and deferred loan fees                       |  |                              | 957     
|Amortization of mortgage servicing rights                                         |  |                              | 2,955   
|Net gain on sale of loans receivable held for sale                                |  |                              | (7,548  
|Net gain on sale of investment securities and mortgage-backed securities          |  |                              | 360     
|Net gain on real estate held for development or sale                              |  |                              | (1,635  
|Decrease in accrued interest receivable                                           |  |                              | 4,883   
|Net increase in other assets and liabilities                                      |  |                              | 27,642  
|Loans originated for sale                                                         |  |                              | (378,761
|Sale of loans originated for sale                                                 |  |                              | 483,502 
|                                                                                  |  |                              |         
|Net cash provided by operating activities                                         |  |                              | 145,785 
|                                                                                  |  |                              |         
|Investing activities:                                                             |  |                              |         
|Loans receivable originated for investment                                        |  |                              | (676,734
|Principal repayments on loans receivable                                          |  |                              | 628,512 
|Principal repayments on mortgage-backed securities                                |  |                              | 57,173  
|Proceeds from maturities of investment securities available for sale              |  |                              | 37,724  
|Proceeds from sale of:                                                            |  |                              |         
|Investment securities available for sale                                          |  |                              | 34,968  
|Mortgage-backed securities available for sale                                     |  |                              | 151,708 
|Real estate held for development or sale                                          |  |                              | 5,185   
|Purchases of:                                                                     |  |                              |         
|Investment securities available for sale                                          |  |                              | (57,865 
|Mortgage-backed securities available for sale                                     |  |                              | (61,383 
|Stock in FHLB of Chicago                                                          |  |                              | (30,000 
|Real estate held for development or sale                                          |  |                              | (7,206  
|Premises and equipment                                                            |  |                              | (3,662  
|                                                                                  |  |                              |         
|Net cash provided by investing activities                                         |  | $                            | 78,420  
|                                                                                  |  |                              |         



(continued)



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MAF BANCORP, INC. AND SUBSIDIARIES



Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)



|                                                          |  | Three Months Ended March 31, |        
|--------------------------------------------------------- |  | ---------------------------- | -------
|                                                          |  | 2003                         |        
|Financing activities:                                     |  |                              |        
|Repayment of FHLB of Chicago advances                     |  |                              | (55,000
|Proceeds from exercise of stock options                   |  |                              | 486    
|Purchase of treasury stock                                |  |                              |       
|Cash dividends                                            |  |                              | (3,450 
|Net increase in deposits                                  |  |                              | 63,950 
|Increase in advances by borrowers for taxes and insurance |  |                              | 452    
|                                                          |  |                              |        
|Net cash provided by financing activities                 |  |                              | 6,438  
|                                                          |  |                              |        
|Increase in cash and cash equivalents                     |  |                              | 230,643
|Cash and cash equivalents at beginning of period          |  |                              | 262,680
|                                                          |  |                              |        
|Cash and cash equivalents at end of period                |  | $                            | 493,323
|                                                          |  |                              |        
|Supplemental disclosure of cash flow information:         |  |                              |        
|Cash paid during the period for:                          |  |                              |        
|Interest on deposits and borrowed funds                   |  | $                            | 35,975 
|Income taxes                                              |  |                              | 1,278  
|Summary of non-cash transactions:                         |  |                              |        
|Transfer of loans receivable to foreclosed real estate    |  |                              | 626    
|Loans receivable swapped into mortgage-backed securities  |  | $                            | 103,289
|                                                          |  |                              |        



See accompanying notes to unaudited consolidated financial statements.



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MAF BANCORP, INC. AND SUBSIDIARIES



Notes to Unaudited Consolidated Financial Statements

Three Months Ended March 31, 2003 and 2002

(Unaudited)



(1) Basis of Presentation



The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions
to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the
opinion of management, all adjustments (consisting of only normal recurring accruals) necessary for a fair presentation have been included. The results of operations for the three months ended March 31, 2003 are not necessarily indicative of results
that may be expected for the year ending December 31, 2003.



The consolidated financial statements include the accounts of MAF Bancorp, Inc. (Company), and its wholly-owned subsidiaries, Mid America Bank, fsb and subsidiaries (Bank) and MAF Developments, Inc.
(MAFD), as of and for the three month periods ended March 31, 2003 and 2002 and as of December 31, 2002. All material intercompany balances and transactions have been eliminated in consolidation.





(2)
Earnings Per Share



Earnings per share is
determined by dividing net income for the period by the weighted average number of shares outstanding. Stock options are regarded as potential common stock and are considered in the diluted earnings per share calculations to the extent that they
have a dilutive effect. Stock options are the only adjustment made to average shares outstanding in computing diluted earnings per share. Weighted average shares used in calculating earnings per share are summarized below for the periods indicated:



|                                                                 |  | Three Months Ended March 31,                 
|---------------------------------------------------------------- |  | ---------------------------------------------
|                                                                 |  | 2003                                         
|                                                                 |  | Income (Numerator)                           
|                                                                 |  | (Dollars in thousands, except per share data)
|Basic earnings per share:                                        |  |                                              
|Income available to common shareholders                          |  | $                                            
|                                                                 |  |                                              
|Effect of dilutive securities:                                   |  |                                              
|Stock options                                                    |  |                                              
|                                                                 |  |                                              
|Diluted earnings per share:                                      |  |                                              
|Income available to common shareholders plus assumed conversions |  | $                                            
|                                                                 |  |                                              





(3) Commitments and Contingencies



At March 31, 2003, the Bank had outstanding commitments to originate one-to-four family loans of $953.1 million, of which $541.8 million were
fixed-rate loans and $411.3 million were adjustable-rate loans. Prospective borrowers had locked the interest rate on $469.3 million of these commitments, of which $320.9 million were fixed-rate loans, with rates ranging from 4.125% to 6.625%, and
$148.4 million were adjustable rate loans with rates ranging from 3.875% to 7.50%. The interest rates on the remaining commitments of $483.8 million float at current market rates. At March 31, 2003, the Bank had outstanding forward commitments to
sell $246.1 million of fixed-rate mortgage loans.



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At March 31, 2003, the Bank had outstanding standby letters of credit totaling $13.6 million. Of
this amount $13.3 million is comprised of letters of credit to enhance a developers industrial revenue bond financings of commercial real estate in the Banks market. These two letters of credit are collateralized by mortgage-backed
securities and U.S. Government and agency securities owned by the Bank. Additionally, the Company had outstanding standby letters of credit totaling $12.1 million related to real estate development improvements.



The contractual amounts of credit-related financial instruments such as
commitments to extend credit, and letters of credit, represent the amounts of potential accounting loss should the contract be fully drawn upon, the customer default, and the value of any existing collateral become worthless. At March 31, 2003, the
Bank had $7.8 million of credit risk related to loans sold to the Federal Home Loan Bank Mortgage Partnership Finance Program (MPF), $3.9 million of loans sold with recourse to other investors, and $9.4 million of credit risk related to
loans with private mortgage insurance in force.





(4) Statement of Cash Flows



For purposes of reporting cash flows, cash and cash equivalents include cash and due from banks, interest-bearing deposits and federal funds sold.
Generally, federal funds are sold for one-day periods and interest-bearing deposits mature within one day to three months.





(5) Reclassifications



Certain reclassifications of 2002 amounts have been made to conform
with the current period presentation.





(6) Segment Information



The Company utilizes the management approach for segment reporting. This approach is based on the way that a chief decision maker for
the Company organizes segments for making operating decisions and assessing performance.



The Company operates two separate lines of business. The Banking segment represents the retail bank, participating in primarily residential mortgage portfolio lending, deposit gathering and offering other
financial services mainly to individuals and small businesses. Land Development consists primarily of developing raw land for residential use and sale to builders. All goodwill has been allocated to the Banking segment. Selected segment information
is included in the tables below:



|                           |  | At or For the Three Months Ended March 31, 2003
|-------------------------- |  | -----------------------------------------------
|                           |  | Banking                                        
|                           |  | (In thousands)                                 
|Interest income            |  | $                                              
|Interest expense           |  |                                                
|                           |  |                                                
|Net interest income        |  |                                                
|Non-interest income        |  |                                                
|Non-interest expense       |  |                                                
|                           |  |                                                
|Income before income taxes |  |                                                
|Income tax expense         |  |                                                
|                           |  |                                                
|Net income                 |  | $                                              
|                           |  |                                                
|Average assets             |  | $                                              
|                           |  |                                                



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|                           |  | At or For the Three Months Ended March 31, 2002
|-------------------------- |  | -----------------------------------------------
|                           |  | Banking                                        
|                           |  | (In thousands)                                 
|Interest income            |  | $                                              
|Interest expense           |  |                                                
|                           |  |                                                
|Net interest income        |  |                                                
|Non-interest income        |  |                                                
|Non-interest expense       |  |                                                
|                           |  |                                                
|Income before income taxes |  |                                                
|Income tax expense         |  |                                                
|                           |  |                                                
|Net income                 |  | $                                              
|                           |  |                                                
|Average assets             |  | $                                              
|                           |  |                                                





(7) Goodwill and Intangible Assets



The Company adopted Statement of Financial Accounting Standards (SFAS) No. 142, Goodwill and Other Intangible Assets
and SFAS No. 147, Acquisitions of Certain Financial Institutions-an amendment of the Financial Accounting Standards Board, (FASB) No. 72 and 144 and FASB Interpretation No. 9, effective January 1, 2002. These pronouncements provide
that intangible assets with finite lives be amortized and that goodwill and intangible assets with indefinite lives will not be amortized, but rather tested at least annually for impairment. As required, the Company discontinued the amortization of
goodwill as of January 1, 2002 and goodwill currently has a net carrying amount of $95.3 million at March 31, 2003. The Company evaluates goodwill for impairment at least annually.



The changes in the carrying amount of goodwill, by segment, for the three months ended March 31, 2003 is as follows:



|                                       |  | Banking                |        | Land Development |   | Total
|-------------------------------------- |  | ---------------------- | ------ | ---------------- | - | -----
|                                       |  | (Dollars in thousands)
|Balance as of December 31, 2002        |  | $                      | 94,796 |                  |  |      
|Addition related to branch acquisition |  |                        | 550    |                  |  |      
|                                       |  |                        |        |                  |   |      
|Balance at March 31, 2003              |  | $                      | 95,346 |                  |  |      
|                                       |  |                        |        |                  |   |      



The changes in the
carrying amount of intangibles for the three months ended March 31, 2003 is as follows:



|                             |  | Core deposit Intangibles |       |   | Mortgage Servicing Rights |        |   | Total |       
|---------------------------- |  | ------------------------ | ----- | - | ------------------------- | ------ | - | ----- | ------
|                             |  | (Dollars in thousands)   |      
|Balance at December 31, 2002 |  | $                        | 7,170 |   |                           | 12,960 |   |       | 20,130
|Additions                    |  |                          | 84    |   |                           | 4,876  |   |       | 4,960 
|Amortization expense         |  |                          | (379  | ) |                           | (2,955 | ) |       | (3,334
|                             |  |                          |       |   |                           |        |   |       |       
|Balance at March 31, 2003    |  | $                        | 6,875 |   |                           | 14,881 |   |       | 21,756
|                             |  |                          |       |   |                           |        |   |       |       



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The following is a summary of intangible assets subject to amortization:



|                             |  | As of March 31, 2003   |        |                          | As of December 31, 2002 |  
|---------------------------- |  | ---------------------- | ------ | ------------------------ | ----------------------- | -
|                             |  | Gross Carrying Amount  |        | Accumulated Amortization |                         |  
|                             |  | (Dollars in thousands) |       
|Core deposit intangibles     |  | $                      | 16,031 |                          | (9,156                  | )
|Mortgage servicing rights(1) |  |                        | 17,271 |                          | (2,390                  | )
|                             |  |                        |        |                          |                         |  
|Total                        |  | $                      | 33,302 |                          | (11,546                 | )
|                             |  |                        |        |                          |                         |  

---

|(1) |  | The gross carrying amounts for March 31, 2003 and December 31, 2002 is net of impairment reserves of $3.4 million.
|--- |  | ------------------------------------------------------------------------------------------------------------------



Amortization expense for core deposit intangibles and mortgage servicing
rights for the three months ended March 31, 2003 and estimates for the nine months ended December 31, 2003 and five years thereafter are as follows. These estimates are based on the carrying value of the Banks core deposit intangibles and
mortgage servicing rights as of March 31, 2003.



|                                            |  | Core Deposit Intangibles |       | Mortage Servicing Rights
|------------------------------------------- |  | ------------------------ | ----- | ------------------------
|                                            |  | (Dollars in thousands)  
|Aggregate Amortization Expense:             |  |                          |       |                         
|For the Three months ended March 31, 2003   |  | $                        | 379   |                         
|Estimated Amortization Expense:             |  |                          |       |                         
|For the Nine Months Ended December 31, 2003 |  |                          | 1,100 |                         
|For the Year Ended December 31, 2004        |  |                          | 1,400 |                         
|For the Year Ended December 31, 2005        |  |                          | 1,300 |                         
|For the Year Ended December 31, 2006        |  |                          | 900   |                         
|For the Year Ended December 31, 2007        |  |                          | 600   |                         
|For the Year Ended December 31, 2008        |  |                          | 600   |                         
|                                            |  |                          |       |                         





(8) Stock Option Plans



The Company applies APB Opinion 25, Accounting for Stock Issued to Employees, and related Interpretations in accounting for its stock
option plans. Accordingly, no compensation cost has been recognized for its stock option plans. Had compensation cost for the Companys stock option plans been determined based on the fair value at the grant dates for awards under those plans
consistent with the method of SFAS No. 148, Accounting for Stock-Based Compensation-Transition and Disclosure, the Companys net income and earnings per share would have been reduced to the pro forma amounts indicated in the table
below:



|                           |  |             |  | Three Months Ended March 31,                 
|-------------------------- |  | ----------- |  | ---------------------------------------------
|                           |  |             |  | 2003                                         
|                           |  |             |  | (Dollars in thousands, except per share data)
|Net income                 |  | As reported |  | $                                            
|                           |  | Pro-forma   |  |                                              
|Basic earnings per share   |  | As reported |  |                                              
|                           |  | Pro-forma   |  |                                              
|Diluted earnings per share |  | As reported |  |                                              
|                           |  | Pro-forma   |  |                                              
|                           |  |             |  |                                              



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(9) New Accounting Pronouncements



In January 2003, the FASB issued Interpretation No.
46, Consolidation of Variable Interest Entities which provides new accounting guidance on when to consolidate a variable interest entity. A variable interest entity exists when either the total equity investment at risk is not sufficient
to permit the entity to finance its activities by itself, or the equity investors lack one of three characteristics associated with owning a controlling financial interest. Those characteristics include the direct or indirect ability to make
decisions about an entitys activities through voting rights or similar rights, the obligation to absorb the expected loss of an entity if they occur, and the right to receive the expected residual return of the entity if they occur. The
Company does not expect that the adoption of this Interpretation to have a material impact on our consolidated financial statements.



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations



Cautionary Statement Regarding Forward-Looking Information



This report, in Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations and elsewhere,
contains, and other periodic reports and press releases of the Company may contain, certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of
1934, as amended. The Company intends such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and is including this statement for
purposes of invoking these safe harbor provisions. Forward-looking statements, which are based on certain assumptions and describe future plans, strategies and expectations of the Company, are generally identifiable by use of the words
believe, expect, intend, anticipate, estimate, project, plan, or similar expressions. The Companys ability to predict results or the actual effect of future
plans or strategies is inherently uncertain and actual results may differ from those predicted. The Company undertakes no obligation to update these forward-looking statements in the future. Factors which could have a material adverse effect on
operations and could affect managements outlook or future prospects of the Company and its subsidiaries include, but are not limited to, difficulties in achieving anticipated cost savings related to the operation of the acquired banking
offices of Fidelity Bancorp or higher than expected costs related to the Fidelity transaction, unanticipated changes in interest rates or flattening of the yield curve, deteriorating economic conditions which could result in increased delinquencies
in the Companys or Fidelitys loan portfolio, legislative or regulatory developments, monetary and fiscal policies of the U.S. Government, including policies of the U.S. Treasury and the Federal Reserve Board, the quality or composition
of the Companys or Fidelitys loan or investment portfolios, or further deterioration in the value of investment securities, demand for loan products, secondary mortgage market conditions, deposit flows, competition, demand for financial
services and residential real estate in the Companys and Fidelitys market areas, unanticipated slow downs in real estate lot sales or problems in closing pending real estate contracts, delays in real estate development projects, the
possible short-term dilutive effect of other potential acquisitions, if any, and changes in accounting principles, policies and guidelines. These risks and uncertainties should be considered in evaluating forward-looking statements and undue
reliance should not be placed on such statements.



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Overview



Set forth below are highlights of the Companys first
quarter 2003 performance results:



| |  |  | Diluted EPS of $.81, up 15.7% from $.70 in last years first quarter;
| | - |  | ---------------------------------------------------------------------



| |  |  | Net income of $19.3 million, up 15.9% from the year ago quarter;
| | - |  | ----------------------------------------------------------------



| |  |  | Net interest margin of 2.94%, 21 basis points ahead of a year ago;
| | - |  | ------------------------------------------------------------------



| |  |  | Return on average equity of 15.10% for the quarter;
| | - |  | ---------------------------------------------------



| |  |  | Return on average assets of 1.30% for the current period;
| | - |  | ---------------------------------------------------------



| |  |  | Loan origination volume of $1.1 billion;
| | - |  | ----------------------------------------



| |  |  | Loan sale volume of $478 million, producing loan sale gains of $7.5 million;
| | - |  | ----------------------------------------------------------------------------



| |  |  | Completion of the purchase of a branch office on Chicagos west side.
| | - |  | ---------------------------------------------------------------------



General



MAF Bancorp, Inc. (Company), is a registered savings and loan holding company incorporated under the laws of the state of Delaware and
is primarily engaged in the retail banking business through its wholly-owned subsidiary, Mid America Bank, fsb (Bank), and in the residential land development business primarily through MAF Developments, Inc.



The Bank offers various financial services to its customers through a
network of 34 branches in suburban and urban communities in the Chicago metropolitan area including 10 locations on the north and northwest side of Chicago, a strong presence in Cook County and DuPage County, and increasing penetration of the
rapidly-growing Will and Kane Counties, as well as a presence in the southwest suburbs of Chicago. In March 2003, a new branch office was acquired on the west side of Chicago and another five banking locations are expected to be added upon the
consummation of the pending acquisition of Fidelity Bancorp. Management has current plans to open another five banking offices during 2003 with sites now under construction or in development. The Bank is principally engaged in the business of
attracting deposits from the general public and using such deposits, along with other borrowings, to make loans secured by real estate, primarily one-to four-family residential loans. To a lesser extent, the Bank also makes multi-family mortgage,
commercial, residential construction, land acquisition and development and a variety of consumer loans.



The Company also participates in the following businesses through the designated subsidiaries:



|Subsidiary                             |  | Activity                                         
|-------------------------------------- |  | -------------------------------------------------
|MAF Developments; NW Financial, Inc.   |  | Residential land development                     
|Mid America Insurance Agency, Inc.     |  | General insurance services                       
|Centre Point Title Services, Inc.      |  | General title services for Bank loan customers   
|Mid America Investments Services, Inc. |  | INVEST affiliate investment services/brokerage   
|MAF Realty Co., LLC III;               |  |                                                  
|MAF Realty Co., LLC IV                 |  | Real estate investment trust                     
|Mid America Re, Inc.                   |  | Captive reinsurance of private mortgage insurance



As it has in
recent years, the Company expects to continue to search for and evaluate potential acquisition opportunities that could enhance franchise value and may periodically be presented with opportunities to acquire other institutions, branches or deposits
in the Chicago metropolitan area or which allow the Company to expand outside its current primary market areas. Management intends to review acquisition opportunities across a variety of parameters, including the potential impact on its financial
condition as well as its financial performance in the future. It is anticipated that future acquisitions, if any, will likely be valued at a premium to book value, and generally at a premium to current market value. As such, management anticipates
that acquisitions made by the Company could involve some short-term book value per share dilution and earnings per share dilution depending on the Companys success in integrating the operations of businesses acquired and the level of cost
savings and revenue enhancements that may be achieved.



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##### Table of Contents



On March 28, 2003, the
Company completed the purchase of a branch office on the west side of Chicago. Deposits at the branch office totaled approximately $8 million at closing. The Company has also received regulatory approval to open a new branch facility in a
neighborhood on the near southwest side of Chicagos central business district and expects to open this office later in 2003.



On December 17, 2002, the Company announced it had reached an agreement to acquire Fidelity Bancorp in an all-stock transaction valued at
approximately $101 million on the date of announcement. The Company expects this transaction to close in mid-2003. At March 31, 2003, Fidelity had assets of $723 million, deposits of $458 million and five branch offices in the Chicago area.



Regulation and Supervision



As a federally chartered savings bank, the Banks deposits are
insured up to the applicable limits by the Federal Deposit Insurance Corporation (FDIC). The Bank is a member of the Federal Home Loan Bank (FHLB) of Chicago, which is one of the twelve regional banks for federally insured
savings institutions comprising the FHLB system. The Bank is regulated by the Office of Thrift Supervision (OTS) and the FDIC. The Bank is further regulated by the Board of Governors of the Federal Reserve System as to reserves required
to be maintained against deposits and certain other matters. Such regulation and supervision establishes a comprehensive framework of activities in which an institution can engage and is intended primarily for the protection of the insurance fund
and depositors. The regulatory structure also gives the regulatory authorities extensive discretion in connection with their supervisory and enforcement activities. Any change in such regulation, whether by the OTS, the FDIC or Congress could have a
material impact on the Company and its operations.



Capital Standards. Savings associations must satisfy three different measures of capital adequacy: core and tangible capital to total assets ratios as well as a regulatory capital to total risk-weighted assets ratio. The
minimum level required for each of these capital standards is established by regulation. The Company has managed its balance sheet so as to reasonably exceed these minimums.



Core Capital Requirement



The core capital requirement, or the required leverage limit, currently requires a savings institution to
maintain core capital of not less than 3% of adjusted total assets. For the Bank, core capital generally includes common stockholders equity (including retained earnings), and minority interests in the equity accounts of fully consolidated
subsidiaries, less intangibles other than certain servicing rights. Investments in and advances to subsidiaries engaged in activities not permissible for national banks are also required to be deducted in computing core capital.



Tangible Capital Requirement



Under OTS regulation, savings institutions are required to meet a
minimum tangible capital requirement of 1.5% of adjusted total assets. Tangible capital is defined as core capital less any intangible assets, plus purchased mortgage servicing rights in an amount includable in core capital.



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Risk-Based Capital
Requirement



The risk-based capital requirement
provides that savings institutions maintain total capital equal to and not less than 8% of total risk-weighted assets. For purposes of the risk-based capital computation, total capital is defined as core capital, as defined above, plus supplementary
capital, primarily general loan loss reserves (limited to a maximum of 1.25% of total risk-weighted assets). In computing total capital, the supplementary capital included cannot exceed 100% of core capital.



At March 31, 2003 and December 31, 2002, the Bank exceeded all of
the minimum capital requirements as follows:



|                                    |  | March 31, 2003         |           |                  | December 31, 2002 |  
|----------------------------------- |  | ---------------------- | --------- | ---------------- | ----------------- | -
|                                    |  | Amount                 |           | Percent ofAssets |                   |  
|                                    |  | (Dollars in thousands) |          
|Stockholders equity of the Bank    |  | $                      | 508,781   |                  | 8.54              | %
|                                    |  |                        |           |                  |                   |  
|Tangible capital                    |  | $                      | 401,285   |                  | 6.86              | %
|Tangible capital requirement        |  |                        | 87,660    |                  | 1.50              |  
|                                    |  |                        |           |                  |                   |  
|Excess                              |  | $                      | 313,625   |                  | 5.36              | %
|                                    |  |                        |           |                  |                   |  
|Core capital                        |  | $                      | 401,285   |                  | 6.86              | %
|Core capital requirement            |  |                        | 175,320   |                  | 3.00              |  
|                                    |  |                        |           |                  |                   |  
|Excess                              |  | $                      | 225,965   |                  | 3.86              | %
|                                    |  |                        |           |                  |                   |  
|Core and supplementary capital      |  | $                      | 413,625   |                  | 12.13             | %
|Risk-based capital requirement      |  |                        | 272,859   |                  | 8.00              |  
|                                    |  |                        |           |                  |                   |  
|Excess                              |  | $                      | 140,766   |                  | 4.13              | %
|                                    |  |                        |           |                  |                   |  
|Total Bank assets                   |  | $                      | 5,956,515 |                  |                   |  
|Adjusted total Bank assets          |  |                        | 5,845,431 |                  |                   |  
|Total risk-weighted assets          |  |                        | 3,521,827 |                  |                   |  
|Adjusted total risk-weighted assets |  |                        | 3,410,742 |                  |                   |  
|                                    |  |                        |           |                  |                   |  



A reconciliation
of consolidated stockholders equity of the Bank for financial reporting purposes to capital available to the Bank to meet regulatory capital requirements is as follows:



|                                                                |  | March 31, 2003 |          |   | December 31, 2002 |         
|--------------------------------------------------------------- |  | -------------- | -------- | - | ----------------- | --------
|                                                                |  | (In thousands) |         
|Stockholders equity of the Bank                                |  | $              | 508,781  |   |                   | 500,746 
|Goodwill and core deposit intangibles                           |  |                | (102,221 | ) |                   | (101,967
|Non-permissible subsidiary deduction                            |  |                | (211     | ) |                   | (208    
|Non-includable mortgage servicing rights                        |  |                | (1,488   | ) |                   | (1,296  
|Regulatory capital adjustment for available for sale securities |  |                | (3,576   | ) |                   | (4,280  
|                                                                |  |                |          |   |                   |         
|Tangible and core capital                                       |  |                | 401,285  |   |                   | 392,995 
|Recourse on loan sales                                          |  |                | (7,089   | ) |                   | (6,477  
|General loan loss reserves                                      |  |                | 19,429   |   |                   | 19,441  
|                                                                |  |                |          |   |                   |         
|Core and supplementary capital                                  |  | $              | 413,625  |   |                   | 405,959 
|                                                                |  |                |          |   |                   |         



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Changes in Financial Condition



Total assets of the Company were $5.98 billion at March 31, 2003, an increase of $47.7 million, or 0.8% from
$5.94 billion at December 31, 2002. The increase is due to higher interest bearing deposits and federal funds held by the Bank, funded by an increase in deposit balances, partially offset by decreases in loans receivable and
mortgage-backed securities.



Cash and short-term
investments totaled a combined $493.3 million at March 31, 2003, an increase of $230.6 million, or 87.8%, from the combined balance of $262.7 million at December 31, 2002. The increase in liquidity is primarily due to sales of mortgage-backed
securities and investments settling toward the end of the quarter. The Company expects to reduce this liquidity level during the remainder of 2003 by reinvesting into mortgage-backed and investment securities, loans receivable, as well as repayment
of debt.



Investment securities available for sale
decreased $19.2 million to $289.0 million at March 31, 2003. The decrease reflects maturities and calls of $37.7 million, and sales of $35.0 million, offset by $57.9 million in purchases of equity securities, government agency and trust preferred
securities as well as approximately $1.5 million of market value increases. The Company recognized a gain of $2.4 million on the sale of investment securities available for sale during the three months ended March 31, 2003, primarily attributable to
gains on corporate debt securities, and to a lesser extent, government agency and equity securities. This was offset, however, by aggregate write-downs for other than temporary impairment in the amount of $8.1 million on the amortized cost of two
floating-rate debt securities, reducing them to a combined estimated fair value of $10.5 million. The write-downs were based on market value quotes as of March 31, 2003 received from independent brokers/dealers. One of the securities is
collateralized by aircraft leases to several different airlines and the other is a collateralized bond obligation secured by various less than investment grade high yield securities. The estimated market values of these securities have been
negatively impacted by the current difficulties in the airline industry and weak economic conditions. See Asset Quality for further information relating to investment securities.



Mortgage-backed securities available for sale decreased $60.7 million to
$305.0 million at March 31, 2003. The Company swapped into mortgage-backed securities $85.3 million of prepayment-protected fixed rate mortgage loans, which were subsequently sold during the first quarter along with an additional $60.9 million of
similar mortgage-backed securities. Normal amortization and prepayments totaled $58.0 million. Purchases of collaterized mortgage obligations (CMOs) and mortgage-backed securities totaled $61.4 million. Included in mortgage-backed
securities classified as available for sale at March 31, 2003, are $230.6 million of CMOs, the majority of which are collateralized by FNMA, FHLMC and GNMA mortgage-backed securities, and to a lesser extent by whole loans.



Loans receivable, including loans held for sale, decreased $135.4
million, or 3.0%, from December 31, 2002, to $4.40 billion at March 31, 2003. The Bank originated $1.06 billion of loans during the three-month period ended March 31, 2003, compared to $678.0 million during the prior year period. The
higher loan origination volume was primarily due to continued mortgage refinance activity, including loan modifications, as interest rates have decreased to historical lows. Offsetting the originations for the quarter was amortization and
prepayments of loans totaling $628.5 million, and sales of $477.6 million. Loans held for sale decreased from December 31, 2002 to March 31, 2003 due to the balance at December 31, 2002 including $40 million of ARM loans and $31 million of
15-year fixed-rate loans as well as $97 million of longer term fixed-rate loans compared to the balance at March 31, 2003 including primarily longer term fixed-rate loans. The Bank has recently started holding 15-year fixed-rate loans in portfolio.



The allowance for loan losses totaled $19.5 million at
March 31, 2003. The Banks allowance for loan losses to total loans outstanding was .45% at March 31, 2003, compared to .44% at December 31, 2002. Non-performing loans decreased $151,000 to $25.2 million, or .58% of total loans receivable at
March 31, 2003, compared to $25.4 million, or .58% of total loans receivable at December 31, 2002. See Asset Quality in this section for a further discussion regarding non-performing assets.



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##### Table of Contents

In determining the allowance for loan losses and the related provision for loan losses, management
considers: (1) subjective factors, including local and general economic business factors and trends, portfolio concentrations and changes in the size and/or general terms of the loan portfolio, (2) historical loss experience and the change in
the mix of the overall portfolio composition over the last five years, (3) specific allocations based upon probable losses identified during the review of the portfolio, and (4) delinquency in the portfolio and the composition of non-performing
loans including the percent of non-performing loans with supplemental mortgage insurance. Based on managements assessment of the adequacy of the loan loss reserve as of March 31, 2003, as well as the composition of the loan portfolio and
non-performing loans, historical loss experience, and the level of non-performing loans, management believes the allowance for loan losses is adequate to provide for losses inherent in the portfolio at March 31, 2003.



Foreclosed real estate decreased $239,000 from December 31, 2002, to
$2.1 million at March 31, 2003. The Banks foreclosed real estate at March 31, 2003 consisted of eight single-family homes.



Real estate held for development or sale increased $5.5 million from December 31, 2002, to $20.5 million at March 31, 2003 primarily due
to continued project development and land acquisition. A summary of the carrying value of real estate held for development or sale follows:



|                        |  | March 31, 2003 |        | December 31, 2002
|----------------------- |  | -------------- | ------ | -----------------
|                        |  | (In thousands)
|Tallgrass of Naperville |  | $              | 3,783  |                  
|Shenandoah              |  |                | 8,723  |                  
|Springbank              |  |                | 7,945  |                  
|                        |  |                |        |                  
|                        |  | $              | 20,451 |                  
|                        |  |                |        |                  



The increase in
the balance of the Tallgrass of Naperville project is due to commercial and residential improvements during the three months ended March 31, 2003. At March 31, 2003, 48 lots remain in Tallgrass, with four under contract. Additionally, the project
has approximately 9 acres remaining for development of townhomes, which are under contract and expected to close in the fourth quarter of 2003 at an estimated profit of $1.8 million. There are also 12.8 acres in two parcels of commercially zoned
land expected to be sold, in bulk, to developers. The first parcel, representing approximately 4.8 acres is under contract and expected to close in the third quarter of 2003 at an estimated profit of $700,000. The Company has a letter of intent on
the remaining commercial parcel of approximately 8.0 acres and expects to close in the fourth quarter of 2003 with an estimated profit of $700,000. The Shenandoah project is a 326-lot development located in Plainfield, Illinois. The Company is
currently developing and selling lots in the first unit of this project. At March 31, 2003, 54 lots in the Shenandoah project were sold and an additional 68 are under contract.



Springbank, another residential development in Plainfield, Illinois, is currently planned to include 1,100 to 1,300
single-family residential lots as well as multi-family parcels depending on zoning ordinances and approvals. At March 31, 2003, MAF Developments, Inc. had multiple real estate purchase contracts that relate to the acquisition of approximately
780 acres of vacant land for this development. The aggregate purchase price of these contracts is $28.4 million of which $6.7 million has been funded to date. The contracts contain various contingencies, including satisfactory soil tests,
environmental testing, and necessary zoning approvals, and provide for the takedown of the land in staggered closings over a four-year period. The proposed development is in its early planning stages and may entail the acquisition of additional land
in the future. The Company is actively pursuing and expects to receive the required zoning and desired plat with the local planning commission in the third quarter of 2003 to develop this project with its joint venture partner. Assuming the Company
proceeds with this project, based on the existing purchase contracts, current estimated total development costs (including land acquisition) are approximately $68 million. The project will include single-family residential lots, multi-family and
commercial parcels, along with various other amenities, including an 18-hole golf course, and is expected to be



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##### Table of Contents

developed in a number of phases over a six- to eight-year period with the first lot closings expected in 2004.



Goodwill increased $550,000 to $95.3 million at March 31, 2003, from
$94.8 million at December 31, 2002 due to a branch acquisition during the quarter.



Deposits increased $63.5 million, to $3.81 billion at March 31, 2003. The increase is primarily due to a $78.1 million increase in core deposit accounts offset by a $14.6 million decrease in certificates of deposit. At March
31, 2003, the Banks core deposits (passbooks, checking and money market accounts) total $2.19 billion or 57.5% of deposits, compared to $2.12 billion, or 56.4% of deposits at December 31, 2002. After consideration of interest of $15.9
million credited to accounts during the three months ended March 31, 2003, net cash inflows were $48.0 million, including $8.0 million acquired in the branch acquisition.



Borrowed funds, which consist primarily of FHLB of Chicago advances, were $1.50 billion at March 31, 2003 and $1.56
billion at December 31, 2002. During the three months ended March 31, 2003, $55.0 million of advances matured. Borrowings at March 31, 2003 also include $51.0 million outstanding on the Companys unsecured bank term loan.



Stockholders equity increased $15.6 million, or 3.1% at March 31,
2003, primarily due to net income of $19.3 million, reduced by cash dividends declared of $4.2 million.



Asset Quality



Non-Performing Assets. A loan (whether considered impaired or not) is classified as non-accrual when collectibility is in doubt. Generally, when a loan is 90 days or more past due, in the process of foreclosure, or in
bankruptcy, the full amount of previously accrued but unpaid interest is deducted from interest income. Income is subsequently recorded to the extent cash payments are received, or at the time when the loan is brought current in accordance with its
original terms. This policy is applied consistently for all types of loans in the Banks loan portfolio. Additionally, the Bank considers the classification of investment securities, should they show signs of deteriorating quality.



Non-performing loans decreased $151,000 to $25.2 million,
or .58% of total loans receivable at March 31, 2003, compared to $25.4 million, or .58% of total loans receivable at December 31, 2002. Non-performing assets increased $9.2 million to $36.9 million, or .62% of total assets, at March 31,
2003, from $27.8 million or .47% of total assets at December 31, 2002, primarily due to two aircraft-related asset-backed securities totaling $9.6 million being placed on non-accrual and classified as substandard. One of these securities, with a
March 31, 2003 carrying value of $5.4 million, was written down by $3.0 million in the fourth quarter of 2002, and the other with a March 31, 2003 carrying value of $4.2 million was written down by $5.0 million in the current quarter. The other
security written down in the current quarter, which management has classified as special mention and is closely monitoring, was current as to principal and interest payments at March 31, 2003 and is still accruing interest. The March 31, 2003
carrying value of this security was $6.3 million after the $3.1 million write-down.



For the quarter ended March 31, 2003, interest on non-accrual loans that would have been recorded as income, had they been performing according to their original terms, amounted to $459,000, compared to $378,000 for the
three months ended March 31, 2002.



Classified
Assets. The federal regulators have adopted a classification system for problem assets of insured institutions which covers all problem assets and requires certain reserves. Under this classification system, problem assets of insured
institutions are classified as substandard, doubtful or loss. An asset is considered substandard if it is inadequately protected by the current net worth and paying capacity of the obligor or the value
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.



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In connection with the
filing of its periodic reports with the OTS, the Bank regularly reviews the problem loans in its portfolio to determine whether any loans require classification in accordance with applicable regulations. At March 31, 2003, all of the
Banks non-performing loans were classified as substandard. In addition, the Bank has classified five loans to two different borrowers aggregating $2.0 million of commercial real estate and land development loans as substandard for
regulatory purposes. These loans are performing in accordance with the terms of the loan agreement and adequately secured by the underlying collateral.



At March 31, 2003, 87% of the Companys loan portfolio consisted of loans secured by one-to-four family residential properties, including 10%
relating to home equity loans and equity lines of credit. A total of 69% of non-performing assets consisted of loans secured by one-to-four family residential properties and on one-to-four family foreclosed real estate. At March 31, 2003, 50%
of the one-to-four family non-performing loans carried private mortgage insurance or government guarantees. The average original loan-to-value ratio on the one-to-four family non-performing loans without supplemental mortgage insurance was 71%. The
ratio of the allowance for loan losses to non-performing loans was 77.1% at March 31, 2003 compared to 76.7% at December 31, 2002, and 77.5% at March 31, 2002.



Delinquent Loans. Delinquencies in the Banks portfolio at the dates indicated were as follows:



|                   |  | 6190 Days             |  | 91 Days or More(2)                   
|------------------ |  | ---------------------- |  | -------------------------------------
|                   |  | Number of Loans        |  | Principal Balance of Delinquent Loans
|                   |  | (Dollars in thousands)
|March 31, 2003     |  | 37                     |  | $                                    
|                   |  |                        |  |                                      
|December 31, 2002  |  | 51                     |  | $                                    
|                   |  |                        |  |                                      
|September 30, 2002 |  | 50                     |  | $                                    
|                   |  |                        |  |                                      
|June 30, 2002      |  | 55                     |  | $                                    
|                   |  |                        |  |                                      
|March 31, 2002     |  | 57                     |  | $                                    
|                   |  |                        |  |                                      

---

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

|(2) |  | The 91 Days or More category includes all loans on non-accrual regardless of days past due.
|--- |  | -------------------------------------------------------------------------------------------





19



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##### Table of Contents

Loan Portfolio Composition.The following table sets forth the composition of the Banks loans
receivable portfolio in dollar amounts at the dates indicated:





|                                                         |  | 3/31/03                |           |   | 12/31/02 |           |   | 9/30/02 |           |   | 6/30/02 |           |   | 3/31/02 |           |   | 12/31/01 |          
|-------------------------------------------------------- |  | ---------------------- | --------- | - | -------- | --------- | - | ------- | --------- | - | ------- | --------- | - | ------- | --------- | - | -------- | ---------
|                                                         |  | (Dollars in thousands) |          
|Real estate loans:                                       |  |                        |           |   |          |           |   |         |           |   |         |           |   |         |           |   |          |          
|One-  to four-family:                                    |  |                        |           |   |          |           |   |         |           |   |         |           |   |         |           |   |          |          
|Held for investment                                      |  | $                      | 3,364,367 |   |          | 3,470,937 |   |         | 3,617,357 |   |         | 3,529,628 |   |         | 3,475,339 |   |          | 3,559,466
|Held for sale                                            |  |                        | 68,076    |   |          | 167,780   |   |         | 132,899   |   |         | 52,809    |   |         | 45,297    |   |          | 161,105  
|Multi-family                                             |  |                        | 292,895   |   |          | 260,318   |   |         | 223,395   |   |         | 210,291   |   |         | 197,422   |   |          | 197,685  
|Commercial                                               |  |                        | 147,955   |   |          | 142,493   |   |         | 145,505   |   |         | 139,115   |   |         | 134,709   |   |          | 140,128  
|Construction                                             |  |                        | 51,688    |   |          | 48,179    |   |         | 50,492    |   |         | 48,936    |   |         | 41,846    |   |          | 43,756   
|Land                                                     |  |                        | 39,611    |   |          | 42,530    |   |         | 40,469    |   |         | 39,939    |   |         | 41,152    |   |          | 44,494   
|                                                         |  |                        |           |   |          |           |   |         |           |   |         |           |   |         |           |   |          |          
|Total real estate loans                                  |  |                        | 3,964,592 |   |          | 4,132,237 |   |         | 4,210,117 |   |         | 4,020,718 |   |         | 3,935,765 |   |          | 4,146,634
|                                                         |  |                        |           |   |          |           |   |         |           |   |         |           |   |         |           |   |          |          
|Consumer loans:                                          |  |                        |           |   |          |           |   |         |           |   |         |           |   |         |           |   |          |          
|Equity lines of credit                                   |  |                        | 420,533   |   |          | 387,025   |   |         | 358,985   |   |         | 317,031   |   |         | 278,688   |   |          | 258,884  
|Home equity loans                                        |  |                        | 26,856    |   |          | 32,120    |   |         | 38,487    |   |         | 42,976    |   |         | 46,249    |   |          | 52,216   
|Other                                                    |  |                        | 6,436     |   |          | 6,255     |   |         | 4,798     |   |         | 5,971     |   |         | 6,835     |   |          | 7,975    
|                                                         |  |                        |           |   |          |           |   |         |           |   |         |           |   |         |           |   |          |          
|Total consumer loans                                     |  |                        | 453,825   |   |          | 425,400   |   |         | 402,270   |   |         | 365,978   |   |         | 331,772   |   |          | 319,075  
|Commercial business loans                                |  |                        | 22,813    |   |          | 20,592    |   |         | 18,928    |   |         | 19,714    |   |         | 17,964    |   |          | 18,596   
|                                                         |  |                        |           |   |          |           |   |         |           |   |         |           |   |         |           |   |          |          
|Total loans receivable                                   |  |                        | 4,441,230 |   |          | 4,578,229 |   |         | 4,631,315 |   |         | 4,406,410 |   |         | 4,285,501 |   |          | 4,484,305
|Loans in process                                         |  |                        | 28,771    |   |          | 30,689    |   |         | 27,175    |   |         | 19,427    |   |         | 17,276    |   |          | 21,678   
|Unearned discounts, premiums and deferred loan fees, net |  |                        | (2,586    | ) |          | (2,875    | ) |         | (2,544    | ) |         | (2,982    | ) |         | (3,016    | ) |          | (4,555   
|Allowance for loan losses                                |  |                        | 19,471    |   |          | 19,483    |   |         | 19,458    |   |         | 19,375    |   |         | 19,554    |   |          | 19,607   
|                                                         |  |                        |           |   |          |           |   |         |           |   |         |           |   |         |           |   |          |          
|Loans receivable, net                                    |  | $                      | 4,395,574 |   |          | 4,530,932 |   |         | 4,587,226 |   |         | 4,370,590 |   |         | 4,251,687 |   |          | 4,447,575
|                                                         |  |                        |           |   |          |           |   |         |           |   |         |           |   |         |           |   |          |          





20



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##### Table of Contents

Non-performing assets. The following table sets forth information regarding non-accrual loans,
non-accrual investments securities, and foreclosed real estate of the Bank.



|                                                                                          |  | 3/31/03        |        |   | 12/31/02 |        | 9/30/02 |        | 6/30/02 |        | 3/31/02 |        | 12/31/01
|----------------------------------------------------------------------------------------- |  | -------------- | ------ | - | -------- | ------ | ------- | ------ | ------- | ------ | ------- | ------ | --------
|                                                                                          |  | (In thousands)
|Non-performing loans:                                                                     |  |                |        |   |          |        |         |        |         |        |         |        |         
|One-  to four-family and multi-family loans:                                              |  |                |        |   |          |        |         |        |         |        |         |        |         
|Non-accrual loans                                                                         |  | $              | 22,279 |   |          | 22,480 |         | 21,538 |         | 18,831 |         | 18,743 |         
|Accruing loans 91 days or more overdue                                                    |  |                |       |   |          |       |         |       |         |       |         |       |         
|                                                                                          |  |                |        |   |          |        |         |        |         |        |         |        |         
|Total                                                                                     |  |                | 22,279 |   |          | 22,480 |         | 21,538 |         | 18,831 |         | 18,743 |         
|                                                                                          |  |                |        |   |          |        |         |        |         |        |         |        |         
|Commercial real estate, construction and land loans:                                      |  |                |        |   |          |        |         |        |         |        |         |        |         
|Non-accrual loans                                                                         |  |                | 1,769  |   |          | 1,755  |         | 6,306  |         | 5,069  |         | 5,330  |         
|Accruing loans 91 days or more overdue                                                    |  |                |       |   |          |       |         |       |         |       |         |       |         
|                                                                                          |  |                |        |   |          |        |         |        |         |        |         |        |         
|Total                                                                                     |  |                | 1,769  |   |          | 1,755  |         | 6,306  |         | 5,069  |         | 5,330  |         
|                                                                                          |  |                |        |   |          |        |         |        |         |        |         |        |         
|Other loans:                                                                              |  |                |        |   |          |        |         |        |         |        |         |        |         
|Non-accrual loans                                                                         |  |                | 1,195  |   |          | 1,159  |         | 1,250  |         | 1,090  |         | 1,144  |         
|Accruing loans 91 days or more overdue                                                    |  |                |       |   |          |       |         |       |         |       |         |       |         
|                                                                                          |  |                |        |   |          |        |         |        |         |        |         |        |         
|Total                                                                                     |  |                | 1,195  |   |          | 1,159  |         | 1,250  |         | 1,090  |         | 1,144  |         
|                                                                                          |  |                |        |   |          |        |         |        |         |        |         |        |         
|Total non-performing loans:                                                               |  |                |        |   |          |        |         |        |         |        |         |        |         
|Non-accrual loans                                                                         |  |                | 25,243 |   |          | 25,394 |         | 29,094 |         | 24,990 |         | 25,217 |         
|Accruing loans 91 days or more overdue                                                    |  |                |       |   |          |       |         |       |         |       |         |       |         
|                                                                                          |  |                |        |   |          |        |         |        |         |        |         |        |         
|Total                                                                                     |  | $              | 25,243 |   |          | 25,394 |         | 29,094 |         | 24,990 |         | 25,217 |         
|                                                                                          |  |                |        |   |          |        |         |        |         |        |         |        |         
|Non-accrual loans to total loans                                                          |  |                | .58    | % |          | .58    |         | .65    |         | .57    |         | .59    |         
|Accruing loans 91 days or more overdue to total loans                                     |  |                |       |   |          |       |         |       |         |       |         |       |         
|                                                                                          |  |                |        |   |          |        |         |        |         |        |         |        |         
|Non-performing loans to total loans                                                       |  |                | .58    | % |          | .58    |         | .65    |         | .57    |         | .59    |         
|                                                                                          |  |                |        |   |          |        |         |        |         |        |         |        |         
|Non-accrual investment securities                                                         |  | $              | 9,571  |   |          |       |         |       |         |       |         |       |         
|                                                                                          |  |                |        |   |          |        |         |        |         |        |         |        |         
|Foreclosed real estate:                                                                   |  |                |        |   |          |        |         |        |         |        |         |        |         
|One-  to four-family                                                                      |  | $              | 2,127  |   |          | 2,366  |         | 474    |         | 809    |         | 2,170  |         
|Commercial, construction and land                                                         |  |                |       |   |          |       |         |       |         |       |         |       |         
|                                                                                          |  |                |        |   |          |        |         |        |         |        |         |        |         
|Total                                                                                     |  | $              | 2,127  |   |          | 2,366  |         | 474    |         | 809    |         | 2,170  |         
|                                                                                          |  |                |        |   |          |        |         |        |         |        |         |        |         
|Non-performing loans and foreclosed real estate to total loans and foreclosed real
estate |  |                | .63    | % |          | .63    |         | .66    |         | .59    |         | .65    |         
|                                                                                          |  |                |        |   |          |        |         |        |         |        |         |        |         
|Total non-performing assets                                                               |  | $              | 36,941 |   |          | 27,760 |         | 29,568 |         | 25,799 |         | 27,387 |         
|                                                                                          |  |                |        |   |          |        |         |        |         |        |         |        |         
|Total non-performing assets to total assets                                               |  |                | .62    | % |          | .47    |         | .50    |         | .45    |         | .49    |         
|                                                                                          |  |                |        |   |          |        |         |        |         |        |         |        |         



21



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##### Table of Contents

Liquidity and Capital Resources



The Companys principal sources of funds during the three months ended March 31, 2003 were cash dividends paid by
the Bank of $10.0 million. The Companys principal uses of funds during the three months ended March 31, 2003 were cash dividends to shareholders and interest payments on the Companys $51.0 million unsecured bank term loan. No principal
payments were paid or due on this loan since December 31, 2002. The Company has a scheduled principal payment of $6.0 million due on December 31, 2003. The Company also maintains a one-year, $40.0 million unsecured revolving line of credit from a
commercial bank, due and renewable annually on November 30. The line of credit has no outstanding balance as of March 31, 2003. For the three-month period ended March 31, 2003, the Company declared common stock dividends of $.18 per share, or $4.2
million.



The Banks principal sources of funds are
deposits, advances from the FHLB of Chicago, principal repayments on loans and mortgage-backed securities, proceeds from the sale of loans and funds provided by operations. While scheduled loan and mortgage-backed securities amortization and
maturing investment securities are a relatively predictable source of funds, deposit flows as well as loan and mortgage-backed securities prepayments are greatly influenced by economic conditions, the general level of interest rates and competition.
The Bank utilizes particular sources of funds based on comparative costs and availability. The Bank generally manages the pricing of its deposits to maintain a steady deposit balance, but has from time to time decided not to pay rates on deposits as
high as its competition, and when necessary, to supplement deposits with longer term and/or less expensive alternative sources of funds.



During the three months ended March 31, 2003, the Bank originated loans totaling $1.06 billion compared with $678.0 million during the same period
in 2002. Loan sales, for the three months ended March 31, 2003, were $477.6 million, compared to $364.5 million for the prior year period. The Bank had outstanding commitments to originate loans of $953.1 million and commitments to sell loans of
$246.1 million at March 31, 2003. At March 31, 2003, the Company believes that it has sufficient cash to fund its outstanding commitments or will be able to obtain the necessary funds from outside sources to meet its cash requirements. Please refer
to Item 7. Managements Discussion and Analysis of Financial Condition and Results of OperationsLiquidity and Capital Resources of the Companys Form 10-K for the year ended December 31, 2002, for a discussion of the
Companys contractual obligations and off-balance sheet commitments. There have been no material changes in the Companys contractual obligations since December 31, 2002. Significant changes in off-balance sheet commitments since December
31, 2002 include a $215.6 million increase in mortgage loan commitments, all expiring within one year, and a $38.8 million increase in unused equity lines of credit balances, primarily with greater than five-year maturities. At March 31, 2003, the
Bank had $7.8 million of credit risk related to loans sold to the MPF program, $3.9 million of loans sold with recourse to other investors and $9.4 million credit risk related to loans with private mortgage insurance in force.



Asset/Liability Management



As part of its normal operations, the Bank is subject to interest-rate
risk on the interest-sensitive assets it invests in and the interest-sensitive liabilities it borrows. The Banks exposure to interest rate risk is reviewed at least quarterly by the Banks asset/liability management committee
(ALCO) and the Board of Directors of the Company. The ALCO, which includes members of senior management, monitors the rate and sensitivity repricing characteristics of the individual asset and liability portfolios the Bank maintains and
determines risk management strategies.



The Bank, except as
noted below, has not used derivative financial instruments such as interest rate swaps, caps, floors, options or similar financial instruments to manage its interest rate risk. However, in conjunction with its origination and sale strategy,
management does hedge the Banks exposure to interest rate risk primarily by committing to sell fixed-rate mortgage loans for future delivery. Under these commitments, the Bank agrees to sell fixed-rate loans at a specified price and at a
specified future date. The sale of fixed-rate mortgage loans for future delivery has enabled the Bank to continue to originate new mortgage loans, and to generate gains on sale of these loans as well as loan servicing fee income, while maintaining
its gap ratio within the parameters discussed above. Most of these forward sale commitments are conducted with FNMA, FHLMC and MPF with respect to loans that conform to the requirements of these government agencies. The forward commitment of
mortgage loans presents a risk to the Bank if the Bank is not able to deliver the mortgage loans by the commitment expiration date. If this should occur, the Bank would be required to pay a fee to the buyer. The Bank attempts to mitigate this risk
by charging potential retail borrowers a 1% fee to fix the interest rate, or by requiring the interest rate to float at market rates until shortly before closing. In addition, the Bank uses U.S. Treasury bond futures contracts and MBS forward sale
commitments to hedge some of the mortgage pipeline exposure. These futures contracts and forward sale commitments are used to hedge mortgage loan production in those circumstances where loans are not sold forward as described above.



The Bank utilizes an interest rate sensitivity gap analysis to monitor
the relationship of maturing or repricing interest-earning assets and interest-bearing liabilities, while maintaining an acceptable interest rate spread. Interest rate sensitivity gap is defined as the difference between the amount of
interest-earning assets maturing or repricing within a specific period of time and the amount of interest-bearing liabilities maturing or repricing within that same period of time, and is usually analyzed at a period of one year. At March 31, 2003,
the Company was positively gapped



22



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##### Table of Contents

over this period. Generally, a positive gap, where more interest-earning assets are repricing or maturing than interest-bearing liabilities, would tend
to result in an improvement in net interest income in a period of rising interest rates. Conversely, during a period of falling interest rates, a positive gap would likely result in a reduction in net interest income. Managements goal is to
maintain its cumulative one-year gap within the range of (15)% to 15%. The gap ratio fluctuates as a result of market conditions and managements decisions based on its expectation of future interest rate trends. The Banks asset/liability
management strategy emphasizes, for its own portfolio, the origination of one- to four-family adjustable-rate loans and other loans which have shorter terms to maturity or reprice more frequently than fixed-rate mortgage loans, yet provide a
positive margin over the Banks cost of funds.



The
table on the next page sets forth the scheduled repricing or maturity of the Banks assets and liabilities at March 31, 2003 and managements assumptions regarding prepayment percentages on loans and mortgage-backed securities, based
on its current experience in these portfolios. The Bank uses the withdrawal assumptions used by the FHLB of Chicago with respect to NOW, checking and passbook accounts, which are 17.0%, 17.0%, 17.0%, 16.0%, and 33.0%, respectively. Investment
securities and FHLB advances that contain call or put provisions are generally shown in the category relating to their respective final maturities. However, due to changes in market interest rates, $5.1 million of investments with a final maturity
of 43 months, but callable in six months to one year are categorized in the six months to one year category, in anticipation of their call.



The effect of these assumptions is to quantify the dollar amount of items that are interest-sensitive and may be repriced within each of the periods
specified. Certain shortcomings are inherent in using gap analysis to quantify exposure to interest rate risk. For example, although certain assets and liabilities may have similar maturities or repricings in the table, they may react differently to
actual changes in market interest rates. The interest rates on certain types of assets and liabilities may fluctuate in advance of changes in market interest rates, while interest rates on other types may lag behind changes in market rates. This is
especially true in circumstances where management has a certain amount of control over interest rates, such as the pricing of deposits. Additionally, certain assets such as hybrid adjustable-rate mortgage loans have features that restrict changes in
interest rates on a short-term basis and over the life of the asset. Finally, as interest rates change, actual loan prepayment rates may differ significantly from those rates assumed by management for presentation purposes in the table. If actual
rates differ from those assumed, there may be an adverse effect on the Banks operations.



23



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##### Table of Contents



Management believes that
its asset/liability management strategies mitigate the potential effects of changes in interest rates on the Banks operations and does not believe that the following table which is a snapshot based on a point in time is particularly useful in
assessing future results.



|                                                                                       |  | At March 31, 2003
|-------------------------------------------------------------------------------------- |  | -----------------
|                                                                                       |  | 6 Months or Less 
|                                                                                       |  | (In thousands)   
|Interest-earning assets:                                                               |  |                  
|Loans receivable                                                                       |  | $                
|Mortgage-backed securities                                                             |  |                  
|Interest-bearing deposits                                                              |  |                  
|Federal funds sold                                                                     |  |                  
|Investment securities (1)                                                              |  |                  
|                                                                                       |  |                  
|Total interest-earning assets                                                          |  |                  
|Impact of hedging activity (2)                                                         |  |                  
|                                                                                       |  |                  
|Total net interest-earning assets adjusted for impact of hedging activities            |  |                  
|                                                                                       |  |                  
|Interest-bearing liabilities:                                                          |  |                  
|NOW and checking accounts                                                              |  |                  
|Money market accounts                                                                  |  |                  
|Passbook accounts                                                                      |  |                  
|Certificate accounts                                                                   |  |                  
|FHLB advances                                                                          |  |                  
|Other borrowings                                                                       |  |                  
|                                                                                       |  |                  
|Total interest-bearing liabilities                                                     |  |                  
|                                                                                       |  |                  
|Interest sensitivity gap                                                               |  | $                
|                                                                                       |  |                  
|Cumulative gap                                                                         |  | $                
|                                                                                       |  |                  
|Cumulative gap assets as a percentage of total assets                                  |  |                  
|Cumulative net interest-earning assets as a percentage of interest-bearing
liabilities |  |                  
|                                                                                       |  |                  
|At December 31, 2002                                                                   |  |                  
|Cumulative gap                                                                         |  | $                
|                                                                                       |  |                  
|Cumulative gap assets as a percentage of total assets                                  |  |                  
|Cumulative net interest-earning assets as a percentage of interest-bearing
liabilities |  |                  
|                                                                                       |  |                  

---

|(1) |  | Includes $204.4 million of stock in FHLB of Chicago in 6 months or less.
|--- |  | ------------------------------------------------------------------------

|(2) |  | Represents forward commitments to sell long-term fixed-rate mortgage loans.
|--- |  | ---------------------------------------------------------------------------



24



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##### Table of Contents



Average Balances/Rates



The following table sets forth certain information
relating to the Banks consolidated statements of financial condition and reflects the average yield on assets and average cost of liabilities for the periods indicated. Average yields and costs are derived by dividing income or expense by the
average balance of assets or liabilities, respectively, for the periods shown. Average balances are derived from average daily balances. The yield/cost at March 31, 2003 includes fees which are considered adjustments to yield.



|                                                                 |  | Three Months Ended March 31, |           |          | At March 31, 2003 |  
|---------------------------------------------------------------- |  | ---------------------------- | --------- | -------- | ----------------- | -
|                                                                 |  | 2003                         |           |          | 2002              |  
|                                                                 |  | Average Balance              |           | Interest |                   |  
|                                                                 |  | (Dollars in Thousands)       |          
|Assets:                                                          |  |                              |           |          |                   |  
|Interest-earning assets:                                         |  |                              |           |          |                   |  
|Loans receivable                                                 |  | $                            | 4,504,911 |          | 66,985            |  
|Mortgage-backed securities                                       |  |                              | 325,744   |          | 3,523             |  
|Interest-bearing deposits(1)                                     |  |                              | 121,419   |          | 563               |  
|Federal funds sold(1)                                            |  |                              | 123,961   |          | 610               |  
|Investment securities                                            |  |                              | 510,289   |          | 5,345             |  
|                                                                 |  |                              |           |          |                   |  
|Total interest-earning assets                                    |  |                              | 5,586,324 |          | 77,026            |  
|Non-interest earning assets                                      |  |                              | 339,634   |          |                   |  
|                                                                 |  |                              |           |          |                   |  
|Total assets                                                     |  | $                            | 5,925,958 |          |                   |  
|                                                                 |  |                              |           |          |                   |  
|Liabilities and stockholders equity:                            |  |                              |           |          |                   |  
|Interest-bearing liabilities:                                    |  |                              |           |          |                   |  
|Deposits                                                         |  |                              | 3,533,951 |          | 16,962            |  
|Borrowed funds                                                   |  |                              | 1,523,944 |          | 19,009            |  
|                                                                 |  |                              |           |          |                   |  
|Total interest-bearing liabilities                               |  |                              | 5,057,895 |          | 35,971            |  
|                                                                 |  |                              |           |          |                   |  
|Non-interest bearing deposits                                    |  |                              | 223,928   |          |                   |  
|Other liabilities                                                |  |                              | 133,058   |          |                   |  
|                                                                 |  |                              |           |          |                   |  
|Total liabilities                                                |  |                              | 5,414,881 |          |                   |  
|Stockholders equity                                             |  |                              | 511,077   |          |                   |  
|                                                                 |  |                              |           |          |                   |  
|Liabilities and stockholders equity                             |  | $                            | 5,925,958 |          |                   |  
|                                                                 |  |                              |           |          |                   |  
|Net interest income/interest rate spread                         |  |                              |           |          | 41,055            |  
|                                                                 |  |                              |           |          |                   |  
|Net earning assets/net yield on average interest-earning assets  |  | $                            | 528,429   |          |                   |  
|                                                                 |  |                              |           |          |                   |  
|Ratio of interest-earning assets to interest-bearing liabilities |  |                              |           |          | 110.45            | %
|                                                                 |  |                              |           |          |                   |  

---

|(1) |  | Includes pro-rata share of interest income received on outstanding drafts payable.
|--- |  | ----------------------------------------------------------------------------------



25



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##### Table of Contents



Rate/Volume Analysis of Net Interest
Income



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



|                                  |  | Three Months Ended March 31, 2003 Compared to March 31, 2002
Increase (Decrease) |      
|--------------------------------- |  | -------------------------------------------------------------------------------- | -----
|                                  |  | Volume                                                                           |      
|                                  |  | (In thousands)                                                                   |      
|Interest-earning assets:          |  |                                                                                  |      
|Loans receivable                  |  | $                                                                                | 2,439
|Mortgage-backed securities        |  |                                                                                  | 1,687
|Interest-bearing deposits         |  |                                                                                  | 178  
|Federal funds sold                |  |                                                                                  | (283 
|Investment securities             |  |                                                                                  | 439  
|                                  |  |                                                                                  |      
|Total                             |  |                                                                                  | 4,460
|                                  |  |                                                                                  |      
|Interest-bearing liabilities:     |  |                                                                                  |      
|Deposits                          |  |                                                                                  | 1,353
|Borrowed funds                    |  |                                                                                  | 1,140
|                                  |  |                                                                                  |      
|Total                             |  |                                                                                  | 2,493
|                                  |  |                                                                                  |      
|Net change in net interest income |  | $                                                                                | 1,967
|                                  |  |                                                                                  |      



Comparison of the Results of
Operations for the Three Months Ended March 31, 2003 and 2002



GeneralNet income for the three months ended March 31, 2003 was $19.3 million, or $.81 per diluted share, compared to net income of $16.6 million, or $.70 per diluted share for the three months ended March 31,
2002. The 15.7% increase in earnings per share is primarily due to higher net interest income, deposit account service fees, and mortgage-backed securities and loan sale gains, offset by higher loan servicing fee expense, impairment write-downs on
investment securities, higher non-interest expense and taxes.



Net interest incomeNet interest income was $41.1 million for the current quarter, compared to $36.0 million for the quarter ended March 31, 2002, an increase of $5.1 million or 14.2%. The Companys average
interest-earning assets increased to $5.59 billion for the three months ended March 31, 2003 compared to $5.27 billion for the three months ended March 31, 2002, while the Companys net interest margin improved to 2.94% for the current three
month period, compared to 2.73% for the prior year quarterly period. The improved margin is attributable to a greater decline in the Banks average cost of funds than the decline in the yield on interest-earning assets. This reflects the
shorter-term nature of the Banks deposit accounts, as well as downward repricing of its core deposit (commercial and non-interest checking accounts, NOW accounts, money market accounts and passbooks) and certificate of deposit accounts due to
the large decline in short-term interest rates over the past twelve months. The Bank has been focused on increasing low-cost core deposit balances, which now comprise 57.5% of the Banks deposit base compared to 53.2% at March 31, 2002.



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Interest income on loans receivable decreased $5.0 million despite a $151.5 million increase in
average loans receivable. The decline in interest rates has led to a high level of prepayments and downward repricing of ARM loans, which led to a 67 basis point decline in the average yield on loans receivable. The decrease in interest income and
average yield on loans receivable was mitigated by the receipt of $866,000 of prepayment penalty fee income on one-to-four family mortgage loans. The increase in the average balance of loans receivable is due to the Companys strong asset
generation capabilities and record low interest rates. Loan originations continued at a high level over the past 12 months with an increase in adjustable rate loan originations, which the Company usually holds in portfolio. Interest income on
mortgage-backed securities increased $1.2 million to $3.5 million for the current quarter, due primarily to a $149.2 million increase in average balances, while interest income on investment securities decreased $471,000 to $5.3 million or 8.1% due
to a 73 basis point decline in average yield, offset by a $36.9 million, or 7.8% increase in average balance. Both portfolios experienced a decrease in average yield due to the dramatic decrease in interest rates. The increase in investment and
mortgage-backed securities balances is primarily due to purchases during the quarter as a result of higher cash flows from loan prepayments, loan sales and deposit inflows.



Interest expense on deposit accounts decreased $8.6 million to $17.0 million for the first quarter of 2003, despite a
$181.7 million increase in average deposits compared to the prior year quarter. The 114 basis point decrease in the average cost of deposits for the first quarter of 2003 compared to the prior years three-month period is primarily due to the
downward repricing of maturing certificates of deposit, as well as the lower interest rates paid on core deposits due to the decline in short-term rates. Based on the current market interest rate outlook, the Bank expects the average cost of
deposits to trend lower throughout the remainder of 2003.



Interest expense on borrowed funds decreased $1.0 million to $19.0 million, as a result of a 58 basis point decrease in the average cost of borrowed funds offset by an $83.5 million increase in the average balance of borrowed funds.
The Bank has been repaying maturing advances due to heavy fixed-rate refinance activity limiting loans receivable growth, and net savings inflows.



Provision for loan lossesBased on managements assessment of the adequacy of the loan loss reserve as of March 31, 2003 and
2002, the Bank provided no provision for loan losses during the first quarters of 2003 or 2002. Net charge-offs during the first quarter of 2003 were $12,000 compared to net charge-offs of $11,000 for the three months ended March 31, 2002.



Non-interest incomeNon-interest income
increased $2.3 million, or 17.1%, to $16.0 million for the three months ended March 31, 2003, compared to $13.7 million for the three months ended March 31, 2002. Increases were primarily in gains on sales of loans and mortgage-backed securities and
fee income from deposit accounts, offset by decreases in loan servicing fee income and write-downs on investment securities.



Gain on sale of loans increased to $7.5 million for the three months ended March 31, 2003, compared to $2.3 million for the three months ended March
31, 2002. The increased gains are due to a $113.1 million increase in loan sale volume to $477.6 million for the three months ended March 31, 2003 compared to loan sales of $364.5 million in the first quarter of 2002, as well as increased margins on
sales.



Gain on the sale of mortgage-backed securities was
$5.4 million for the three months ended March 31, 2003. The Company did not sell any mortgage-backed securities during the first quarter 2002. During the current three-month period, the Company swapped into mortgage-backed securities a total of
$85.3 million of prepayment-protected fixed-rate mortgages, which were subsequently sold along with an additional $60.9 million of similar mortgage-backed securities resulting in the gain for the period. These sales were undertaken to improve the
Companys interest rate risk position by lengthening its asset duration to better match the Companys increased liability duration, as the average lives of these loans and related mortgage-backed securities had become very short due to
high prepayment speeds.



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During the current three months, the Company recorded a net loss of $5.7 million on investment
securities, reflecting the $8.1 million write-downs on two floating-rate debt securities, partially offset by gains of $2.4 million on the sale of $32.6 million of various fixed-rate debt, equity and government securities.



Income from real estate operations decreased $1.3 million to $1.6
million for the three months ended March 31, 2003 compared to the prior year quarter. The decrease is primarily due to lower profit margins on the 54 lots sold during the current quarter in the Shenandoah project and one lot in its Tallgrass of
Naperville project during the three months ended March 31, 2003, compared to profit margins on the 46 lots sold in the Tallgrass of Naperville project for the prior year quarter.



Deposit account service charges increased $615,000, or 12.7%, to $5.4 million for the three months ended March 31, 2003
compared to $4.8 million for the prior year quarter, due to continued growth in the number of checking accounts through internal sales efforts and branch openings, as well as fee increases for services provided. At March 31, 2003, the Bank had
157,700 checking accounts, compared to 144,000 at March 31, 2002, an increase of 9.5%.



In April 2003, Visa reached an agreement to settle merchant litigation regarding debit card interchange reimbursement fees. We issue Visa debit cards to a large percentage of our checking account customers. The
amount of interchange revenue generated for a transaction depends on whether it is signature-based (offline) or PIN-based (online). Signature-based transactions generate a higher amount of interchange revenue than PIN-based transactions. During the
three months ended March 31, 2003, gross revenue from signature-based debit transactions totaled $1.0 million. Preliminary information on the settlement includes a reduction in the signature-based fee collected from merchants of at least 33%
beginning on August 1, 2003. Assuming no increase in signature-based debit card volume over first-quarter levels, the decrease in fees would result in a reduction in net income of approximately $350,000 for the five-month period from August 1, 2003
to December 31, 2003.



The Company recorded net loan
servicing fee expense of $1.4 million for the three months ended March 31, 2003 compared to expense of $40,000 for the three months ended March 31, 2002, a net decrease of $1.3 million. Although the average balance of loans serviced for others
increased 38% to $2.10 billion for the current three months, which increased fees received by the Bank, amortization of mortgage servicing rights increased to $3.0 million for the current quarter compared to $1.1 million for the prior period due to
heavy prepayments resulting from lower interest rates.



Non-interest expenseNon-interest expense increased $3.1 million or 13.1% to $26.7 million, compared to $23.6 million for the three months ended March 30, 2002.



Compensation and benefits increased 9.9% or $1.4 million to $15.6
million for the three months ended March 31, 2003, compared to the three months ended March 31, 2002. The increase is primarily due to normal salary increases, higher payroll taxes and medical costs and increased staffing costs.



Occupancy expense increased $664,000, or 23.2% to $3.5 million for the
three months ended March 31, 2003 compared to the prior year period, primarily due to higher depreciation, rent expenses and general maintenance costs.



Advertising and promotion expense increased $134,000 or 11.3% to $1.3 million for the three months ended March 31, 2003 compared to the three months
ended March 31, 2002 due to higher costs relating to new account openings and radio advertising.



Other non-interest expense increased $954,000 or 24.6% to $4.8 million for the three months ended March 31, 2003 compared to the prior year period. The increased costs were primarily due to higher professional,
postage and telephone expenses, as well as higher bad check losses.



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Income
taxesFor the three months ended March 31, 2003, income tax expense totaled $11.1 million, or an effective income tax rate of 36.5% compared to $9.4 million, or an effective income tax rate of 36.1%, for the three months ended March 31,
2002. The higher effective income tax rate in the first quarter of 2003 is primarily the result of higher state income taxes.



Outlook for the Balance of 2003



The Company is reiterating its previous outlook for calendar 2003, and currently expects earnings to be in the range of $3.30-$3.35 per
diluted share.



The Companys projections for 2003
assume a relatively unchanged yield curve from the current level. The Company currently expects loan origination activity to decline modestly in the second half of the year as loan refinancing activity is expected to ease, and estimates that total
origination volume for the year may decline 510% compared to 2002. Loan sale volume for 2003 is expected to be comparable to 2002 levels. If the economy remains sluggish and the Federal Reserve does not begin tightening monetary policy until
early 2004 as expected, management anticipates the net interest margin for 2003 to be in a range of 2.82%2.90%. The Company expects to report continued growth in fee income in 2003 and is currently projecting income from real estate
development operations in the range of $12$13 million for 2003. The projections also assume continued strong housing and mortgage activity in the Banks markets and good credit quality.



Item 3. Quantitative and Qualitative Disclosures About Market Risk



A comprehensive qualitative and quantitative analysis regarding market risk is disclosed in the Companys December 31, 2002 Form 10-K. There have been no material changes in the assumptions used
or in the results of market risk analysis since December 31, 2002. See Asset/Liability Management in Item 2. for a further discussion of the Companys interest rate sensitivity gap analysis.



Item 4. Controls and Procedures



Within the 90 days prior to the date of this report, the Companys Chief Executive Officer and Chief Financial Officer carried out an evaluation under their supervision, with the participation of other members of management as
they deemed appropriate, of the effectiveness of the design and operation of the Companys disclosure controls and procedures as contemplated by Rule 13a-15 under the Securities Exchange Act of 1934. Based upon, and as of the date of that
evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Companys disclosure controls and procedures are effective, in all material respects, in timely alerting them to material information relating to the Company
(and its consolidated subsidiaries) required to be included in the periodic reports the Company is required to file and submit to the SEC under the Securities Exchange Act.



There have been no significant changes to the Companys internal controls or in other factors that could
significantly affect these controls subsequent to the date that the internal controls were most recently evaluated. There were no significant deficiencies or material weaknesses identified in that evaluation and, therefore, no corrective actions
have been taken.



The Companys management, including
the Chief Executive Officer and the Chief Financial Officer, does not expect that our Disclosure Controls or our Internal Controls will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only
reasonable assurance that the objectives of the control system are met. Further, the design of a control system will take into account resource constraints, and the benefits of controls must be considered relative to their costs. Because of the
inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities
that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, any system of controls can be circumvented by the individual acts of some persons, by collusion of two or more people,
or by management override of the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated
goals under all potential future conditions; over time, controls may require changes to address changes in conditions and other factors to remain effective, or the degree of



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compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due
to error or fraud may occur and not be detected. However, based on its most recent evaluation of controls, the Companys management believes it has a reasonable basis to conclude that its system of controls provides reasonable assurances as to
the integrity of its financial records and accounts.



Part II - Other
Information



|Item 1. |  | Legal Proceedings. Not applicable.
|------- |  | ----------------------------------



|Item 2. |  | Changes in Securities. Not applicable.
|------- |  | --------------------------------------



|Item 3. |  | Defaults Upon Senior Securities. Not applicable.
|------- |  | ------------------------------------------------



|Item 4. |  | Submission of Matters to a Vote of Security Holders. Not applicable.
|------- |  | --------------------------------------------------------------------



|Item 5. |  | Other Information. None.
|------- |  | ------------------------



|Item 6. |  | Exhibits and Reports on Form 8-K.
|------- |  | ---------------------------------



| | (a) |  | Exhibits.
| | --- |  | ---------



| |  |  | Exhibit No. 3. Certificate of Incorporation and By-laws.
| |  |  | --------------------------------------------------------



| | (i) |  | Restated Certificate of Incorporation. (Incorporated herein by reference to Exhibit 3.1 to Registrants Form 8-K dated December 19, 2000.)
| | --- |  | ------------------------------------------------------------------------------------------------------------------------------------------



| | (ii) |  | Amended and Restated By-laws of Registrant. (Incorporated herein by reference to Exhibit No. 3 to Registrants March 31, 2001 Form 10-Q.)
| | ---- |  | -----------------------------------------------------------------------------------------------------------------------------------------

---

| |  |  | Exhibit No. 11. Statement re: Computation of per share earnings.
| |  |  | ----------------------------------------------------------------



|                                                                 |  | Quarter Ended March 31, 2003
|---------------------------------------------------------------- |  | ----------------------------
|Net income                                                       |  | $                           
|                                                                 |  |                             
|Weighted average common shares outstanding                       |  |                             
|                                                                 |  |                             
|Basic earnings per share                                         |  | $                           
|                                                                 |  |                             
|Weighted average common shares outstanding                       |  |                             
|Common stock equivalents due to dilutive effect of stock options |  |                             
|                                                                 |  |                             
|Total weighted average common shares and equivalents             |  |                             
|Outstanding for diluted computation                              |  |                             
|                                                                 |  |                             
|Diluted earnings per share                                       |  | $                           
|                                                                 |  |                             



| |  |  | Exhibit No. 99.1. Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
| |  |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (b) |  | Reports on Form 8-K.
| | --- |  | --------------------



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| |  |  | A Form 8-K was filed to report that on January 28, 2003 MAF Bancorp, Inc. announced its 2002 fourth quarter earnings results, and a copy of the press release was included as
an exhibit.
| |  |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | A Form 8-K was filed to report that on February 24, 2003 MAF Bancorp, Inc. announced its participating in the Midwest 2003 Super-Community Bank Conference held in Chicago on
February 25-26, 2003, and a copy of the press release was included as an exhibit.
| |  |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | A Form 8-K was filed to report that on February 24, 2003 MAF Bancorp, Inc. announced its participating in the Raymond James and Associates 24thAnnual Institutional Investor Conferences held in Orlando, FL on March 3-5, 2003, and a copy of the press release was included as an exhibit.
| |  |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





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SIGNATURES



Pursuant to the
requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.





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CERTIFICATIONS



I, Allen H. Koranda, certify
that:



1. I have reviewed this quarterly report on Form
10-Q of MAF Bancorp, Inc.;



2. Based on my knowledge, this
quarterly 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 quarterly report;



3. Based on my
knowledge, the financial statements, and other financial information included in this quarterly 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 quarterly 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 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 the period in which this quarterly 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 date of this quarterly report (the Evaluation Date); and



(c) presented in this quarterly 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 functions):



(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 quarterly report whether 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.





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I, Jerry A. Weberling, certify that:



1. I have reviewed this quarterly report on Form 10-Q of
MAF Bancorp, Inc.;



2. Based on my knowledge, this
quarterly 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 quarterly report;



3. Based on my
knowledge, the financial statements, and other financial information included in this quarterly 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 quarterly 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 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 the period in which this quarterly 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 date of this quarterly report (the Evaluation Date); and



(c) presented in this quarterly 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 functions):



(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 quarterly report whether 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.





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