<PAGE>
 
================================================================================

                      SECURITIES AND EXCHANGE COMMISSION

                            Washington, D.C.  20549

                                        
                                   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 September 30, 1997
 
                                      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

                               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   X     No________
                                        --------

The number of shares outstanding of the issuer's common stock, par value $.01
per share, was 15,101,735 at November 12, 1997.

================================================================================
<PAGE>
 
                      MAF BANCORP, INC. AND SUBSIDIARIES
                                        
                                   FORM 10-Q

                                     Index
                                     -----

<TABLE>
<CAPTION>
Part I.     Financial Information                                              Page
------      ---------------------                                              ----
<S>         <C>                                                                <C>
Item 1      Financial Statements
 
            Consolidated Statements of Financial Condition
            as of September 30, 1997 (unaudited) and December 31, 1996.......     3
 
            Consolidated Statements of Operations for the Three and Nine
            Months Ended September 30, 1997 and 1996 (unaudited).............     4
 
            Consolidated Statements of Changes in Stockholders' Equity
            for the Nine Months Ended September 30, 1997 and 1996 (unaudited)     5
 
            Consolidated Statements of Cash Flows for the
            Nine Months Ended September 30, 1997 and 1996 (unaudited)........     6
 
            Notes to Unaudited Consolidated Financial Statements.............     8
 
Item 2      Management's Discussion and Analysis of Financial
            Condition and Results of Operations..............................    10
 
Part II.    Other Information
-------     -----------------
 
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.................................    31
 
            Signature Page...................................................    32
</TABLE>

                                       2
<PAGE>
 
                       MAF BANCORP, INC. AND SUBSIDIARIES
                 Consolidated Statements of Financial Condition
                             (Dollars in thousands)

<TABLE>
<CAPTION>
                                                                          September 30,      December 31,
                                                                              1997               1996
                                                                        -----------------  ----------------
                                                                            (Unaudited)
<S>                                                                     <C>                <C>
Assets
------
Cash and due from banks                                                       $   38,319            45,732
Interest-bearing deposits                                                         38,179            55,285
Federal funds sold                                                                49,850            24,700
Investment securities, at amortized cost (fair value of $36,431 at
 September 30, 1997 and $72,855 at December 31, 1996)                             35,304            72,040
Investment securities available for sale, at fair value                           88,646            69,049
Stock in Federal Home Loan Bank of Chicago, at cost                               29,775            30,729
Mortgage-backed securities, at amortized cost (fair value of $229,352
 at September 30, 1997 and $266,340 at December 31, 1996)                        228,141           266,658
Mortgage-backed securities available for sale, at fair value                      74,080            92,929
Loans receivable held for sale                                                     6,620             6,495
Loans receivable, net of allowance for losses of $18,337
 at September 30, 1997 and $17,914 at December 31, 1996                        2,632,614         2,423,618
Accrued interest receivable                                                       21,326            20,457
Foreclosed real estate                                                             1,810             1,257
Real estate held for development or sale                                          33,609            28,112
Premises and equipment, net                                                       35,276            32,302
Excess of cost over fair value of net assets acquired                             24,940            26,347
Other assets                                                                      32,098            34,631
                                                                              ----------         ---------
                                                                              $3,370,587         3,230,341
                                                                              ==========         =========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Liabilities:
 Deposits                                                                      2,296,139         2,262,226
 Borrowed funds                                                                  727,663           632,897
 Subordinated capital notes, net                                                  26,761            26,709
 Advances by borrowers for taxes and insurance                                    11,075            18,442
 Accrued expenses and other liabilities                                           46,333            39,442
                                                                              ----------         ---------
  Total liabilities                                                            3,107,971         2,979,716
                                                                              ----------         ---------
Stockholders' equity:
 Preferred stock, $.01 par value; authorized 5,000,000
  shares; none outstanding                                                             -                 - 
 Common stock, $.01 par value; authorized 40,000,000 shares;
  16,940,405 shares issued; 15,249,102 outstanding at
  September 30, 1997, 16,878,302 shares issued;
  15,734,733 outstanding at December 31, 1996                                        169               168
 Additional paid-in capital                                                      172,198           171,732
 Retained earnings, substantially restricted                                     120,943            95,356
 Unrealized gain on marketable securities, net of tax                              1,219               138
 Treasury stock, at cost; 1,698,434 shares at September 30, 1997
 and 1,143,569 shares at December 31, 1996                                       (31,913)          (16,769)
                                                                              ----------         ---------
  Total stockholders' equity                                                     262,616           250,625
Commitments and contingencies
                                                                              ----------         ---------
                                                                              $3,370,587         3,230,341
                                                                              ==========         =========
</TABLE>

See accompanying notes to unaudited consolidated financial statements.

                                       3
<PAGE>
 
                      MAF BANCORP, INC. AND SUBSIDIARIES
                       Consolidated Statements of Income
                 (Dollars in thousands, except per share data)

<TABLE>
<CAPTION>
                                                                      THREE MONTHS ENDED            Nine Months Ended
                                                                        September 30,                 September 30,
                                                                ------------------------------  --------------------------
                                                                     1997            1996          1997          1996
                                                                --------------  --------------  -----------  -------------
                                                                         (Unaudited)                   (Unaudited)
<S>                                                             <C>             <C>             <C>          <C> 
Interest income:
 Loans receivable                                                     $50,632          45,043       147,027       107,192
 Mortgage-backed  securities                                            4,120           5,033        13,069         9,790
 Mortgage-backed  securities available for sale                         1,253           1,912         4,031         6,320
 Investment securities                                                  1,171           1,976         4,115         4,092
 Investment securities available for sale                               1,193             634         3,325         1,761
 Interest-bearing deposits and federal funds sold                       2,104             994         5,714         2,643
                                                                      -------          ------       -------       -------
   Total interest income                                               60,473          55,592       177,281       131,798
                                                                      -------          ------       -------       -------
Interest expense:
 Deposits                                                              25,200          23,915        73,511        56,789
 Borrowed funds                                                        12,041           9,588        33,712        25,307
                                                                      -------          ------       -------       -------
   Total interest expense                                              37,241          33,503       107,223        82,096
                                                                      -------          ------       -------       -------
   Net interest income                                                 23,232          22,089        70,058        49,702
Provision for loan losses                                                 250             350           850           800
                                                                      -------          ------       -------       -------
   Net interest income after provision for loan losses                 22,982          21,739        69,208        48,902
                                                                      -------          ------       -------       -------
Non-interest income:
 Gain (loss) on sale of:
  Loans receivable                                                         80             155           179           180
  Mortgage-backed  securities                                               -              (4)            7           (66)
  Investment securities                                                   137             100           225           243
  Foreclosed real estate                                                  (15)             64            10            93
 Income from real estate operations                                     2,114           1,663         5,088         3,629
 Deposit account service charges                                        1,899           1,518         5,224         4,042
 Loan servicing fee income                                                552             624         1,752         1,854
 Brokerage commissions                                                    482             426         1,461         1,387
 Other                                                                    836             995         2,558         2,525
                                                                      -------          ------       -------       -------
   Total non-interest income                                            6,085           5,541        16,504        13,887
                                                                      -------          ------       -------       -------
Non-interest expense:
 Compensation and benefits                                              7,844           7,425        22,548        18,937
 Office occupancy and equipment                                         1,581           1,307         4,639         3,326
 Advertising and promotion                                                776             458         1,939         1,288
 Data processing                                                          542             566         1,515         1,489
 Federal deposit insurance premiums                                       365           1,312         1,102         3,044
 Special SAIF assessment                                                    -          14,216             -        14,216
 Amortization of goodwill                                                 334             338         1,007           451
 Other                                                                  2,535           2,193         7,570         5,577
                                                                      -------          ------       -------       -------
   Total non-interest expense                                          13,977          27,815        40,320        48,328
                                                                      -------          ------       -------       -------
   Income before income taxes                                          15,090            (535)       45,392        14,461
Income taxes                                                            5,894            (197)       16,700         5,405
                                                                      -------          ------       -------       -------
   Net income                                                         $ 9,196            (338)       28,692         9,056
                                                                      =======          ======       =======       =======
 
Primary and fully diluted earnings per share:                            $.58            (.02)         1.79           .75
                                                                      =======          ======       =======       =======
</TABLE>
 

See accompanying notes to unaudited consolidated financial statements.

                                       4
<PAGE>
 
                      MAF BANCORP, INC. AND SUBSIDIARIES
          Consolidated Statements of Changes in Stockholders' Equity
                            (Dollars in thousands)
                                  (Unaudited)

<TABLE>
<CAPTION>
                                                                                        Unrealized gain (loss)
                                                                Additional                  on marketable
                                                        Common   paid-in    Retained         securities,        Treasury
Nine Months Ended September 30, 1997                     STOCK   CAPITAL    EARNINGS         NET OF TAX           STOCK     TOTAL
                                                         -----  ----------  ---------        ----------         ---------  --------
<S>                                                    <C>      <C>         <C>         <C>                     <C>        <C>
Balance at December 31, 1996                           $   168     171,732    95,356               138           (16,769)  250,625
Net income                                                   -           -    28,692                 -                 -    28,692
Proceeds from exercise of 69,234 stock options               1         409         -                 -              (236)      174 
Tax benefits from stock-related compensation                 -          57         -                 -                 -        57
Market value adjustment on available                                                                          
 for sale securities                                         -           -         -             1,081                 -     1,081
Purchase of treasury stock                                   -           -         -                 -           (14,908)  (14,908)
Impact of 50% stock dividend                                                                                  
  related to fractional shares                               -           -       (13)                -                 -       (13)
Cash dividends ($.20 per share)                              -           -    (3,092)                -                 -    (3,092) 
                                                                                                              
                                                          ----     -------  --------             -----            -------  -------
Balance at September 30, 1997                          $   169     172,198   120,943             1,219           (31,913)  262,616
                                                          ====     =======  ========          ========          ========   ======= 
                                                                                                                                   
Nine Months Ended September 30, 1996                                                                          
------------------------------------                                                                          
Balance at December 31, 1995                              $ 59      39,750    80,377               125           (10,005)  110,306 
Net income                                                   -           -     9,056                 -                 -     9,056
Issuance of 7,791,850 shares, including value of                                                              
 option carryovers, for acquisition of N.S. Bancorp         52     131,186         -                 -                 -   131,238 
Proceeds from exercise of 233,991 stock options              1         752         -                 -                 -       753 
Tax benefits from stock-related compensation                 -          20         -                 -                 -        20  
                                                                                                              
Market value adjustment on available                                                                          
 for sale securities                                         -           -         -              (581)                -      (581)
Purchase of treasury stock                                   -           -         -                 -            (6,759)   (6,759)
Cash dividends ($.18 per share)                              -           -    (2,190)                -                 -    (2,190) 
                                                                                                              
                                                          ----     -------  --------                              ------   -------
Balance at September 30, 1996                            $ 112     171,708    87,243              (456)          (16,764)  241,843
                                                          ====     =======  ========          ========          ========   =======
</TABLE>

   See accompanying notes to unaudited consolidated financial statements.

                                       5
<PAGE>
 
                       MAF BANCORP, INC. AND SUBSIDIARIES
                     Consolidated Statements of Cash Flows
                                 (in thousands)

<TABLE>
<CAPTION>
                                                                                   NINE MONTHS ENDED
                                                                                     September 30,
                                                                          -----------------------------------
                                                                                 1997              1996
                                                                          ------------------  ---------------
                                                                                      (Unaudited)
<S>                                                                       <C>                 <C>
Operating activities:
Net income                                                                        $  28,692            9,056
 Adjustments to reconcile net income to net cash
  provided by operating activities:
   Depreciation and amortization                                                      2,260            1,751
   Provision for loan losses                                                            850              800
   Deferred income tax (benefit) expense                                               (366)             589
   Amortization of premiums, discounts, loan fees and servicing rights                  (44)            (388)
   Amortization of goodwill and core deposit premium                                  2,010              927
   Net gain on sale of loans, mortgage-backed securities,
     and real estate held for development or sale                                    (5,274)          (3,743)
   Gain on sale of investment securities                                               (225)            (243)
   Increase in accrued interest receivable                                             (869)          (1,644)
   Net  decrease in other assets and liabilities                                      3,294           14,813
 Loans originated for sale                                                          (10,726)         (75,429)
 Loans purchased for sale                                                           (53,976)         (56,105)
 Sale of loans originated and purchased for sale                                     64,708          169,155
 Sale of mortgage-backed securities available for sale                                2,209           34,118
                                                                                  ---------         --------
      Net cash provided by operating activities                                      32,543           93,657
                                                                                  ---------         --------
Investing activities:
 Loans originated for investment                                                   (559,223)        (371,808)
 Principal repayments on loans receivable                                           483,890          338,380
 Principal repayments on mortgage-backed securities                                  57,523           62,042
 Proceeds from maturities of investment securities available for sale                57,545            9,487
 Proceeds from maturities of investment securities held to maturity                  42,350          100,850
 Proceeds from sale of:
  Investment securities available for sale                                            6,660              824
  Real estate held for development or sale                                           33,987           17,643
  Premises and equipment                                                                172                1
  Stock in FHLB of Chicago                                                            6,299              300
 Purchases of:
  Loans receivable held for investment                                             (138,911)        (256,689)
  Investment securities available for sale                                          (82,072)         (18,244)
  Investment securities held to maturity                                             (5,133)          (1,970)
  Stock in FHLB of Chicago                                                           (5,345)          (3,300)
  Real estate held for development or sale                                          (27,738)         (12,228)
  Premises and equipment                                                             (5,424)          (3,472)
 Payment for purchase of N.S. Bancorp, net of cash acquired                              --         (174,730)
                                                                                  ---------         --------
      Net cash used in investing activities                                        (135,420)        (312,914)
                                                                                  ---------         --------
</TABLE>
                                                                     (continued)

                                       6
<PAGE>
 
                       MAF BANCORP, INC. AND SUBSIDIARIES
                     Consolidated Statements of Cash Flows
                                 (in thousands)

<TABLE>
<CAPTION>
                                                                                   NINE MONTHS ENDED
                                                                                     September 30,
                                                                           ----------------------------------
                                                                                 1997              1996
                                                                           -----------------  ---------------
                                                                                      (Unaudited)
<S>                                                                        <C>                <C>
Financing activities:
 Proceeds from FHLB of Chicago advances                                            $200,000          275,000
 Proceeds from unsecured line of credit                                               3,000               --
 Proceeds from unsecured term loan                                                       --           35,000
 Repayment of FHLB of Chicago advances                                              (85,000)        (200,000)
 Repayment of unsecured line of credit                                               (3,000)              --
 Net decrease in reverse repurchase agreements                                      (15,000)          (4,235)
 Net decrease in other borrowings                                                    (5,465)          (5,964)
 Issuance of common stock in conjunction with acquisition                                --          131,238
 Proceeds from exercise of stock options                                                174              757
 Purchase of treasury stock                                                         (14,908)          (4,297)
 Cash dividends                                                                      (2,967)          (1,692)
 Net increase in deposits                                                            34,041           10,673
 Decrease in advances by borrowers for taxes and insurance                           (7,367)          (7,073)
                                                                                   --------         --------
     Net cash provided by financing activities                                      103,508          229,407
                                                                                   --------         --------
Increase  in cash and cash equivalents                                                  631           10,150
                                                                                   --------         --------
Cash and cash equivalents at beginning of period                                    125,717           77,797
                                                                                   --------         --------
Cash and cash equivalents at end of period                                         $126,348           87,947
                                                                                   ========         ========
 
Supplemental disclosure of cash flow information:
 Cash paid during the period for:
  Interest on deposits and borrowed funds                                          $108,028           78,787
  Income taxes                                                                       16,800            4,600
Summary of non-cash transactions:
 Transfer of loans receivable to foreclosed real estate                               2,361            1,038
 Loans receivable swapped into mortgage-backed securities                             2,202           34,194
 Treasury stock received for option exercises                                           236               --
                                                                                   ========         ========
</TABLE>

See accompanying notes to unaudited consolidated financial statements.

                                       7
<PAGE>
 
                       MAF BANCORP, INC. AND SUBSIDIARIES
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
            Three and Nine Months Ended September 30, 1997 and 1996


(1)  Basis of Presentation

     The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles 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 generally accepted accounting principles 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 and nine months ended September 30,
1997 are not necessarily indicative of results that may be expected for the
entire fiscal year ended December 31, 1997.

     The consolidated financial statements include the accounts of MAF Bancorp,
Inc. ("Company"), and its wholly-owned subsidiaries, Mid America Federal Savings
Bank and subsidiaries ("Bank") and MAF Developments, Inc., as of and for the
three and nine month periods ended September 30, 1997 and 1996 and as of
December 31, 1996.  All material intercompany balances and transactions have
been eliminated in consolidation.

(2)  Earnings Per Share

     For purposes of computed earnings per share, the number of average shares
outstanding for the periods indicated is as follows:

<TABLE>
<CAPTION>
                                               THREE MONTHS ENDED                Nine Months Ended
                                                    September 30,                   September 30,
                                             -------------------------       ---------------------------
                                                1997           1996             1997             1996
                                             ----------     ----------       ----------       ----------
     <S>                                     <C>            <C>              <C>              <C> 
     Primary earnings per share              15,873,735     16,183,979       16,024,764       12,008,879
     Fully-diluted earnings per share        15,885,717     16,190,881       16,037,929       12,011,179
                                             ==========     ==========       ==========       ==========
</TABLE>

     All share amounts have been adjusted for the 3-for-2 stock split which was
paid in the form of a 50% stock dividend, on July 9, 1997 to shareholders of
record on June 17, 1997. The large increase in average shares outstanding for
the nine months ended September 30, 1997, is due to the acquisition of N.S.
Bancorp, Inc. ("NSBI" or "Northwestern") on May 30, 1996, whereby the Company
issued 7,791,850 of its common shares as part of the merger consideration.

                                       8
<PAGE>
 
(3)  Commitments and Contingencies

     At September 30, 1997, the Bank had outstanding commitments to originate
and purchase loans of $190.4 million, of which $106.3 million were fixed-rate
loans, with rates ranging from 6.50% to 9.50%, and $84.1 million were adjustable
- rate loans. At September 30, 1997, commitments to sell loans were $15.4
million.

     At September 30, 1997, the Bank had outstanding 21 standby letters of
credit totaling $16.4 million, two of which totaled $13.3 million to enhance a
developer's industrial revenue bond financings of commercial real estate in the
Bank's market. These letters of credit are collateralized by mortgage-backed
securities and U.S. Government and agency securities owned by the Bank.
Additionally, the Company had 12 outstanding standby letters of credit totaling
$6.3 million related to real estate development improvements.


(4)  NEW ACCOUNTING PRONOUNCEMENT

     In February, 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings Per
Share." SFAS No. 128 supersedes APB Opinion No. 15, "Earnings Per Share," and
specifies the computation, presentation, and disclosure requirements for
earnings per share ("EPS") for entities with publicly held common stock or
potential common stock. SFAS No. 128 was issued to simplify the computations of
EPS and to make the U.S. standard more compatible with the EPS standards of
other countries and that of the International Accounting Standards Committee. It
replaces the presentation of primary EPS with a presentation of basic EPS and
fully-diluted EPS with diluted EPS. It also requires dual presentation of basic
EPS and diluted EPS on the face of the income statement for all entities with
complex capital structures and requires a reconciliation of the numerator and
denominator of the basic EPS computation to the numerator and denominator of the
diluted EPS computation.

     Basic EPS, unlike primary EPS, excludes dilution and is computed by
dividing income available to common stockholders by the weighted-average number
of common shares outstanding for the period. Diluted EPS reflects the potential
dilution that could occur if securities or other contracts to issue common stock
were exercised or converted into common stock or resulted in the issuance of
common stock that then shared in the earnings of the entity. Diluted EPS is
computed similarly to fully-diluted EPS under APB 15.

     SFAS No. 128 is effective for financial statements for both interim and
annual periods ending after December 15, 1997. However, pro forma EPS
disclosures for periods prior to adoption is allowed. Had the provisions of SFAS
No. 128 been adopted for the nine months ended September 30, 1997 and 1996,
earnings per share would have been as follows:

<TABLE>
<CAPTION>
                                                             NINE MONTHS ENDED
                                                               SEPTEMBER 30,
                                                            ------------------
                                                            1997          1996
                                                            ----          ----
           <S>                                              <C>           <C> 
           As reported:
            Primary and fully-diluted earnings per share    $1.79         0.75
                                                            =====         ====
           Pro forma:                                                     
            Basic earnings per share                        $1.85         0.80
            Diluted earnings per share                       1.79         0.75
                                                            =====         ====
</TABLE>

(5)  Reclassifications

     Certain reclassifications of prior quarter amounts have been made to
conform with current quarter presentation.

                                       9
<PAGE>
 
                      MAF BANCORP, INC. AND SUBSIDIARIES
          MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                           AND RESULTS OF OPERATIONS

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 consumer banking business through its wholly-owned subsidiary,
Mid America Federal Savings Bank ("Bank") and secondarily, in the residential
real estate development business through MAF Developments, Inc. ("MAF
Developments").

     On May 30, 1996, the Company completed its acquisition of N.S. Bancorp,
Inc. ("NSBI"), which was the sole shareholder of Northwestern Savings Bank
("Northwestern"). At acquisition date, Northwestern had $749.7 million in loans
receivable, which were primarily one-to four-family residential mortgage loans,
and $872.0 million in deposits, which were serviced from six branch locations.
All but one of the branches are in markets which the Bank did not serve in the
past.
 
     The Bank is a consumer-oriented financial institution offering various
financial services to its customers through 21 retail banking offices.  The
Bank's market area is generally defined as the western suburbs of Chicago,
including DuPage County, which has the second highest per capita income in
Illinois, as well as the northwest side of Chicago.  It 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 mortgage loans.  To a lesser extent,
the Bank also makes multi-family mortgage, residential construction, land
acquisition and development and a variety of consumer loans.  The Bank also has
a small portfolio of commercial real estate.  Through three wholly-owned
subsidiaries, MAF Developments, Mid America Development Services, Inc. ("Mid
America Developments"), and NW Financial, Inc. ("NW Financial")  (which the
Company acquired with NSBI), the Company and the Bank are also engaged in
primarily residential real estate development activities. Additionally, the Bank
operates an insurance agency, Mid America Insurance Agency, Inc., which provides
general insurance services, and an investment brokerage operation through its
affiliation with INVEST, a registered broker-dealer.

     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.

REGULATION AND SUPERVISION

     The Bank is subject to extensive regulation, by the OTS, as its chartering
authority and primary federal regulator, and by the FDIC, which insures its
deposits up to applicable limits. 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 their operations.

                                       10
<PAGE>
 
CAPITAL STANDARDS.   Savings associations must meet three capital requirements;
core and tangible capital to total assets ratios as well as a regulatory capital
to total risk-weighted assets ratio.

      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.  Core capital generally includes common stockholders'
equity (including retained earnings), certain noncumulative perpetual preferred
stock and related surplus 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, such as Mid America Developments, are required
to be deducted from total capital.  See "Deductions from Regulatory Capital on
Non-Permissible Activities".

      Tangible Capital Requirement

  Under OTS regulation, savings institutions are required to meet a 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.

      Risk-Based Capital Requirement

  The risk-based capital requirement provides that savings institutions maintain
total capital equal to 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.)
Supplementary capital included in total capital cannot exceed 100% of core
capital.

  The Bank was in compliance with all of its capital requirements as of the
dates indicated below:

<TABLE>
<CAPTION>
                                                    September 30, 1997           DECEMBER 31, 1996
                                                  -----------------------     -----------------------
                                                              Percent of                  Percent of
                                                    Amount      Assets          Amount      Assets
                                                  ----------  -----------     ----------  -----------
                                                               (Dollars in thousands)
<S>                                               <C>         <C>             <C>         <C>
Stockholder's equity of the Bank               $     281,327        8.43%  $     273,545        8.52%
                                                  ==========       =====      ==========       =====
Tangible capital                                  $  231,229        7.04%     $  219,080        6.96%
Tangible capital requirement                          49,233        1.50          47,202        1.50
                                                  ----------       -----      ----------       -----
Excess                                         $     181,996        5.54%  $     171,878        5.46%
                                                  ==========       =====      ==========       =====
Core capital                                      $  231,229        7.04%     $  219,080        6.96%
Core capital requirement                              98,467        3.00          94,404        3.00
                                                  ----------       -----      ----------       -----
Excess                                         $     132,762        4.04%  $     124,676        3.96%
                                                  ==========       =====      ==========       =====
Core and supplementary capital                    $  247,761       14.81%     $  235,057       15.05%
Risk-based capital requirement                       133,802        8.00         124,943        8.00
                                                  ----------       -----      ----------       -----
Excess                                         $     113,959        6.81%  $     110,114        7.05%
                                                  ==========       =====      ==========       =====
Total Bank assets                               $  3,336,978                $  3,209,058
Adjusted total Bank assets                         3,282,231                   3,146,788
Total risk-weighted assets                         1,727,573                   1,624,489
Adjusted total risk-weighted assets                1,672,520                   1,561,782
Investment in Bank's real estate subsidiary           17,933                      20,184
                                                  ==========                  ==========
</TABLE>

                                       11
<PAGE>
 
  A reconciliation of consolidated stockholder's equity of the Bank for
financial reporting purposes to regulatory capital available to the Bank to meet
regulatory capital requirements is as follows:

<TABLE>
<CAPTION>
                                                                         SEPTEMBER 30,       December 31,
                                                                             1997                1996
                                                                      -------------------  ----------------
                                                                                 (in thousands)
<S>                                                                   <C>                  <C> 
Stockholder's equity of the Bank                                                $281,327           273,545
Goodwill and other non-allowable intangible assets                               (31,957)          (34,368)
Non-permissible subsidiary deduction                                             (17,933)          (20,184)
Non-includable purchased mortgage servicing rights                                  (233)             (203)
SFAS No. 115 capital adjustment                                                       25               290
                                                                                --------           -------
 Tangible and core capital                                                       231,229           219,080
General loan loss reserves                                                        16,837            16,414
Land loans greater than 80% loan-to-value                                           (305)             (437)
                                                                                --------           -------
 Core and supplementary capital                                                 $247,761           235,057
                                                                                ========           =======
</TABLE>

      Deductions from Regulatory Capital on Non-Permissible Activities

  Under the OTS capital regulation, deductions from tangible and core capital,
for the purpose of computing regulatory capital requirements, are required for
investments in and loans to subsidiaries engaged in non-permissible activities
for a national bank.  Included in these non-permissible activities is the
development of real estate through the Bank's wholly-owned subsidiaries, Mid
America Developments, and NW Financial, which was acquired on May 30, 1996 as
part of the acquisition of NSBI.  Current OTS regulations require 100% of such
investment in and advances to Mid America Developments and NW Financial to be
deducted from capital for purposes of computing regulatory capital requirements.

  Included in the calculation of the Bank's deduction from tangible and core
capital due to investments in and advances to Mid America Developments and NW
Financial is the Bank's total equity investment as well as unsecured loans made
to these real estate subsidiaries.  Decreasing the investment in and advances to
the real estate subsidiaries requires the generation of cash to repay its loans
to the Bank or to declare dividends to pass undistributed profits up to the
Bank.  Currently, the generation of cash at Mid America Developments is
accomplished by continued lot sales from improved land developments, and, with
respect to NW Financial, from home sales in projects owned by such subsidiary.

  The following is a summary of the Bank's investment in and advances to Mid
America Developments and NW Financial at the dates indicated:

<TABLE>
<CAPTION> 
                                    9/30/97       6/30/97       3/31/97      12/31/96       9/30/96
                                    -------       -------       -------      --------       -------
                                                      (in thousands)
<S>                                 <C>           <C>           <C>           <C>           <C>
     Common stock                   $  1,657         1,657         1,657         1,657         1,657
     Retained earnings                11,419        11,402        10,955        10,642        10,767
     Intercompany advances             4,857         7,097         8,263         7,885         7,637
                                    --------       -------       -------      --------       -------
                                    $ 17,933        20,156        20,875        20,184        20,061
                                    ========       =======       =======      ========       =======
</TABLE>

                                       12
<PAGE>
 
      Interest Rate Risk Component of Regulatory Capital

  The OTS regulatory capital requirements also incorporate an interest rate risk
component.  Savings institutions with "above normal" interest rate risk exposure
are subject to a deduction from total capital for purposes of calculating their
risk-based capital requirements.  A savings institution's interest rate risk is
measured by the decline in the net portfolio value of its assets (i.e., the
difference between incoming and outgoing discounted cash flows from assets,
liabilities and off-balance sheet contracts) that would result from a
hypothetical 200 basis point increase or decrease in market interest rates
divided by the estimated economic value of the institution's assets.  In
calculating its total capital under the risk-based capital rule, a savings
institution whose measured interest rate risk exposure exceeds 2% must deduct an
amount equal to one-half of the difference between the institution's measured
interest rate risk and 2%, multiplied by the estimated economic value of the
institution's assets.  The Director of the OTS may waive or defer a savings
institution's interest rate risk component on a case-by-case basis. For the
present time, the OTS has deferred implementation of the interest rate risk
component.  If the Bank had been subject to an interest rate risk capital
component as of September 30, 1997, the Bank's total risk-weighted capital would
not have been subject to a deduction based on interest rate risk.  At September
30, 1997, the Bank met each of its capital requirements.

  Insurance of Deposit Accounts.  The FDIC has adopted a risk-based deposit
insurance system that assesses deposit insurance premiums according to the level
of risk involved in an institution's activities. An institution's risk category
is based upon whether the institution is classified as "well capitalized,"
"adequately capitalized" or "undercapitalized" and one of three supervisory
subcategories within each capital group.  The supervisory subgroup to which an
institution is assigned is based on a supervisory evaluation and information
which the FDIC determines to be relevant to the institution's financial
condition and the risk posed to the deposit insurance fund.  Based on its
capital and supervisory subgroups, each Bank Insurance Fund ("BIF") and SAIF
member institution is assigned an annual FDIC assessment rate, with an
institution in the highest category (i.e., well-capitalized and healthy)
receiving the lowest rates and an institution in the lowest category (i.e.,
undercapitalized and posing substantial supervisory concern) receiving the
highest rates.  The FDIC has authority to further raise premiums if deemed
necessary.  If such action is taken, it could have an adverse effect on the
earnings of the Bank.

  On September 30, 1996, the President signed the Deposit Insurance Funds Act of
1996 (the "Funds Act"), which, among other things, imposed a special one-time
assessment on SAIF members, including the Bank, to recapitalize the SAIF. The
Funds Act also spreads the obligations for payment of the Financing Corporation
("FICO") bonds across all SAIF and BIF members.  As of January 1, 1997, BIF
deposits are being assessed for a FICO payment of 1.3 basis points, while SAIF
deposits are being assessed 6.48 basis points.  Full pro rata sharing of the
FICO payments between BIF and SAIF members will occur on the earlier of January
1, 2000 or the date the BIF and SAIF are merged.  The Funds Act specifies that
the BIF and SAIF will be merged on January 1, 1999, provided no savings
associations remain as of that time.

  As a result of the Funds Act, the FDIC recently voted to effectively lower
SAIF assessments to 0 to 27 basis points as of January 1, 1997, a range
comparable to that of BIF members.  Also, SAIF members will continue to make the
FICO payments described above. Management cannot predict the level of FDIC
insurance assessments on an on-going basis, whether the federal savings
association charter will be eliminated or whether the BIF and SAIF will
eventually be merged.

  The Bank's assessment rate is currently 6.48 basis points.  A significant
increase in SAIF insurance premiums would likely have an adverse effect on the
operating expenses and results of operations of the Bank.

                                       13
<PAGE>
 
  Under the FDI Act, insurance of deposits may be terminated by the FDIC upon a
finding that the institution has engaged in unsafe or unsound practices, is in
an unsafe or unsound condition to continue operations or has violated any
applicable law, regulation, rule, order or condition imposed by the FDIC or the
OTS.  The management of the Bank does not know of any practice, condition or
violation that might lead to termination of deposit insurance.

  Thrift Rechartering Legislation.  The Funds Act provides that the BIF and SAIF
will merge on January 1, 1999 if there are no more savings associations as of
that date.  Various proposals to eliminate the federal thrift charter, create a
uniform financial institutions charter and abolish the OTS have been introduced
in Congress.  The House Banking Committee reported a bill in July 1997 that
would require federal savings institutions to convert to a national or state
bank charter within two years of enactment. The bill would allow banks resulting
from the conversion of a savings association to continue to engage in activities
(and hold assets) in which it was lawfully engaged on the day before enactment.
State chartered thrifts would become subject to the same federal regulation as
applies to state commercial banks.  Holding companies for savings institutions
would become subject to the same regulation as holding companies that control
commercial banks, with a limited grandfather provision for unitary savings and
loan holding company activities.  The OTS would be merged with the Office of the
Comptroller of the Currency, the agency that regulates national banks.  The Bank
is unable to predict whether such legislation would be enacted, the extent to
which the legislation would restrict or disrupt its operations or whether the
BIF and SAIF funds will eventually merge.
 
CHANGES IN FINANCIAL CONDITION

  As of September 30, 1997, total assets of the Company were $3.37 billion, an
increase of $140.2 million or 4.3% from the $3.23 billion at December 31, 1996.
The increase is primarily due to an increase in deposits and borrowings which
were used to fund mortgage loans held for investment.

  Cash and short-term investments totaled a combined $126.3 million at September
30, 1997, an increase of $631,000 from the combined balance of $125.7 million at
December 31, 1996.

  Investment securities classified as held to maturity decreased $36.7 million
to $35.3 million at September 30, 1997.  The decrease is primarily due to
maturities of U.S. Government agency obligations totaling $17.4 million, and the
call, prior to maturity, of $20.0 million of FHLB callable notes, offset by
purchases of $5.1 million.

  Investment securities available for sale increased $19.6 million to $88.6
million at September 30, 1997. The increase is due to purchases of $82.1 million
of which $64.9 million was in U.S. Government and agency securities, $11.2
million in floating rate asset-backed certificates, and $5.9 million in equity
securities, offset by maturities of $53.0 million, and sales of marketable
equity securities with a book value of $1.4 million.  The Company recognized a
gain on the sale of investment securities of $225,000 during the nine months
ended September 30, 1997.  At September 30, 1997, gross unrealized gains in the
available for sale portfolio were $2.1 million, compared to $592,000 at December
31, 1996.

  Mortgage-backed securities classified as held to maturity decreased $38.5
million to $228.1 million at September 30, 1997, compared to $266.7 million at
December 31, 1996.  The decrease is primarily due to amortization and
prepayments in the portfolio.  The Bank did not actively purchase any mortgage-
backed securities during the current period due to the ability to generate loans
receivable for its own portfolio through its retail and wholesale originations.

  Mortgage-backed securities available for sale decreased $18.8 million to $74.1
million at September 30, 1997, compared to $92.9 million at December 31, 1996.
The decrease is due to amortization and prepayment activity in the portfolio.
There was no purchase or sale activity during the nine month period

                                       14
<PAGE>
 
ended September 30, 1997.  Gross unrealized losses in the available for sale
portfolio were $39,000 at September 30, 1997, compared to $352,000 at December
31, 1996.

  The Bank has $145.1 million of CMO securities at September 30, 1997, the
majority of which are collateralized by FNMA, FHLMC and GNMA mortgage-backed
securities, and to a lesser extent by whole loans.  Additionally, included in
mortgage-backed securities held to maturity as of September 30, 1997, and
December 31, 1996 are $32.4 million, and $38.1 million, respectively of FHLMC
securities with an average yield of 8.70% and 8.73%, respectively, which
collateralize a similar amount of CMO bonds issued by the Bank's special purpose
finance subsidiaries.  Principal repayments and prepayments on these securities
are available exclusively for the repayment of the CMO bonds which they
collateralize.

  Loans receivable, including loans held for sale, increased $209.1 million, or
8.6%, to $2.64 billion at September 30, 1997.  The Bank originated $760.4
million during the nine months period ended September 30, 1997.  Offsetting this
increase was amortization and prepayments totaling $483.9 million, as well as
sales of $66.8 million.  Loans receivable held for sale increased $125,000 to
$6.6 million as of September 30, 1997, compared to $6.5 million at December 31,
1996. The Company has reduced its sales activity of longer term, fixed-rate
originations in an effort to better utilize the Bank's capital base.  The
relatively small balance in loans held for sale as of September 30, 1997 is a
result of this strategy.

  The allowance for loan losses totaled $18.3 million at September 30, 1997,
including a $1.5 million specific allowance for loss against a commercial real
estate loan.  The increase of $423,000 from the balance at December 31, 1996, is
due to a $850,000 provision for loan losses, offset by net charge-offs of
$427,000.  The Bank's allowance for loan losses to total loans outstanding was
 .69% at September 30, 1997, compared to .73% at December 31, 1996.  Non-
performing loans decreased $1.0 million to $12.4 million at September 30, 1997,
or .47% of total loans receivable, compared to $13.5 million, or .55% at
December 31, 1996.

  Real estate held for development or sale increased $5.5 million to $33.6
million at September 30, 1997. A summary of real estate held for development or
sale is as follows:

<TABLE>
<CAPTION>
 
                                  SEPTEMBER 30,  DECEMBER 31,
                                      1997           1996
                                  -------------  ------------
                                        (in thousands)
<S>                               <C>            <C>
MAF Developments, Inc.
 Harmony Grove                          $ 4,429         4,164
 Creekside of Remington                   1,709         1,760
 Clow Creek Farm                            168           717
 Other                                   13,901         4,392
                                        -------        ------
                                         20,207        11,033
                                        -------        ------
Mid America Developments, Inc.
 Ashbury                                     50           122
 Woods of Rivermist                         109           546
                                        -------        ------
                                            159           668
                                        -------        ------
NW Financial, Inc.
 Woodbridge                               6,634         8,348
 Reigate Woods                            5,393         6,263
 Fields of Ambria                         1,216         1,800
                                        -------        ------
                                         13,243        16,411
                                        -------        ------
                                      $  33,609        28,112
                                        =======        ======
</TABLE>

  The Company had 89 lot sales in Harmony Grove for the nine months ended
September 30, 1997, which were offset by continued development costs.  In
addition, the development's commercial site was 

                                       15
<PAGE>
 
sold in February 1997 at a pre-tax profit of $228,000. As of September 30, 1997
there are 67 lots under contract in Harmony Grove. Clow Creek Farm is
substantially complete, with only 9 lots remaining, of which one is under
contract as of September 30, 1997. The Creekside of Remington subdivision, with
170 total lots, and 131 lots remaining, had six sales during the current nine
month period. Eight lots are under contract as of September 30, 1997. The $9.5
million increase in the other category represents an additional land parcel
purchased for future development. The other category represents 241 acres of
land in Naperville that are expected to be developed into approximately 550
residential lots. Preliminary work has begun on the project.
 
  Ashbury has been fully sold out, with the sale of the remaining eight lots of
this 1,115-lot subdivision during the current nine month period. The balance
represents a small commercial parcel currently being offered for sale. The
balance in the Woods of Rivermist subdivision decreased due to five lot sales
during the current nine month period. At September 30, 1997, the development is
substantially complete, with two lots remaining.

  The $1.7 million decrease in the Woodbridge subdivision is primarily due to
the sale of 91 homesites since December 31, 1996. Of the remaining 57 homesites,
45 are under contract as of September 30, 1997. The balance of Reigate Woods
decreased due to continued sales of homesites. At September 30, 1997, there are
44 remaining homesites, with five homesites under contract. There were nine home
sales in Fields of Ambria during the nine months ended September 30, 1997. At
September 30, 1997, there are six homesites remaining, none of which were under
contract.

  Deposits increased $33.9 million, to $2.30 billion at September 30, 1997.
After consideration of interest credited to accounts of $69.8 million for the
nine months ended September 30, 1997, actual cash outflows were $35.8 million.

  Borrowed funds, which consist primarily of FHLB of Chicago advances and CMO
bonds payable, increased $94.8 million to $727.7 million at September 30, 1997.
The primary reason for the increase is due to the Bank increasing its FHLB of
Chicago advances by a net $115.0 million since December 31, 1996.  The increases
were primarily to fund loan volume held for investment.  Offsetting this
increase was a $5.7 million decrease in the Bank's CMO bonds payable issued by
its special-purpose finance subsidiaries, as well as the repayment of a maturing
reverse repurchase agreement of $15.0 million.

ASSET QUALITY

  NON-PERFORMING ASSETS. When a borrower fails to make a required payment by the
end of the month in which the payment is due, the Bank generally institutes
collection procedures. The Bank will send a late notice, and in most cases,
delinquencies are cured promptly; however, if a loan has been delinquent for
more than 60 days, the Bank contacts the borrower in order to determine the
reason for the delinquency and to effect a cure, and, where appropriate, reviews
the condition of the property and the financial circumstances of the borrower.
Based upon the results of any such investigation, the Bank may: (1) accept a
repayment program for the arrearage from the borrower; (2) seek evidence, in the
form of a listing contract, of efforts by the borrower to sell the property if
the borrower has stated that he is attempting to sell; (3) request a deed in
lieu of foreclosure; or (4) initiate foreclosure proceedings. When a loan
payment is delinquent for three or more monthly installments, the Bank will
initiate foreclosure proceedings. Interest income on loans is reduced by the
full amount of accrued and uncollected interest on loans which are in
foreclosure or otherwise determined to be uncollectible.

  The Bank considers a loan impaired when, based on current information and
events, it is probable that a creditor will be unable to collect all amounts due
according to the contractual terms of the loan. For loans which are not
individually significant (i.e. loans under $750,000), and represent a
homogeneous population, the Bank evaluates impairment collectively based on
management reports on the level and extent of delinquencies, as well as
historical loss experience for these types of loans. The Bank uses this criteria
on

                                       16
<PAGE>
 
one-to four-family residential loans, consumer loans, multi-family residential
loans, and land loans. Impairment for loans considered individually significant
and commercial real estate loans are measured based on the present value of
expected future cash flows discounted at the loan's effective interest rate, or
the fair value of the collateral if the loan is collateral dependent. Charge-
offs of principal occur when a loss has deemed to have occurred as a result of
the book value exceeding the fair value.

  A loan (whether considered impaired or not) is classified as non-accrual when
collectibility is in doubt, and is normally analyzed upon the borrower becoming
90 days past due on contractual principal or interest payments. When a loan is
placed on non-accrual status, or in the process of foreclosure, previously
accrued but unpaid interest is reserved in full. Income is subsequently recorded
to the extent cash payments are received, or at a time when the loan is brought
current in accordance with its original terms.

  At September 30, 1997, the Bank has one loan which is considered impaired
based on the criteria above. The average balance of this impaired loan was $2.9
million during the current quarter. A specific reserve of $1.5 million is
recorded against this impaired loan, and the net recorded balance of this loan
is $1.4 million. No interest income was recorded on this loan during the three
months ended September 30, 1997. Management anticipates the completion of
foreclosure proceedings in the first quarter of 1998.

  For the quarter ended September 30, 1997, interest income that would have been
recorded on non-accrual loans (had they been performing according to their
original terms) amounted to $202,000, compared to $213,000 for the three months
ended September 30, 1996.

  As of September 30, 1997, the Bank's ratio of non-performing loans to total
loans was .47%, compared to .55% at December 31, 1996 and .57% at September 30,
1996.

  Foreclosed real estate increased $553,000 to $1.8 million at September 30,
1997, due to the addition of fifteen single family residential properties offset
by the sale of nine properties. At September 30, 1997, foreclosed real estate
consists primarily of ten single-family residences.

  DELINQUENT LOANS. Delinquencies in the Bank's portfolio at the dates indicated
were as follows:

<TABLE>
<CAPTION>
                                        61-90 DAYS                           91 DAYS OR MORE
                            -----------------------------------  ---------------------------------------
                                        PRINCIPAL                               PRINCIPAL
                             NUMBER     BALANCE OF    PERCENT      NUMBER      BALANCE OF      PERCENT
                               OF       DELINQUENT       OF          OF        DELINQUENT        OF
                              LOANS       LOANS        TOTAL        LOANS         LOANS         TOTAL
                            ---------  ------------  ----------  -----------  -------------  -----------
                                                      (Dollars in thousands)
<S>                         <C>        <C>           <C>         <C>          <C>            <C> 
September 30, 1997              39        $3,847           .14%       67          $11,822         .44%    
                                ==        ======           ===        ==          =======         ===     
June 30, 1997                   30        $3,946           .15%       73          $13,378         .52%    
                                ==        ======           ===        ==          =======         ===     
March 31, 1997                  46        $4,913           .20%       81          $14,102         .57%    
                                ==        ======           ===        ==          =======         ===     
December 31, 1996               48        $6,834           .28%       76          $ 9,780         .40%    
                                ==        ======           ===        ==          =======         ===     
September 30, 1996              48        $6,050           .25%       63          $ 8,688         .36%    
                                ==        ======           ===        ==          =======         ===     
</TABLE>

                                       17
<PAGE>
 
LOAN PORTFOLIO COMPOSITION. The following table sets forth the composition of
the Bank's loan portfolio in dollar amounts at the dates indicated:

<TABLE>
<CAPTION>
                                                                                  AT
                                       ---------------------------------------------------------------------------------------
                                          9/30/97      6/30/97     3/31/97     12/31/96    9/30/96      6/30/96      3/31/96
                                        -----------  ----------- ----------- ----------- -----------  -----------  ----------- 
                                                                            (In thousands )                               
<S>                                   <C>            <C>         <C>         <C>         <C>          <C>          <C>    
 REAL ESTATE LOANS:                                                                                                     
  One-to four-family:                                                                                                   
   Held for investment                $  2,341,861   2,258,938   2,198,886   2,160,525   2,114,595    2,032,102    1,227,470  
   Held for sale                             6,620       4,697       6,284       6,495       1,250        9,314       14,817      
  Multi-family                              99,949      97,515      97,483      92,968      93,246       94,713       81,919  
  Commercial                                44,164      44,881      45,459      46,313      45,875       46,101       45,087  
  Construction                              16,615      17,105      17,277      17,263      15,854       16,090       17,860      
  Land                                      26,345      26,854      26,561      25,685      22,932       26,644       26,149  
                                         ---------   ---------   ---------   ---------   ---------    ---------    ---------   
     Total real estate loans             2,535,554   2,449,990   2,391,950   2,349,249   2,293,752    2,224,964    1,413,302

 OTHER LOANS:
  Consumer loans:
   Equity lines of credit                   89,155      88,868      88,595      86,614      83,786       79,193       75,902      
   Home equity loans                        31,629      22,866      13,634      14,251      13,126       10,525        8,877      
   Other                                     5,610       4,797       5,838       5,009       4,797        4,110        3,946      
                                         ---------   ---------   ---------   ---------   ---------    ---------    ---------       
     Total consumer loans                  126,394     116,531     108,067     105,874     101,709       93,828       88,725      
  Commercial business lines                  2,360       2,312       2,333       1,871       2,098        1,821        2,220      
                                         ---------   ---------   ---------   ---------   ---------    ---------    ---------      
     Total other loans                     128,754     118,843     110,400     107,745     103,807       95,649       90,945      
                                         ---------   ---------   ---------   ---------   ---------    ---------    ---------       
   Total loans receivable                2,664,308   2,568,833   2,502,350   2,456,994   2,397,559    2,320,613    1,504,247   

  Less:
  Loans in process                           7,005       6,990       6,700       7,620       6,406        6,715        8,843
  Unearned discounts, premiums 
   and deferred loan fees, net                (268)        645         696       1,347       2,572        3,245       (1,416)
  Allowance for loan losses                 18,337      18,182      18,010      17,914      17,589       17,254        9,498
                                         ---------   ---------   ---------   ---------   ---------    ---------    ---------
     Total loans receivable, net         2,639,234   2,543,016   2,476,944   2,430,113   2,370,992    2,293,399    1,487,322  
Loans receivable held for sale              (6,620)     (4,697)     (6,284)     (6,495)     (1,250)      (9,314)     (14,817)
                                         ---------   ---------   ---------   ---------   ---------    ---------   ----------
Loans receivable, net                 $  2,632,614   2,538,319   2,470,660   2,423,618   2,369,742    2,284,085    1,472,505
                                         =========   =========   =========   =========   =========    =========   ==========
</TABLE>

                                       18
<PAGE>
 
NON-PERFORMING ASSETS. The following table sets forth information regarding non-
accrual loans, loans which are 91 days or more delinquent but on which the Bank
is accruing interest, foreclosed real estate and non-accrual investment
securities of the Bank.

<TABLE>
<CAPTION>
                                                                                              AT
                                                              ---------------------------------------------------------------------
                                                               9/30/97   6/30/97   3/31/97   12/31/96   9/30/96   6/30/96  3/31/96 
                                                              --------  --------  --------- ---------- --------- -------- ---------
                                                                                         (In thousands)       
<S>                                                           <C>       <C>       <C>       <C>        <C>       <C>      <C> 
Non-performing loans:                                                                                                             
One-to four-family and multi-family loans:                                                                                        
 Non-accrual loans                                                6,260     8,965    8,757     7,680     5,929    5,415     2,801  
 Accruing loans 91 days or more overdue                           1,547       845    1,008       896     1,589    1,940     1,235 
                                                               --------  --------  -------   -------   -------   ------    ------ 
  Total                                                        $  7,807     9,810    9,765     8,576     7,518    7,355     4,036 
                                                               --------  --------  --------  -------   -------   -------   ------ 
Commercial real estate, construction and land loans:                                                                              
 Non-accrual loans                                                4,376     4,067    4,254     3,762       889      433       439 
 Accruing loans 91 days or more overdue                              --        --      599       699       599      459        -- 
 Restructured or renegotiated loans                                  --        --       --        --     4,271    4,299     4,321 
                                                               --------  --------  -------   -------   -------   ------    ------ 
  Total                                                           4,376     4,067    4,853     4,461     5,759    5,191     4,760 
                                                               --------  --------  --------  -------   -------   -------   ------ 
Other loans:                                                                                                                      
 Non-accrual loans                                                  225       461      366       353       385      287       223 
 Accruing loans 91 days or more overdue                              24        25       79        74        23       --        -- 
                                                               --------  --------  -------   -------   -------   ------    ------ 
   Total                                                            249       486      445       427       408      287       223 
                                                               --------  --------  -------   -------   -------   ------    ------ 
 Total non-performing loans                                                                                                       
  Non-accrual loans                                              10,861    13,493   13,377    11,795     7,203    6,135     3,463 
  Accruing loans 91 days or more overdue                          1,571       870    1,686     1,669     2,211    2,399     1,235 
  Restructured or renegotiated loans                                 --        --       --        --     4,271    4,299     4,321 
                                                               --------  --------  -------   -------   -------   ------    ------ 
   Total                                                       $ 12,432    14,363   15,063    13,464    13,685   12,833     9,019 
                                                               ========  ========  =======   =======   =======   ======    ====== 
Non-accrual loans to total loans                                    .41%      .53      .54       .48       .30      .27       .23 
Accruing loans 91 days or more overdue to total loans               .06       .03      .07       .07       .09      .10       .08 
Restructured or renegotiated loans to total loans                    --        --       --        --       .18      .19       .29 
                                                               --------  --------  -------   -------   -------   ------    ------ 
Non-performing loans to total loans                                 .47%      .56      .61       .55       .57      .56       .60 
                                                               ========  ========  =======   =======   =======   ======    ====== 
Foreclosed real estate (net of related reserves):                                                                                 
 One- to four-family                                           $  1,810       724      773     1,257     1,068      888       109 
 Commercial, construction and land                                   --        --       --        --        --       --        -- 
                                                               --------  --------  -------   -------   -------   ------    ------ 
  Total                                                        $  1,810       724      773     1,257     1,068      888       109 
                                                               ========  ========  =======   =======   =======   ======    ====== 
Non-performing loans and foreclosed real estate                                                                                   
 to total loans and foreclosed real estate                          .54%      .59      .63       .60       .62      .60       .61 
                                                               ========  ========  =======   =======   =======   ======    ====== 
Total non-performing assets                                    $ 14,242    15,087   15,836    14,721    14,753   13,721     9,128 
                                                               ========  ========  =======   =======   =======   ======    ====== 
Total non-performing assets to total assets                         .42%      .45      .49       .46       .47      .44       .46 
                                                               ========  ========  =======   =======   =======   ======    ====== 
</TABLE>

                                       19
<PAGE>
 
LIQUIDITY AND CAPITAL RESOURCES

  The Company's principal sources of funds are cash dividends paid by the Bank
and MAF Developments, and liquidity generated by the issuance of common stock,
preferred stock, or borrowings. The Company's principal uses of funds are
interest payments on the Company's $26.7 million of 8.32% subordinated notes and
$35.0 million unsecured term bank loan, loans to and investments in MAF
Developments, cash dividends to shareholders and repurchases of the Company's
common stock under its stock repurchase programs. The Company also maintains a
one year, $15.0 million unsecured revolving line of credit from a commercial
bank. The line of credit is generally renewed annually, and matures on April 30,
1998. It is available for general corporate purposes. For the nine month period
ended September 30, 1997, the Company received $22.5 million in dividends from
the Bank and declared common stock dividends of $.20 per share. In addition, the
Company repurchased 543,001 shares of its common stock since December 31, 1996
at a cost of $14.8 million, or an average of $27.31 per share.

  The Bank's principal sources of funds are deposits, advances from the FHLB of
Chicago, reverse repurchase agreements, 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 interest-bearing deposits are a relatively predictable source of
funds, deposit flows and 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 current nine month period the Bank
borrowed $200.0 million of fixed-rate FHLB of Chicago advances and repaid $85.0
million of maturing advances. The Bank was able to fund the remainder of its
mortgage loan originations held for investment for the current quarter with
liquidity from prepayments and amortization from its mortgage loan and mortgage-
backed securities portfolios.

  The Bank is required by regulation to maintain specific minimum levels of
liquid investments. Regulations currently in effect require the Bank to maintain
liquid assets at least equal to 5.0% of the sum of its average daily balance of
net withdrawable accounts and borrowed funds due in one year or less. This
regulatory requirement may be changed from time to time to reflect current
economic conditions. During the quarter ended September 30, 1997, the Bank's
average liquidity ratio was 6.81%. At September 30, 1997, total liquidity was
$128.0 million, or 5.26%, which was $6.3 million in excess of the 5.0%
regulatory requirement.

  During the nine months ended September 30, 1997, the Bank originated and
purchased loans totaling $760.4 million compared with $756.3 million during the
same period a year ago. Loan sales and swaps for the nine months ended September
30, 1997, were $66.8 million, compared to $201.7 million for the prior year
period, reflecting the Bank's current strategy of holding more fixed-rate
mortgage loan originations for investment purposes during the current nine month
period. The Bank has outstanding commitments to originate and purchase mortgage
loans of $190.4 million and commitments to sell or swap loans of $15.4 million
at September 30, 1997.

                                       20
<PAGE>
 
ASSET/LIABILITY MANAGEMENT

  The Bank's overall asset/liability management strategy is directed toward
reducing the Bank's exposure to interest rate risk over time in changing
interest rate environments.  Asset/liability management is a daily function of
the Bank's management due to continual fluctuations in interest rates and
financial markets.

  As part of its asset/liability strategy, the Bank has implemented a policy to
maintain its cumulative one-year hedged interest sensitivity gap ratio within a
range of (15)% to 15% of total assets, which helps the Bank to maintain a more
stable net interest rate spread in various interest rate environments.  The gap
ratio fluctuates as a result of market conditions and management's expectation
of future interest rate trends. Under OTS Thrift Bulletin 13, the Bank is
required to measure its interest rate risk assuming various increases and
decreases in general interest rates, and the effect on net interest income and
market value of portfolio equity.  An interest rate risk policy has been
approved by the Board of Directors setting the limits to changes in net interest
income and market value of portfolio equity at the various rate scenarios
required. In addition, the OTS has added an interest rate risk component to its
regulatory capital requirements which could require an additional amount of
capital based on the level of adverse change in a savings institution's market
value of portfolio equity, resulting from changes in interest rates.  Management
continually reviews its interest rate risk policies in light of potential higher
capital requirements that may result from the final adoption of an interest rate
risk component to the OTS capital requirements.

  The Bank's asset/liability management strategy emphasizes 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.  In response to
customer demand, the Bank originates fixed-rate mortgage loans, but has
historically generally sold the conforming loans in the secondary market in
order to maintain its interest rate sensitivity levels.  During the last six
months, the Bank has been retaining the majority of the retail fixed-rate
originations in portfolio for investment purposes to help utilize the Bank's
higher capital base resulting from the merger with NSBI.

  In conjunction with the strategy discussed above, management has also hedged
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 and FHLMC 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 its wholesale lending operation, there is more risk due to
the competitive inability to charge a rate lock fee to the mortgage brokers,
which the Bank tries to offset by using higher assumed fallout rates.  In
addition, the Bank uses U.S. Treasury bond futures contracts to hedge some of
the mortgage pipeline exposure.  These futures contracts are used to hedge
mortgage loan production in those circumstances where loans are not sold forward
as described above.

                                       21
<PAGE>
 
  The table below sets forth the scheduled repricing or maturity of the Bank's
assets and liabilities at September 30, 1997, based on the assumptions used by
the FHLB of Chicago with respect to NOW, checking and passbook account
withdrawals and loan prepayment percentages.  In a departure from the FHLB of
Chicago assumptions, which assume a 0% prepayment for other borrowings, the Bank
assumes that the collateralized mortgage obligations of Mid America Finance
Corporation included in other borrowings prepay at the same rate used for the
mortgage-backed securities collateralizing these obligations, while the
Northwestern Acceptance Corporation collateralized mortgage obligations are
adjustable-rate and included in the 6 months or less category.

  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.
The table does not necessarily indicate the impact of general interest rate
movements on the Bank's net interest yield because the repricing of certain
categories of assets and liabilities is subject to competitive and other
pressures beyond the Bank's control.  As a result, certain assets and
liabilities indicated as maturing or otherwise repricing within a stated period
may, in fact, mature or reprice at different times and at different volumes.


<TABLE>
<CAPTION>
                                                                    At September 30, 1997
                                            ----------------------------------------------------------------------
                                                        More Than   More Than    More Than
                                             6 Months   6 Months     1 Year       3 Years    More Than
                                             or Less    to 1 Year  to 3 Years   to 5 Years    5 Years      Total
                                            ----------  ---------  -----------  -----------  ----------  ---------
                                                                      (In thousands)
<S>                                         <C>         <C>        <C>          <C>          <C>         <C>
Interest-earning  assets:
 Loans receivable                            $672,243     428,312     798,209      270,943     487,596   2,657,303
 Mortgage-backed securities                   141,824      14,020      40,727       27,512      77,386     301,469
 Interest-bearing deposits                     38,179          --          --           --          --      38,179
 Federal funds sold                            49,850          --          --           --          --      49,850
 Investment securities (1)                     85,802       4,977       7,999       10,020      45,458     154,256
                                             --------     -------     -------      -------     -------   ---------
  Total interest-earning assets               987,898     447,309     846,935      308,475     610,440   3,201,057
 Less yield adjustments, net                       69         328         246         (243)         89         489
                                             --------     -------     -------      -------     -------   ---------
  Total net interest-earning assets           987,967     447,637     847,181      308,232     610,529   3,201,546
 Impact of hedging activity  (2)                6,620          --          --           --      (6,620)         --
                                             --------     -------     -------      -------     -------   ---------
  Total net interest-earning  assets
   adjusted for impact of hedging           
   activities                                 994,587     447,637     847,181      308,232     603,909   3,201,546
                                             --------     -------     -------      -------     -------   ---------
Interest-bearing  liabilities:
 NOW and checking accounts                     12,780      11,692      42,796       26,584      56,491     150,343
 Money market accounts                        128,132                                                      128,132
 Passbook accounts                             55,075      50,393     184,439      114,569     243,460     647,936
 Certificate accounts                         670,690     271,932     309,143       35,380      13,548   1,300,693
 FHLB advances                                 45,000      30,000     315,000      200,000       5,500     595,500
 Other borrowings                              79,606      27,353      25,204           --      26,761     158,924
                                             --------     -------     -------      -------     -------   ---------
  Total interest-bearing  liabilities         991,283     391,370     876,582      376,533     345,760   2,981,528
                                             --------     -------     -------      -------     -------   ---------
Interest sensitivity gap                     $  3,304      56,267     (29,401)     (68,301)    258,149     220,018
                                             ========     =======     =======      =======     =======   =========
Cumulative gap                               $  3,304      59,571      30,170      (38,131)    220,018
                                             ========     =======     =======      =======     =======
Cumulative gap as a percentage
 of total assets                                 0.10%       1.77        0.90        (1.13)       6.53
Cumulative net interest-earning  assets as
 a percentage of interest-bearing                                                                     
 liabilities                                   100.33      104.31      101.34        98.55      107.38
</TABLE>

_____________________
(1) Includes $29.8 million of stock in FHLB of Chicago in 6 months or less.
(2) Represents forward commitments to sell long-term fixed-rate mortgage loans.

                                       22
<PAGE>
 
   Average Balance Sheets

   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.  Such
   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
   September 30, 1997 includes fees which are considered adjustments to yield.

<TABLE>
<CAPTION>
 
                                              Three Months Ended September 30,                
                             ---------------------------------------------------------------- 
                                         1997                           1996
                              ------------------------------  -------------------------------
                                                    Average                          Average 
                               Average               Yield/     Average               Yield/ 
                               Balance    Interest    Cost      Balance    Interest    Cost  
                             -----------  --------  --------  -----------  --------  --------
                                                      (dollars in thousands)
<S>                          <C>          <C>       <C>       <C>          <C>       <C>     
   ASSETS:                                                                                   
   Interest-earning assets:                                                                  
   Loans receivable          $2,601,481     50,632     7.78%  $2,326,633     45,043     7.74%
   Mortgage-backed                                                                           
    securities                  307,987      5,373     6.98      405,381      6,945     6.85 
   Interest-bearing                                                                          
    deposits (1)                 79,312      1,296     6.39       41,787        713     6.68  
   Federal funds sold (1)        49,230        808     6.42       16,686        281     6.59  
   Investment securities                                                                      
    (2)                         150,506      2,411     6.27      161,908      2,699     6.52  
                             ----------    -------            ----------    -------           
    Total interest-earning                                                                    
     assets                   3,188,516     60,520     7.57    2,952,395     55,681     7.53  
   Noninterest earning                                                                        
    assets                      167,009                          165,125                      
                             ----------                       ----------                      
    Total assets             $3,355,525                       $3,117,520                      
                             ==========                       ==========                      
                                                                                              
   LIABILITIES AND STOCKHOLDERS' EQUITY: 
   Interestbearing liabilities:                                                                                    
   Deposits                   2,230,287     25,200     4.48    2,162,688     23,915     4.39                       
   Borrowed funds               721,249     12,041     6.55      558,878      9,588     6.74                       
                             ----------    -------            ----------    -------                                
    Total interest-bearing                                                                                         
     liabilities              2,951,536     37,241     4.99    2,721,566     33,503     4.87                       
                                           -------     ----                 -------     ----                       
   Noninterest bearing                                                                                             
    deposits                     73,949                           78,039                                           
   Other liabilities             67,298                           71,215                                           
                             ----------                       ----------                                           
    Total other liabilities     141,247                          149,254                                           
                             ----------                       ----------                                           
    Total liabilities         3,092,783                        2,870,820                                           
   Stockholders' equity         262,742                          246,700                                           
                             ----------                       ----------                                           
    Liabilities and                                                                                                
     stockholders' equity    $3,355,525                       $3,117,520                                           
                             ==========                       ==========                                           
                                                                                                                   
   Net interest                                                                                                    
    income/interest rate                                                                                           
    spread                                 $23,279     2.58%                $22,178     2.66%                       
                                           =======     ====                 =======     ====                           
                                                                                                                   
   Net earning assets/net                                                                                          
    yield on average                                                                                               
   interestearning assets    $  236,980                2.92%  $  230,829                3.00%                      
                             ==========                ====   ==========                ====                                
                                                                                                                   
   Ratio of interestearning                                                                                        
   assets to interestbearing 
    liabilities                  108.03%                          108.48%
                             ==========                       ========== 

<CAPTION> 
 
                             NINE MONTHS ENDED SEPTEMBER 30,
                             -----------------------------------------
                               1997                             1996                           AT SEPTEMBER 30,
                             --------                         --------                              1997
                                                                                              ------------------
                                                   Average                          Average
                             Average               Yield/     Average               Yield/
                             Balance    Interest    Cost      Balance    Interest    Cost        Balance    Cost
                           -----------  --------  --------  -----------  --------  --------    -----------  -----
   <S>                     <C>          <C>       <C>       <C>          <C>       <C>         <C>          <C> 
   ASSETS:
   Interest-earning assets:  
   Loans receivable          $2,528,339    147,027     7.75%  $1,860,702    107,202     7.68%  $2,657,571   7.82%
   Mortgage-backed           
    securities                  326,119     17,100     6.99      329,393     16,110     6.52      302,221   7.02
   Interest-bearing           
                                                               
    deposits (1)                 74,479      3,541     6.27       32,656      1,861     7.49       38,179   5.41
   Federal funds sold (1)        45,375      2,173     6.32       14,646        781     7.01       49,850   5.46
   Investment securities  (2)    
                                148,494      7,665     6.81      124,948      6,065     6.38      153,725   6.19
                             ----------    -------            ----------    -------            ----------
    Total interest-earning
     assets                   3,122,806    177,506     7.57    2,362,345    132,019     7.44    3,201,546   7.60
   Noninterest earning        
    assets                      163,883                          128,468                          169,041
                             ----------                       ----------                       ----------
    Total assets             $3,286,689                       $2,490,813                       $3,370,587
                             ==========                       ==========                       ==========
 
   LIABILITIES AND 
    STOCKHOLDERS' EQUITY: 
   Interestbearing
    liabilities:
   Deposits                   2,214,013     73,511     4.44    1,687,740     56,789     4.48    2,227,104   4.53
   Borrowed funds               676,094     33,712     6.58      494,684     25,307     6.74      754,424   6.60
                             ----------    -------            ----------    -------            ----------
    Total interest-bearing
     liabilities              2,890,107    107,223     4.94    2,182,424     82,096     4.99    2,981,528   5.05
                             ----------    -------     ----                 -------     ----                ----
   Noninterest bearing
    deposits                     72,041                           66,717                           69,035
   Other liabilities             66,378                           69,833                           57,408
                              ---------                       ----------                       ----------
    Total other liabilities     138,419                          136,550                          126,443
                              ---------                       ----------                       ----------
    Total liabilities         3,028,526                        2,318,974                        3,107,971  
   Stockholders' equity         258,163                          171,839                          262,616
                             ----------                       ----------                       ----------
    Liabilities and
     stockholders' equity    $3,286,689                       $2,490,813                       $3,370,587
                             ==========                       ==========                       ==========
 
   Net interest
    income/interest rate                  
    spread                                $70,283      2.63%                $49,923     2.45%               2.55%
                                          =======      ====                 =======     ====                ====   
 
   Net earning assets/net
    yield on average
   interestearning assets    $  232,699                3.00%  $  179,921                2.82%  $  220,018    N/A
                             ==========                ====   ==========                ====   ==========   ====     
   Ratio of
    interestearning assets
    to
   interestbearing
    liabilities                  108.05%                          108.24%                          107.38% 
                             ==========                       ==========                       ==========  
</TABLE>


   (1) Includes prorata share of interest income received on outstanding drafts
payable.
   (2) Income and yields are stated on a taxable equivalent basis.

                                       23
<PAGE>
 
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, on a taxable equivalent basis.  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.

<TABLE>
<CAPTION>
                                             THREE MONTHS ENDED                     NINE MONTHS ENDED
                                             SEPTEMBER 30, 1997                     SEPTEMBER 30, 1997
                                                COMPARED TO                            COMPARED TO
                                             SEPTEMBER 30, 1996                     September 30, 1996
                                            Increase (Decrease)                    Increase (Decrease)
                                   --------------------------------------  ------------------------------------
                                      Volume        Rate          NET        Volume        Rate         Net
                                   ------------  -----------  -----------  -----------  -----------  ----------
                                                                  (In thousands)
<S>                                <C>           <C>          <C>          <C>          <C>          <C> 
INTEREST-EARNING ASSETS:
 Loans receivable                      $ 5,348          241        5,589       38,784        1,041       39,825
 Mortgage-backed securities             (1,697)         125       (1,572)        (161)       1,151          990
 Interest-bearing deposits                 613          (30)         583        2,020         (340)       1,680
 Federal funds sold                        534           (7)         527        1,475          (83)       1,392
 Investment securities                    (185)        (103)        (288)       1,179          421        1,600
                                       -------         ----       ------       ------       ------       ------
  Total                                $ 4,613          226        4,839       43,297        2,190       45,487
                                       -------         ----       ------       ------       ------       ------
 
INTEREST-BEARING LIABILITIES:
 Deposits                                  757          528        1,285       17,281         (559)      16,722
 Borrowed funds                          2,717         (264)       2,453        8,982         (577)       8,405
                                       -------         ----       ------       ------       ------       ------
  Total                                  3,474          264        3,738       26,263       (1,136)      25,127
                                       -------         ----       ------       ------       ------       ------
Net change in net interest income      $ 1,139          (38)       1,101       17,034        3,326       20,360
                                       =======         ====       ======       ======       ======       ======
</TABLE>


COMPARISON OF THE THREE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996

  GENERAL - Net income for the three months ended September 30, 1997 was $9.2
million, or $.58 per fully-diluted share, compared to a net loss of $338,000, or
($.02) per fully-diluted share for the three months ended September 30, 1996.
The prior year quarter included a one-time charge of $8.7 million or $.54, net
of applicable income taxes, reflecting the cost of the SAIF recapitalization.

  NET INTEREST INCOME - Net interest income was $23.2 million for the current
quarter, compared to $22.1 million for the quarter ended September 30, 1996, an
increase of $1.1 million. Although the Company's average net interest-earning
assets increased to $237.0 million for the three months ended September 30,
1997, compared to $230.8 million for the three months ended September 30, 1996,
the Company's net interest margin declined to 2.92% for the current three month
period, compared to 3.00% for the prior year period.  The decrease is primarily
due to a combination of a flattening Treasury yield curve, and the reliance on
higher cost FHLB of Chicago advances to fund new loan volume.  While the average
yield on interest-earning assets rose four basis points to 7.57%, the average
cost of interest-bearing liabilities rose 12 basis points to 4.99%.

                                       24
<PAGE>
 
  Interest income on loans increased $5.6 million as a result of a $247.8
million increase in average loans receivable as well as a 4 basis point increase
in the average yield of the loan portfolio.  Interest income on mortgage-backed
securities decreased $1.6 million to $5.4 million for the current quarter, due
to a $97.4 million decrease in average balances due to regular amortization and
prepayments, offset by a 13 basis point increase in average yield, primarily due
to slight upward repricing of certain adjustable rate mortgage-backed securities
and CMO's.  Interest income on investment securities decreased $246,000 to $2.4
million.  The combined average balances of federal funds sold and interest-
bearing deposits increased $70.1 million, due to higher prepayments in loans
receivable.

  Interest expense on deposit accounts increased $1.3 million to $25.2 million,
due to an increase in average deposits of $67.6 million during the current three
month period, as well as a 9 basis point increase in the average cost of
savings.  The increase in the average cost of deposits is primarily due to an
increase in average certificate of deposit balances, which carry higher interest
rates than the Bank's core deposit accounts.

  Interest expense on borrowed funds increased $2.5 million to $12.0 million, as
a result of a $162.4 million increase in the average balance of borrowed funds,
offset by a 19 basis point decrease in the average cost of borrowed funds.  The
increase in the average balance is primarily due to an increase in FHLB of
Chicago advances of $167.3 million.  The decrease in the average cost  is a
result of falling medium term interest rates, as well as the repayment of $85.0
million of FHLB of Chicago advances with higher rates.

  PROVISION FOR LOAN LOSSES - The Bank provided $250,000 in provision for loan
losses during the current three month period, compared to $350,000 for the prior
three month period.  Net charge-offs during the current quarter were $95,000,
compared to $15,000 for the three months ended September 30, 1996.  At September
30, 1997, the Bank's allowance for loan losses was $18.3 million, which was .69%
of total loans receivable, compared to .73% at December 31, 1996.  The ratio of
the allowance for loan losses to non-performing loans was 147.5% at September
30, 1997 compared to 133.1% at December 31, 1996.

  NON-INTEREST INCOME - Non-interest income increased 9.8% to $6.1 million for
the three months ended September 30, 1997, compared to $5.5 million for the
three months ended September 30, 1996.

  Gain on sale of loans and mortgage-backed securities decreased to a combined
$80,000 for the three months ended September 30, 1997, compared to a combined
gain of $151,000 for the three months ended September 30, 1996. The Bank sold
$21.4 million in mortgage loans during the quarter ended September 30, 1997
compared to $48.7 million during the quarter ended September 30, 1996.

  The Company recognized $137,000 in gains on investment securities for the
three months ended September 30, 1997, compared to $100,000 for the prior year
period, primarily due to sales of marketable equity securities. Unrealized gains
in the Company's marketable equity portfolio totaled $2.1 million at September
30, 1997.

                                       25
<PAGE>
 
  Income from real estate operations increased $451,000 to $2.1 million for the
three months ended September 30, 1997.  A summary of income from real estate
operations is as follows:

<TABLE>
<CAPTION>
                                                THREE MONTHS ENDED SEPTEMBER 30,
                                          ---------------------------------------------
                                                   1997                   1996
                                          ----------------------  ---------------------
           <S>                            <C>        <C>          <C>        <C>
                                                      PRE-TAX
                                               # OF   INCOME           # OF    PRE-TAX
                                               LOTS    (LOSS)          LOTS    INCOME
                                               ----   -------          ----    ------- 
                                                     (dollars in thousands)
           Woodbridge                            49    $1,497            10     $  115
           Harmony Grove                         34       370             -          -
           Reigate Woods                          2       132             5        245
           Clow Creek Farm                        3       111             6        142
           Creekside of Remington                 4         9             -          -
           Fields of Ambria                       3        (5)            5         39
           Woods of Rivermist                     -         -             2        112
           Ashbury                                -         -             7      1,010
                                               ----   -------          ----    ------- 
                                                 95    $2,114            35     $1,663
                                               ====   =======          ====    =======
</TABLE>

  The Woodbridge subdivision consists of 531 residential lots.  At September 30,
1997, 57 lots were remaining with 45 under contract.  The increase in sales is
due to an improvement in identification of the subdivision's target market.  The
Company expects to close the current pending sales during the next two quarters.
Harmony Grove, with a total of 386 lots, commenced sales one year ago.  To date,
the project has sold 164 lots, 34 in the current quarter.  Of the remaining 222
lots, 67 lots are under contract as of September 30, 1997. The 85-lot Reigate
Woods subdivision had two sales during the current quarter, with 44 homesites
remaining.  Five homesites are under contract as of September 30, 1997. Lot sale
profits per lot in Clow Creek Farm improved due to higher prices in the 260-lot
subdivision, as it nears completion.  At September 30, 1997, one of the
remaining nine lots are under contract.  The Company had 4 sales in the
Creekside of Remington subdivision, which is a 170-lot development. Project to
date sales have been slower than in other projects.  At September 30, 1997,
eight lots are under contract. The Fields of Ambria subdivision is nearly
complete, with three sales during the current quarter.  Only six of the 240
total homesites in this project remain unsold at September 30, 1997.  The Woods
of Rivermist development has two lots remaining to be sold at September 30,
1997.  Prior year Ashbury profits represent lot sale profits, as well as the
sale of a 13 acre commercial parcel at a  $728,000 profit.

  Deposit account service charges increased $381,000, or 25.1% to $1.9 million
for the three months ended September 30, 1997.  The increase is due to improved
fee income from checking accounts due to a large increase in the number of
checking accounts opened in response to the Bank's direct mail program.  The
number of checking accounts at the Bank exceeded 80,000 at September 30, 1997,
compared to 69,000 at September 30, 1996.

  Loan servicing fee income decreased $72,000 or 11.5% to $552,000, for the
three months ended September 30, 1997.  The average balance of loans serviced
for others decreased 3.3% to $1.02 billion for the current three month period,
compared to $1.05 billion for the prior year period, and the average servicing
fee decreased to 26 basis points in 1997 compared to 27 basis in 1996.
Amortization of servicing rights equaled $111,000 for the three months ended
September 30, 1997, compared to $76,000 for the prior three month period, as a
result of increased prepayments in the loan serviced for others portfolio.

  NON-INTEREST EXPENSE -  Non-interest expense decreased $13.8 million to $14.0
million for the three months ended September 30, 1997 primarily due to a one-
time charge of $14.2 million for the recapitalization of the SAIF in the prior
year period.  Without regard to the one-time charge, non-interest expense
increased $378,000.

  Compensation and benefits increased $419,000 to $7.8 million for the three
months ended September 30, 1997, compared to the three months ended September
30, 1996.  The increase is primarily due to higher medical costs and 

                                       26
<PAGE>
 
retirement plan expenses, as well as higher loan officer commissions due to an
increase in loan originations during the current quarter as compared to the
prior year quarter.

  Occupancy expense increased $274,000, or 21.0%, to $1.6 million for the three
months ended September 30, 1997.  The increase is a result of increased
occupancy costs related to the Bank's new loan operations center, Downers Grove
branch, and land lease for the new Harlem Irving branch.

  FDIC insurance premiums decreased significantly due to legislation passed to
recapitalize the SAIF, which insures deposits of savings institutions.  The
decrease in the Bank's insurance rate on deposits to 6.48 basis points for the
three months ended September 30, 1997, compared to 23 basis points for the three
months ended September 30, 1996 led to the decrease in FDIC insurance costs.

  Marketing expense increased $318,000, or 69.4% to $776,000 for the three
months ended September 30, 1997 due to costs associated with the opening of the
Bank's newest branch, as well as costs for marketing new deposit products, and
direct mail expenses related to home equity loans.  In addition, the prior year
quarter did not include marketing expense for our Northwestern branches since
our products had not yet been introduced in those areas.

  Other non-interest expense increased  $342,000 to $2.5 million for the three
months ended September 30, 1997. The increase is primarily due to higher title,
credit report and appraisal fees due to higher loan volume in the quarter and a
higher experience of check losses due to the increased checking account base.

  INCOME TAXES -  For the three months ended September 30, 1997, income tax
expense totaled $5.9 million, or an effective income tax rate of 39.1%, compared
to an income tax benefit of $197,000, or an effective income tax benefit rate of
36.8%, for the three months ended September 30, 1996.

COMPARISON OF THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996

  GENERAL - Net income for the nine months ended September 30, 1997 was $28.7
million, or $1.79 per share, compared to $9.1 million, or $.75 per share, an
increase of $19.6 million.  Results between the two periods are generally not
comparable due to the Company's acquisition of NSBI on May 30, 1996.

  NET INTEREST INCOME - Net interest income for the nine months ended September
30, 1997 was $70.1 million compared to $49.7 million for the nine months ended
September 30, 1996, an increase of $20.4 million, or 41.0%.  The increase is a
function of the growth in average interest-earning assets of $760.5 million due
primarily to the acquisition of NSBI, as well as an increase in the net interest
margin to 3.00% for the nine months ended September 30, 1997, compared to 2.82%
for the prior year's six month period.

  Interest income on interest-earning assets increased $45.5 million during the
nine months ended September 30, 1997.  Of this increase, $39.8 million is
attributable to loans receivable. The Bank's average balance of loans receivable
increased $667.6 million during the current period, primarily due to the
acquisition of NSBI, while the average yield on loans receivable increased 7
basis points. The $990,000 increase in interest income on mortgage-backed
securities is due to a 47 basis point increase in average yield offset by a
decrease in average balance of $3.2 million.  Interest income on investment
securities increased $1.6 million to $7.4 million for the nine months ended
September 30, 1997, due to the increase in the average balance of $23.5 million,
and an increase in the average yield of 43 basis points. Both increases are
generally due to the acquisition of NSBI, whose investment portfolio carried a
longer duration than that of the Bank's.

  Interest expense on interest-bearing liabilities increased $25.1 million
during the nine months ended September 30, 1997.  Interest expense on savings
deposits increased $16.7 million, primarily due to an increase in the average
deposits of $526.3 million primarily from the NSBI acquisition.  Interest
expense on borrowed funds increased $8.4 million, due primarily to a $181.4
million increase in the average balance of borrowed funds offset by a 16 basis
point decrease in average cost.

                                       27
<PAGE>
 
  PROVISION FOR LOAN LOSSES - The Bank provided $850,000 for possible loan
losses for the nine months ended September 30, 1997 compared to $800,000 for the
nine months ended September 30, 1996.  Net charge-offs were $427,000 for the
current nine month period compared to $246,000 for the prior nine month period.
At September 30, 1997, the Bank's allowance for loan losses was $18.3 million
which was .69% of total loans receivable, compared to .73% at December 31, 1996.
The ratio of allowance for loan losses to non-performing loans was 147.5% at
September 30, 1997 compared to 133.1% at December 31, 1996.

  NON-INTEREST INCOME - Non-interest income increased $2.6 million to $16.5
million for the nine months ended September 30, 1997.

  Gain on sale of  loans receivable and mortgage-backed securities were a
combined $186,000 for the nine months ended September 30, 1997, compared to
$114,000 for the nine months ended September 30, 1996, an increase of $72,000.
Loan sales were $64.6 million during the current period compared to $167.5
million in the prior nine month period.  During the current nine month period,
the Bank swapped and sold $2.2 million of current loan originations compared to
$34.2 million in the prior nine month period.  Loan sale activity is down due to
the Bank's strategy of keeping more fixed-rate mortgage loans in portfolio to
better utilize its capital base.

  During the current nine months, the Company recognized gains on the sale of
investment securities of $225,000, compared to $243,000 for the previous nine
month period.  The gains are primarily from the sale of marketable equity
securities.

  Income from real estate operations was $5.1 million for the nine months ended
September 30, 1997, compared to income of $3.6 million for the nine months ended
September 30, 1996.

<TABLE>
<CAPTION>
                                                            NINE MONTHS ENDED SEPTEMBER 30,
                                               ----------------------------------------------------------
                                                           1997                          1996
                                               ----------------------------  ----------------------------
                                                   # OF                         # OF          INCOME
                                                   LOTS          INCOME         LOTS          (LOSS)
                                               ------------  --------------  -----------  ---------------
<S>                                            <C>           <C>             <C>          <C>
                                                                (dollars in thousands)
 
   Ashbury                                                8          $  290           17          $1,338
   Woods of Rivermist                                     5             220            2             112
   Clow Creek Farm                                       15             576           76           2,004
   Harmony Grove                                         89           1,221            -               -
   Fields of Ambria                                       9              33            7              56
   Creekside of Remington                                 6              15            -               -
   Reigate Woods                                          8             447            7             343
   Woodbridge                                            91           2,286           20             200
   Other                                                  -               -            -            (424)
                                                        ---          ------          ---          ------
                                                        231          $5,088          129          $3,629
                                                        ===          ======          ===          ======
</TABLE>


  The eight lot sales in Ashbury represent the final sales of this 1,115-lot
subdivision.  Included in the pre-tax income from Ashbury in 1996 is a $728,000
profit from the sale of a 13-acre commercial parcel.  The Woods of Rivermist
activity during the current nine month period leaves only two lots remaining in
the 31-lot development. Clow Creek Farm sales decreased  due to the near
completion of this project as of September 30, 1997.  At September 30, 1997, 9
lots remain, with one under contract.  Harmony Grove is the Company's newest
subdivision. The 89 lot sales represent a majority of the remaining Unit 1 and
Unit 3 lots.  The Company expects sales to continue to close in the fourth
quarter of 1997 in the next unit of this project.  Activity in Fields of Ambria,
Reigate Woods and Woodbridge is due to the acquisition of NSBI.  Prior period
amounts represent four months of activity. The $424,000 loss in the prior nine
month period represents the write-off of capitalized costs related to a real
estate project which the Company decided not to exercise its options  to
purchase two parcels of  land.

                                       28
<PAGE>
 
  Loan servicing fee income decreased 5.5%, or $102,000 to $1.8 million for the
nine months ended September 30, 1997. Although the average balance of loans
serviced for others has increased 1.5% to $1.03 billion for the current nine
month period, compared to $1.02 billion in the prior nine month period, loan
servicing fees decreased primarily due to amortization of purchased loan
servicing rights, which totaled $280,000 for the current nine month period,
compared to $206,000 for the prior nine month period.

  Deposit account service charges increased $1.2 million or 29.2% to $5.2
million for the nine months ended September 30, 1997, due to an  increase in the
number of checking accounts generated by the Bank's direct mail checking account
program.

  NON-INTEREST EXPENSE - Non-interest expense for the nine months ended
September 30, 1997 decreased $8.0 million, or 16.6% to $40.3 million compared to
$48.3 million for the nine months ended September 30, 1996 primarily due to a
one-time charge of $14.2 million for the recapitalization of the SAIF in the
prior year period.  Exclusive of the SAIF assessment, non-interest expenses
increased $6.2 million.  The general reason for this increase in non-interest
expense for the current nine month period is due to the prior nine month period
including the impact of the Company's acquisition of NSBI for only four months,
compared to nine months for the current period.

  Compensation and benefits increased $3.6 million for the nine months ended
September 30, 1997, to $22.5 million.  The increase is primarily due to the
increase in staff with the acquisition of NSBI and normal salary increases.

  Occupancy expense increased $1.3 million, or 39.5% to $4.6 million for the
nine months ended September 30, 1997 due to the acquisition of NSBI, which added
six locations to the branch network.  In addition, the current nine month
increase is due to a branch opening by the Bank, and the addition of a
centralized loan processing center for the Bank's loan origination and
processing departments.

  FDIC insurance premiums declined $1.9 million to $1.1 million due to
legislation passed to recapitalize the SAIF, which insures deposits of savings
institutions.  The result was a decrease in the Bank's insurance rate on
deposits to 6.48 basis points for the nine months ended September 30, 1997,
compared to 23 basis points for the nine months ended September 30, 1996.

  Advertising and promotion costs increased $651,000 to $1.9 million for the
nine months ended September 30, 1997 due primarily to additional costs incurred
with a new branch and the expansion of the direct mail program for checking
accounts to the six new locations acquired.

  Other non-interest expense increased $2.0 million to $7.6 million for the nine
months ended September 30, 1997. The increase is due to the current nine month
period including $1.0 million in amortization of the core deposit intangible
created in the acquisition of NSBI, compared to $476,000 in the prior year
period. Additionally, increased operating costs as a result of the merger with
NSBI account  for the remainder of the increase in this category.  The Company
also incurred $1.0 million in amortization expense of goodwill during the
current nine month period, compared to $451,000 in the prior year period.

  INCOME TAXES - The Company recorded a provision for income taxes of $16.7
million for the nine months ended September 30, 1997, or an effective income tax
rate of 36.8%, compared to $5.4 million for the nine months ended September 30,
1996, or an effective income tax rate of 37.4%.  The decrease in the effective
income tax rate is primarily due to the recognition of $1.0 million in income
tax benefits, equal to $.06 per share, relating to the resolution of certain
prior years' state income tax issues.

                                       29
<PAGE>
 
PART II  -  OTHER INFORMATION
-----------------------------

Item 1.  Legal Proceedings

         The Company is not presently engaged in any legal proceedings of a
         material nature.

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.

                                       30
<PAGE>
 
Item 6.  Exhibits and Reports on Form 8-K.

         (a) Exhibit No. 11.  Statement re:  Computation of per share earnings

<TABLE>
<CAPTION>
                                                                 QUARTER ENDED         NINE MONTHS ENDED
                                                              SEPTEMBER 30, 1997       SEPTEMBER 30, 1997
                                                             ---------------------  ------------------------
<S>                                                          <C>                    <C>
Net income                                                             $ 9,196,000                28,692,000
                                                                       ===========                ==========
 
Weighted average shares outstanding                                     15,338,117                15,522,337
 
Common stock equivalents due to dilutive
effect of stock options                                                    535,618                   502,427
                                                                       -----------                ----------
 
Total weighted average common shares
and equivalents outstanding for primary
computation                                                             15,873,735                16,024,764
                                                                       ===========                ==========
 
Primary earnings per share                                             $       .58                      1.79
                                                                       ===========                ==========
 
Total weighted average common shares
and equivalents outstanding for primary
computation                                                             15,873,735                16,024,764
 
Additional dilutive shares using the end of
period market value versus the average
market value when applying the
treasury stock method                                                       11,982                    13,165
                                                                       -----------                ----------
 
Total weighted average common shares and
equivalents outstanding for fully diluted
computation                                                             15,885,717                16,037,929
                                                                       ===========                ==========
 
Fully diluted earnings per share                                       $       .58                      1.79
                                                                       ===========                ==========
</TABLE>

         (b) Reports on Form 8-K.
 
         None.

                                       31
<PAGE>
 
                                  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.



                                                MAF Bancorp. Inc.
                                              ---------------------
                                                   (Registrant)
 
 
 
Date:     November 12, 1997            By:    /s/  Allen H. Koranda
     ----------------------               -------------------------
                                                   Allen H. Koranda
                                             Chairman of the Board and
                                              Chief Executive Officer
                                             (Duly Authorized Officer)
 
 

Date:    November 12, 1997             By:    /s/  Jerry A. Weberling
     ---------------------                ---------------------------
                                                   Jerry A. Weberling
                                             Executive Vice President and
                                               Chief Financial Officer
                                              (Duly Authorized Officer)
 
 
 
 

                                       32