<PAGE>   1

                             CHESTER BANCORP, INC.


                             [CHESTER BANCORP. LOGO]



                               1998 Annual Report


<PAGE>   2




TABLE OF CONTENTS
--------------------------------------------------------------------------------


                                                                Page
                                                                ----

Message to Our Stockholders                                       1
Common Stock and Related Matters                                  2
Selected Consolidated Financial Information                       3
Management's Discussion and Analysis                              5
Independent Auditors' Report                                     16
Consolidated Financial Statements                                17
Notes to Consolidated Financial Statements                       22
Stockholder Information                                    Inside Back Cover


<PAGE>   3




MESSAGE TO OUR STOCKHOLDERS
--------------------------------------------------------------------------------

To Our Stockholders:

     Chester Bancorp, Inc. has completed its second full year as a public
company. On October 4, 1996, Chester Savings Bank, F.S.B. converted from mutual
to stock ownership and converted from a federal savings bank to two national
banks, Chester National Bank and Chester National Bank of Missouri.
Simultaneously with these conversions, the Company, Chester Bancorp, Inc., was
formed as a holding company for the two banks and the Company completed the
initial public offering of its common stock. The conversion from mutual
ownership in a savings association to stock ownership in a bank holding company
has enabled customers, community members and other investors to participate in
the Bank's growth and success through an equity interest in the Company.

     The Banks continue to focus on maintaining profitability by increasing
their lending base while maintaining safe and sound banking practices. Both
Chester National Bank and Chester National Bank of Missouri are well positioned
as strong local community banks in the markets they serve. The Banks' multiple
locations, including main facilities in Chester, Illinois, and Perryville,
Missouri, branch facilities in Sparta, Pinckneyville and Red Bud, Illinois, and
a loan production office in Cape Girardeau, Missouri, enable the Banks to
provide quality banking service to several local communities in the region.

     The Company is expanding in the Perryville market with the opening of a
branch office in the new Bucheit building located on Route 51 in Perryville.

     The Company initially offered 2,182,125 shares of common stock to the
public on October 4, 1996. The Company has reduced the number of outstanding
shares of its common stock to 1,481,988 as of December 31, 1998, through various
repurchases of the Company's capital stock. Beginning on April 4, 1997, the
Company announced its initial repurchase plan to repurchase 5% of its then
outstanding capital stock, with this repurchase plan being completed in 1997. On
October 7, 1997, the Company announced a further plan to repurchase an
additional 10% of its then outstanding shares, with this plan being completed
during 1998. In addition, the Company has continued to repurchase shares from
time to time, to the extent that such repurchases are then determined to be
advisable by the Board of Directors and authorized by the appropriate regulatory
authorities. The Company will continue this practice which is considered by the
Board of Directors as a method of increasing value to the Company's
stockholders.

     On behalf of the Board of Directors of Chester Bancorp, Inc. and the
management and employees of Chester National Bank and Chester National Bank of
Missouri, I extend our sincere appreciation to our stockholders and customers
for your support during 1998. We look forward to an exciting and profitable
1999.

Sincerely,
Michael W. Welge
Michael W. Welge

Chairman of the Board,
President and Chief
Financial Officer

                                        1


<PAGE>   4




COMMON STOCK AND RELATED MATTERS
--------------------------------------------------------------------------------

     The common stock of Chester Bancorp, Inc. is traded in the over-the-counter
market and is listed for quotation in the Nasdaq National Market under the
symbol "CNBA." The stock was issued on October 4, 1996 at $10.00 per share. As
of December 31, 1998, there were 624 stockholders of record and 1,481,988 shares
of common stock issued and outstanding.

     The following table sets forth the high and low closing prices as reported
by Nasdaq National Market and dividends paid per share of common stock for the
period indicated.



<TABLE>
<CAPTION>
                                                                    Dividends
  Quarter ended                High                Low                paid
-----------------------------------------------------------------------------
<S>                           <C>                <C>                <C>
December 31, 1996             $13.750            $12.625              $.05
March 31, 1997                $15.500            $13.125              $.06
June 30, 1997                 $15.500            $14.000              $.06
September 30, 1997            $18.750            $14.750              $.06
December 31, 1997             $20.500            $15.375              $.07
March 31, 1998                $18.750            $17.125              $.07
June 30, 1998                 $18.000            $16 .750             $.07
September 30, 1998            $18.000            $17.000              $.07
December 31, 1998             $17.250            $16.750              $.07

</TABLE>

     Payment of dividends on the common stock is subject to determination and
declaration by the Board of Directors and will depend upon a number of factors,
including capital requirements, regulatory limitations on the payment of
dividends, Chester Bancorp's results of operations and financial condition, tax
considerations, and general economic conditions. No assurance can be given that
dividends will be declared or, if declared, what the amount of dividends will
be, or whether such dividends, once declared, will continue.

                                        2


<PAGE>   5




SELECTED CONSOLIDATED FINANCIAL INFORMATION
--------------------------------------------------------------------------------



<TABLE>
<CAPTION>
                                                                                 At December 31,
                                         -------------------------------------------------------------------------------------------
           (DOLLARS IN THOUSANDS)               1998               1997               1996               1995               1994
------------------------------------------------------------------------------------------------------------------------------------
<S>                                      <C>                <C>                <C>                <C>                <C>
SELECTED FINANCIAL CONDITION DATA:
Total assets                             $       142,796    $       133,777    $       145,843    $       134,781    $       141,755
Loans receivable, net                             48,209             60,468             54,842             57,021             58,157
Mortgage-backed securities, net(1)                21,870             13,788             15,897             15,413             13,136
Investments, net(2)                               68,218             54,689             69,842             57,605             64,410
Savings deposits(3)                               99,435             95,362            102,247            106,718            129,712
Securities sold under agreements to
  repurchase(3)                                   10,880              8,380             11,340             15,000              --
Federal Home Loan Bank advances                   10,000               --                 --                 --
Stockholders' equity                              21,705             28,988             31,427             11,712             10,675

</TABLE>


<TABLE>
<CAPTION>
                                                                                Year Ended December 31,
                                                ------------------------------------------------------------------------------------
           (DOLLARS IN THOUSANDS)                 1998               1997               1996               1995               1994
------------------------------------------------------------------------------------------------------------------------------------
<S>                                      <C>                <C>                <C>                <C>               <C>
SELECTED OPERATING DATA:
Interest income                          $         9,077    $         9,182    $         9,307    $         9,035    $         8,696
Interest expense                                   5,122              4,647              5,300              5,474              5,089
------------------------------------------------------------------------------------------------------------------------------------
  Net interest income                              3,955              4,535              4,007              3,561              3,607
Provision for loan losses                             17                 98                 33                161                 69
------------------------------------------------------------------------------------------------------------------------------------
  Net interest income after provision for
     loan losses                                   3,938              4,437              3,974              3,400              3,538
Loss on sale of certificates of deposit               --                 --                (54)                --                 --
Gain on sale of investment securities and
  mortgage-backed securities                          33                 16                 42                 98                 --
Other noninterest income                             207                203                180                140                114
Noninterest expense                                2,514              2,835              3,338              2,338              2,374
------------------------------------------------------------------------------------------------------------------------------------
Income before income taxes                         1,664              1,821                804              1,300              1,278
Income taxes                                         514                511                109                299                285
------------------------------------------------------------------------------------------------------------------------------------
Net income                               $         1,150    $         1,310    $           695    $         1,001    $           993
====================================================================================================================================
Earnings per share -- basic              $           .75    $           .68    $           .19                N/A                N/A
====================================================================================================================================
Earnings per share -- diluted            $           .73    $           .67    $           .19                N/A                N/A
====================================================================================================================================

</TABLE>

                                        3


<PAGE>   6



SELECTED CONSOLIDATED FINANCIAL INFORMATION (CONTINUED)
--------------------------------------------------------------------------------



<TABLE>
<CAPTION>
                                                          At or for the Year Ended December 31,
                                                  ------------------------------------------------------
                                                   1998       1997         1996        1995        1994
--------------------------------------------------------------------------------------------------------
<S>                                               <C>        <C>          <C>        <C>         <C>
KEY OPERATING RATIOS(3):
Performance Ratios:
Return on average assets (net income divided
  by average assets)                                0.82%       0.96%       0.49%       0.73%       0.69%
Return on average equity (net income divided
  by average equity)                                4.63        4.28        4.12        8.94        9.76
Interest rate spread (difference between
  average yield on interest-earning assets and
  average cost of interest-bearing
  liabilities)(4)                                   2.31        2.69        2.74        2.60        2.61
Net interest margin (net interest income as a
  percentage of average interest-earning
  assets)(4)                                        3.03        3.60        3.15        2.87        2.79
Noninterest expense to average assets               1.79        2.07        2.38(6)     1.70        1.66
Average interest-earning assets to average
  interest-bearing liabilities                    118.91      125.71      110.41      106.48      104.91
Asset Quality:
Allowance for loan losses to total loans at
  end of period                                      .92        0.72        0.70        0.68        0.42
Ratio of allowance for loan losses to
  non-performing loans                            287.41    1,159.97      485.74      244.79       64.65
Net charge offs to average outstanding loans
  during the period                                  .01        0.08        0.07        0.03        0.05
Ratio of non-performing assets to total
  assets(5)                                          .20        0.06        0.13        0.27        0.31
Capital Ratios:
Average equity to average assets                   17.74       22.39       12.00        8.15        7.12
Equity to assets at end of period                  15.20       21.67       21.55        8.69        7.53

</TABLE>



<TABLE>
<CAPTION>
                                                                     At December 31,
                                                  ------------------------------------------------------
                                                   1998       1997         1996        1995        1994
--------------------------------------------------------------------------------------------------------
<S>                                              <C>         <C>         <C>         <C>       <C>
OTHER DATA:
Number of:
  Real estate loans outstanding                    1,127       1,317       1,466       1,484       1,542
  Deposit accounts                                 9,970      10,391      12,632      12,282      12,742
  Full-service offices                                 5           5           6           6           6
  Loan production offices                              1           1           1           1        --

</TABLE>

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

(1)  Includes mortgage backed securities available for sale of $11.3 million,
     $1.6 million, $1.9 million, and $2.2 million at December 31, 1998, 1997,
     1996, and 1995, respectively.
(2)  Includes investment securities, interest-bearing deposits, federal funds
     sold, and certificates of deposits. Includes securities available for sale
     of $12.5 million, $19.7 million, $12.5 million, and $7.1 million at
     December 31, 1998, 1997, 1996 and December 31, 1995, respectively.
(3)  During the year ended December 31, 1995, $15.0 million of certificates of
     deposit were converted into reverse repurchase agreements and, therefore,
     are not reflected in deposit totals.
(4)  Information is presented on a tax equivalent basis assuming a tax rate of
     34%.
(5)  Non-performing assets include loans which are contractually past due 90
     days or more, loans accounted for on a nonaccrual basis and real estate
     acquired through foreclosure.
(6)  Includes SAIF special assessment of $812,498. Non-interest expense to
     average assets excluding SAIF special assessment is 1.80%.

                                        4


<PAGE>   7




MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
--------------------------------------------------------------------------------

GENERAL

     The principal business of Chester Bancorp, Inc. and its subsidiaries (the
Company) consists of attracting deposits from the general public and using these
funds to originate mortgage loans secured by one- to four-family residences and
to invest in investments and mortgage-backed securities. To a lesser extent, the
Company engages in various forms of consumer lending. The Company's
profitability depends primarily on its net interest income, which is the
difference between the interest income it earns on its loans, mortgage-backed
securities and investment portfolio and its cost of funds, which consists mainly
of interest paid on deposits, securities sold under agreements to repurchase and
advances from the Federal Home Loan Bank (FHLB). Net interest income is affected
by the relative amounts of interest-earning assets and interest-bearing
liabilities and the interest rates earned or paid on these balances. When
interest-earning assets approximate or exceed interest-bearing liabilities, any
positive interest rate spread will generate net interest income.

     The Company's profitability is also affected by the level of provisions for
loan losses, noninterest income and noninterest expense. Noninterest income
consists primarily of gains and losses on the sale of investment securities,
late charges on loans, and deposit account fees. Noninterest expense consists of
salaries and benefits, occupancy related expenses, data processing expenses,
deposit insurance premiums paid to the SAIF and other operating expenses.

     The operations of the Company are significantly influenced by general
economic conditions and related monetary and fiscal policies of financial
institutions regulatory agencies. Deposit flows and the cost of funds are
influenced by interest rates on competing investments and general market rates
of interest. Lending activities are affected by the demand for financing real
estate and other types of loans, which in turn is affected by the interest rates
at which such financing may be offered and other factors affecting loan demand
and the availability of funds.

     On October 4, 1996, the Company, formerly known as Chester Savings Bank,
FSB (the Bank), completed its conversion from a federal mutual savings bank to a
federal capital stock savings bank and simultaneously formed Chester Bancorp,
Inc., a Delaware corporation, to act as the holding company of the converted
savings bank. Pursuant to the plan of conversion, the Bank converted to a
national bank known as Chester National Bank, and a newly chartered bank
subsidiary was formed by the Company known as Chester National Bank of Missouri.
The stock conversion resulted in the sale and issuance of 2,181,125 shares of $
 .01 par value common stock at a price of $10.00 per share. In conjunction with
the conversion, the Company loaned $1,745,700 to the Company's employee stock
ownership plan for the purchase of 174,570 shares of common stock in connection
with the stock conversion. After reducing gross proceeds for conversion costs of
$939,363 and $1,745,700 related to the sale of shares to the Company's employee
stock ownership plan, net proceeds totaled $19,136,187.

     When used in this Annual Report the words or phrases "will likely result,"
"are expected to," "will continue," "is anticipated," "estimate," "project" or
similar expressions are intended to identify "forward- looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995. Such
statements are subject to certain risks and uncertainties, including, among
other things, changes in economic conditions in the Company's market area,
changes in policies by regulatory agencies, fluctuations in interest rates,
demand for loans in the Company's market area and competition, that could cause
actual results to differ materially from the historical earnings and those
presently anticipated or projected. The Company wishes to caution readers not to
place undue reliance on any such forward-looking statements, which speak only as
of the date made. The Company wishes to advise readers that the factors listed
above could affect the Company's financial performance and could cause the
Company's actual results for future periods to differ materially from any
opinions or statements expressed with respect to future periods in any current
statements.

     The Company does not undertake, and specifically declines any obligation,
to publicly release the result of any revisions which may be made to any
forward-looking statements to reflect events or circumstances after the date of
such statements or to reflect the occurrence of anticipated or unanticipated
events.

BUSINESS STRATEGY

     The Company's current business strategy is to operate as a well
capitalized, profitable and independent community bank dedicated to financing
home ownership and consumer needs in its market area and to providing quality
service to its customers. The Company has implemented this strategy by: (1)
closely monitoring the needs of customers and providing quality service; (2)
emphasizing consumer banking by originating residential mortgage loans and
consumer loans, and by offering checking accounts and other financial services
and products; (3) maintaining asset quality; (4) maintaining

                                        5


<PAGE>   8




significant investments in investment and mortgage-backed securities; (5)
maintaining capital in excess of regulatory requirements; (6) increasing
earnings; and, (7) managing interest rate risk by attempting to match asset and
liability maturities and rates.

FINANCIAL CONDITION

Assets.

     The Company's total assets increased by $9.0 million, or 6.7%, to $142.8
million at December 31, 1998 from $133.8 million at December 31, 1997. The
increase in the Company's asset size was reflective of increases in investment
securities and mortgage-backed securities, offset by a decline in loans
receivable. The funding for the increased asset size resulted from a $4.1
million increase in the level of savings deposits, a $2.5 million increase in
securities sold under agreements to repurchase, and $10.0 million of FHLB
advances received during the first quarter of 1998.

     Loans receivable decreased $12.3 million, or 20.3%, to $48.2 million at
December 31, 1998 from $60.5 million at December 31, 1997. The primary reason
for the decline in loans receivable relates to the significant level of
prepayments experienced by the Company during 1998. Refinancing volume was high
due to the low level of interest rates throughout 1998. In addition, new
originations declined from $20.7 million in 1997 to $6.2 million in 1998. In
1997, management made a conscious effort to originate loans in the St. Louis
residential lending market through various wholesale channels. The program
generated $8 million of new loan volume in 1997. A similar program was not
utilized in 1998. Also, local demand for mortgage loans has been limited the
past few years because of significant competition in the Company's primary
market area. In 1999, management will focus on: increasing commercial lending by
participating in government guaranteed lending arrangements; expanding the
Company's presence in the growing Perryville, Missouri area; and, renewed focus
on consumer lending.

     Mortgage-backed securities at December 31, 1998 were $21.9 million compared
to $13.8 million at December 31, 1997. Investment securities increased $7.7
million, or 17.1%, to $52.6 million at December 31, 1998 from $44.9 million at
December 31, 1997. The excess funds received from the repayment of loans and the
funds received from FHLB advances were primarily invested in U.S. government
agency securities and mortgage-backed securities

     Certificates of deposit decreased $195,000, or 67.2%, to $95,000 at
December 31, 1998 from $290,000 at December 31, 1997. Management began in 1995
to liquidate its certificate of deposit portfolio and has reinvested the
proceeds from certificate of deposit sales and maturities into other types of
investments with higher yields.

     Cash, interest-bearing deposits, federal funds sold, and bankers'
acceptances, on a combined basis, increased $5.5 million, or 48.8%, to $16.8
million at December 31, 1998 from $11.3 million at December 31, 1997. The
increase in interest-bearing deposits resulted primarily from the sale of $4.5
million of investment securities in the fourth quarter of 1998. Management is
currently evaluating longer term investing opportunities for the proceeds from
these sales.

Liabilities.

     Savings deposits increased $4.1 million, or 4.3%, to $99.4 million at
December 31, 1998 from $95.4 million at December 31, 1997. The increase in
savings deposits reflects a $3.3 million increase in the level of deposits from
Gilster-Mary Lee Corporation (Gilster-Mary Lee), a food manufacturing and
packaging company headquartered in Chester, Illinois. The Chairman of the Board
of the Company is also the Executive Vice President, Treasurer and Secretary of
Gilster-Mary Lee.

     Securities sold under agreements to repurchase increased $2.5 million from
$8.4 million at December 31, 1997 to $10.9 million at December 31, 1998. These
agreements averaged $9.5 million during 1998 compared to a 1997 average balance
of $6.9 million. At December 31, 1998, $10.3 million of the agreements are
maintained with Gilster-Mary Lee.

     Over the last several years, the Company has maintained a deposit
relationship with Gilster-Mary Lee, which at times has had as much as $25
million in funds on deposit, typically with short terms. At December 31, 1998
and 1997, the balance of funds on deposit with the Company was $24.3 million and
$18.5 million, respectively, which included the securities sold under agreements
to repurchase. Gilster-Mary Lee notified the Company at the time of the Bank's
stock conversion of its intent to maintain smaller deposit balances with the
institution in the future; however, this situation has not developed. A
significant loss of funds from Gilster-Mary Lee could impair future earnings as
there is no intent to replace the Gilster-Mary Lee savings deposits or
securities sold under agreements to repurchase with other wholesale funds. At
December 31, 1998, the Company maintained an adequate liquidity level to cover
the withdrawal of such deposits and/or additional reduction of such borrowings.

                                        6


<PAGE>   9




     Advances from the Federal Home Loan Bank (FHLB) were $10.0 million at
December 31, 1998, whereas the Company had no FHLB advances at December 31,
1997. The advances have ten year terms at a fixed rate of interest. Management
invested the funds from the advances into U.S. government agency securities with
a one year maturity.

RESULTS OF OPERATIONS

     The Company's operating results depend primarily on its level of net
interest income, which is the difference between the interest income earned on
its interest-earning assets (loans, mortgage-backed securities, investment
securities, and interest-bearing deposits) and the interest expense paid on its
interest-bearing liabilities (deposits and borrowings). Operating results are
also significantly affected by provisions for losses on loans, noninterest
income, and noninterest expense. Each of these factors is significantly affected
not only by the Company's policies, but, to varying degrees, by general economic
and competitive conditions and by policies of federal regulatory authorities.

AVERAGE BALANCES, INTEREST AND AVERAGE YIELDS/COST

     The following table sets forth certain information for the periods
indicated regarding average balances of assets and liabilities as well as the
total dollar amounts of interest income from average interest-earning assets and
interest expense on average interest-bearing liabilities and average yields and
costs. Yields and costs are derived by dividing income or expense by the average
monthly balance of assets or liabilities, respectively, for the periods
presented. Average balances are derived from month-end balances instead of daily
balances, which management believes has not caused any material difference in
the information presented.


<TABLE>
<CAPTION>

                                                                        1998                                            1997      
                                                     -------------------------------------------     -----------------------------
                                           At                                          Average                                    
                                      December 31,       Average                       Yield/            Average                  
       (DOLLARS IN THOUSANDS)             1998           Balance        Interest        Cost             Balance        Interest  
----------------------------------------------------------------------------------------------------------------------------------
<S>                                  <C>             <C>               <C>             <C>           <C>              <C>        
INTEREST-EARNING ASSETS:
  Loans receivable, net(1)               8.30%       $        52,893   $    4,496          8.50%     $        58,127   $    5,040 
  Investments, net(2)(6)                 5.96                 47,607        2,735          5.74               46,873        2,753 
  Mortgage-backed securities, net        6.14                 18,670        1,145          6.13               16,453        1,050 
  Interest-bearing deposit               5.55                 16,128          839          5.20                9,868          538
                                                     -----------------------------                   -----------------------------
    Total interest-earning assets        6.76                135,298        9,215          6.81              131,321        9,381 
                                      ------------                     -------------------------                       -----------
Non-interest-earning assets                                    4,796                                           5,454              
                                                     ---------------                                 ---------------              
    Total assets                                     $       140,094                                 $       136,775              
                                                     ===============                                 ===============              
INTEREST-BEARING LIABILITIES:
  Deposits                               4.36        $        95,493        4,223          4.42      $        97,552        4,300 
  FHLB advances                          4.76                  8,767          423          4.82                   --           -- 
  Securities sold under agreements
    to repurchase                        4.59                  9,523          476          5.00                6,915          347 
                                                     -----------------------------                   -----------------------------
    Total interest-bearing
      liabilities                        4.41                113,783        5,122          4.50              104,467        4,647 
                                      ------------                     -------------------------                       -----------
Non-interest-bearing liabilities                               1,458                                           1,690              
                                                     ---------------                                 ---------------              
    Total liabilities                                        115,241                                         106,157              
Stockholders' equity                                          24,853                                          30,618              
                                                     ---------------                                 ---------------              
    Total liabilities and
      stockholders' equity                           $       140,094                                 $       136,775              
                                                     ===============                                 ===============              
Net interest income                                                    $    4,093                                      $    4,734 
                                                                       ===========                                     ===========
Interest rate spread(4)(6)               2.35%                                             2.31%                                  
                                         ====                                        ===========                                  
Net interest margin(5)                    N/A                                              3.03%                                  
                                          ===                                        ===========                                  
Ratio of average interest-earning
  assets to average interest-bearing
  liabilities                                                                            118.91%                                  
                                                                                     ===========                                  
</TABLE>



<TABLE>
<CAPTION>

                                                     1997                             1996                        
                                                   ----------     -------------------------------------------
                                                    Average                                         Average
                                                    Yield/            Average                       Yield/
       (DOLLARS IN THOUSANDS)                        Cost             Balance        Interest        Cost
-------------------------------------------------------------------------------------------------------------
<S>                                                <C>            <C>               <C>           <C>
INTEREST-EARNING ASSETS:                           
  Loans receivable, net(1)                              8.67%     $        55,758   $    4,867           8.73%
  Investments, net(2)(6)                                5.87               48,262        2,785           5.77
  Mortgage-backed securities, net                       6.38               16,408        1,083           6.60
  Interest-bearing deposit                              5.45               14,227          807           5.67
                                                                  -----------------------------
    Total interest-earning assets                       7.14              134,655        9,542           7.09
                                                   ----------                       -------------------------
Non-interest-earning assets                                                 5,824
                                                                  ---------------
    Total assets                                                  $       140,479
                                                                  ===============
INTEREST-BEARING LIABILITIES:                      
  Deposits                                              4.41      $       106,904        4,557           4.26
  FHLB advances                                           --                   --           --             --
  Securities sold under agreements                 
    to repurchase                                       5.02               15,057          743           4.93
                                                                  -----------------------------
    Total interest-bearing                         
      liabilities                                       4.45              121,961        5,300           4.35
                                                   ----------                       -------------------------
Non-interest-bearing liabilities                                            1,662
                                                                  ---------------
    Total liabilities                                                     123,623
Stockholders' equity                                                       16,856
                                                                  ---------------
    Total liabilities and                          
      stockholders' equity                                        $       140,479
                                                                  ===============
Net interest income                                                                 $    4,242
                                                                                    ===========
Interest rate spread(4)(6)                              2.69%                                            2.74%
                                                   ==========                                     ===========
Net interest margin(5)                                  3.60%                                            3.15%
                                                   ==========                                     ===========
Ratio of average interest-earning                  
  assets to average interest-bearing               
  liabilities                                         125.71%                                          110.41%
                                                   ==========                                     ===========
</TABLE>                                           
                                                   
---------------                      

(1) Average balance includes non-accrual loans. 
(2) Includes FHLB stock, FRB stock and investment securities. 
(3) Includes interest-bearing deposits, federal funds sold, bankers' 
    acceptances, and certificates of deposit.
(4) Represents the difference between the average yield on interest-earning
    assets and the average cost of interest-bearing liabilities.
(5) Represents net interest income as a percentage of average interest-earning
    assets.

                                        7


<PAGE>   10




(6)  Information is presented on a tax-equivalent basis assuming a tax rate of
     34%. The tax-equivalent adjustments were approximately $138,000, $199,000
     and $235,000 for the years ended December 31, 1998, 1997 and 1996,
     respectively.

RATE/VOLUME ANALYSIS

     The following table sets forth the effects of changing volumes and rates on
net interest income of the Company. Information is provided with respect to (i)
effects on interest income and expense attributable to changes in volume
(changes in volume when multiplied by prior rate); (ii) effects on interest
income and expense attributable to changes in rate (changes in rate multiplied
by prior volume); and (iii) changes in rate/volume (change in rate multiplied by
change in volume). Information is presented on a tax equivalent basis assuming a
tax rate of 34% for all years presented.


<TABLE>
<CAPTION>
                                   1998 Compared to 1997                  1997 Compared to 1996         
                            ------------------------------------   ------------------------------------ 
                                                        Total                                  Total    
                                             Rate/     Increase                     Rate/     Increase  
  (Dollars in thousands)    Volume   Rate    Volume   (Decrease)   Volume   Rate    Volume   (Decrease) 
--------------------------------------------------------------------------------------------------------

INTEREST-EARNING ASSETS:
<S>                         <C>      <C>      <C>       <C>        <C>      <C>      <C>       <C>      
  Loans receivable, net(1)  $(454)   $ (99)   $  9      $(544)     $ 207    $ (34)   $  0      $ 173    
  Investments, net(2)          43      (61)      0        (18)       (80)      48       0        (32)   
  Mortgage-backed
    securities, net           142      (41)     (6)        95          3      (36)      0        (33)   
  Interest-bearing
    deposits(3)               341      (25)    (15)       301       (247)     (31)      9       (269)   
--------------------------------------------------------------------------------------------------------
    Total net change in
      income on interest-
      earning assets           72     (226)    (12)      (166)      (117)     (53)      9       (161)   
--------------------------------------------------------------------------------------------------------
Interest-bearing
  liabilities:
  Deposits                    (91)      10       4        (77)      (398)     160     (19)      (257)   
  FHLB advances               440       --     (17)       423         --       --      --         --    
  Securities sold under
    agreements to
    repurchase                131       (2)      0        129       (401)      13      (8)      (396)   
--------------------------------------------------------------------------------------------------------
    Total net change in
      expense on interest-
      bearing liabilities     480        8     (13)       475       (799)     173     (27)      (653)   
--------------------------------------------------------------------------------------------------------
    Net change in net
      interest income       $(408)   $(234)   $  1      $(641)     $ 682    $(226)   $ 36      $ 492    
========================================================================================================
</TABLE>


<TABLE>
<CAPTION>
                                       1996 Compared to 1995
                            -------------------------------------------
                                                               Total
                                                   Rate/     Increase
  (Dollars in thousands)      Volume    Rate       Volume   (Decrease)
-----------------------------------------------------------------------

INTEREST-EARNING ASSETS:
<S>                           <C>       <C>      <C>       <C>   
  Loans receivable, net(1)    $138      $ (23)      1      $(160)
  Investments, net(2)          304         65      10        379
  Mortgage-backed
    securities, net            196        (57)    (11)       128
  Interest-bearing
    deposits(3)               (195)       163     (35)       (67)
-----------------------------------------------------------------------
    Total net change in
      income on interest-
      earning assets           167        148     (35)       280
-----------------------------------------------------------------------
Interest-bearing
  liabilities:
  Deposits                    (589)      (156)     23       (722)
  FHLB advances                 --         --      --         --
  Securities sold under
    agreements to
    repurchase                 585         (9)    (27)       549
-----------------------------------------------------------------------
    Total net change in
      expense on interest-
      bearing liabilities       (4)      (165)     (4)      (173)
-----------------------------------------------------------------------
    Net change in net
      interest income         $171      $ 313    $(31)     $ 453
=======================================================================
</TABLE>

(1) Average balance includes nonaccrual loans. 
(2) Includes FHLB stock, FRB stock and investment securities.
(3) Includes interest-bearing deposits, federal funds sold, bankers'
    acceptances and certificates of deposit.

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

Net Income.

     The Company's net income for 1998 was $1.1 million compared to $1.3 million
for 1997. The lower net income level in 1998 reflects a $580,000 decline in net
interest income which was partially offset by a $320,000 decrease in noninterest
expense. The decline in net interest income resulted from a decrease in the
Company's interest rate spread. Net income in 1997 was negatively impacted by
the accelerated vesting of restricted stock awards due to the death of one of
the Company's directors. The expense recorded by the Company in 1997 for the
vesting of restricted stock awards related to the deceased director totaled
$305,000.

Net Interest Income.

     Net interest income decreased $580,000, or 12.8%, to $4.0 million for 1998
from $4.5 million for 1997. This decrease was the result of a decline in the
Company's interest rate spread from 2.69% for 1997 to 2.31% for 1998. The
decrease in the Company's interest rate spread was mainly attributable to a
decline in the average yield for each component of interest-earning assets. This
decline is reflective of the lower interest rate environment experienced during
1998 and a change in the asset mix that has occurred over the past year. For
1997, average loans comprised 44% of total earning assets, whereas for 1998
average loans comprised only 39% of total earning assets. Net interest income
was also impacted by a decline in the ratio of average interest-earning assets
to average interest-bearing liabilities from 125.71% in 1997 to 118.91% in 1998.
The reduction in the ratio was primarily attributable to management's continued
planned use of funds to repurchase the Company's common stock.

                                        8


<PAGE>   11




Interest Income.

     Interest income on loans receivable totaled $4.5 million for 1998 compared
to $5.0 million for 1997. The $543,000, or 10.8%, decrease in interest income on
loans receivable resulted from a $5.2 million, or 9.0%, decrease in the average
balance of loans receivable. The impact of decreased volume was further impacted
by a decline in the average yield on loans receivable from 8.67% in 1997 to
8.50% in 1998. The decrease in the average balance resulted from significant
loan prepayments coupled with a significant reduction in origination volume.

     Interest income on mortgage-backed securities increased $95,000, or 9.0%,
to $1.15 million for 1998 from $1.05 million for 1997. The increase in interest
income on mortgage-backed securities resulted from a $2.2 million, or 13.5%,
increase in the average balance of mortgage-backed securities. The impact of an
increased average balance was partially offset by a decline in the average yield
on mortgage-backed securities from 6.38% in 1997 to 6.13% in 1998. The increase
in the average balance resulted primarily from a greater emphasis on
mortgage-backed securities as a means of investing excess funds resulting from
significant loan repayments.

     Interest earned on investment securities was $2.6 million for both 1998 and
1997. The impact of the $734,000, or 1.6%, increase in the average balance of
investment securities was offset by a decrease in the average yield. During
1998, management increased the Company's investment in held to maturity
securities and reduced the level of investments available-for-sale. At December
31, 1998, investment securities held to maturity comprised 76% of the investment
portfolio, while at December 31, 1997 investment securities held to maturity
were 56% of the investment portfolio.

     In June 1998, the Financial Accounting Standards Board (FASB) issued SFAS
No. 133, "Accounting for Derivative Instruments and Hedging Activities," which
requires all derivative instruments to be recorded on the balance sheet at
estimated fair value. Among other things, the Statement provides that on the
date of initial application, an entity may transfer any held-to-maturity
security into the available-for-sale category. The Company adopted this
Statement on October 1, 1998. Although the Company did not have any derivative
instruments to record, management reconsidered their ability and intent to hold
certain debt securities to maturity and transferred $11,064,440 and $10,510,911
of investment securities and mortgage-backed securities classified as held to
maturity, respectively, to available for sale on October 1, 1998.

     Interest income on interest-bearing deposits increased $301,000, or 56.1%,
during 1998. The increase in interest income on interest-bearing deposits
resulted from an increase in the average balance of interest-bearing deposits of
$6.3 million, or 63.4%, for 1998. The increase in the average balance was due to
the increased availability of funds that resulted from significant loan
repayments. The increase in interest income on interest-bearing deposits was
partially offset by a decrease in the average yield on interest-bearing deposits
from 5.45% in 1997 to 5.20% in 1998.

Interest Expense.

     Interest expense increased $475,000, or 10.2%, during 1998. Interest
expense on savings deposits decreased $77,000, or 1.8%, to $4.2 million for 1998
from $4.3 million for 1997. This decrease resulted primarily from the $2.1
million, or 2.1%, reduction in the average balance of deposits from $97.6
million for 1997 to $95.5 million for 1998. The decrease in interest expense on
deposits was not significantly impacted by the slight increase in the average
cost of deposits. The decline in average deposits was mainly impacted by
management's decision to continue to compete less aggressively on savings rates
and a full year's impact from the closing of the Company's Carbondale, Illinois
branch location on June 30, 1997. Interest expense on reverse repurchase
agreements increased $129,000, or 37.2%, to $476,000 for 1998 from $347,000 for
1997, This increase resulted primarily from the $2.6 million, or 37.7%, increase
in the average balance of securities sold under agreements to repurchase from
$6.9 million for 1997 to $9.5 million for 1998. The increase in the average
balance of securities sold under agreements to repurchase was attributable to
Gilster-Mary Lee increasing the level of funds maintained with the Company.

     Interest expense on FHLB advances was $423,000 for 1998 compared to no
expense in 1997. The Company borrowed $10.0 million from the FHLB in February
1998 and invested the funds in a U.S. government agency security with a one-year
maturity. The Company had no FHLB advances outstanding during 1997. The average
balance and the average cost on FHLB advances for 1998 was $8.8 million and
4.82% respectively.

Provision for Loan Losses.

     The allowance for loan losses is established through a provision for loan
losses based on management's evaluation of the risk inherent in its loan
portfolio and the general economy. Such evaluation considers numerous factors
including general economic conditions, loan portfolio composition, prior loss
experience, the estimated fair value of the underlying collateral, and other
factors that warrant recognition in providing for an adequate loan loss
allowance.

                                        9


<PAGE>   12




     During 1998, the Company's provision for loan losses was $17,000 compared
to $98,000 in 1997. Management decreased the provision in 1998 due to the
reduction in the loan portfolio experienced in 1998.

     The Company's allowance for loan losses was $449,000, or .92%, of loans
outstanding at December 31, 1998, compared to $436,000, or .72%, of loans
outstanding at December 31, 1997. The Company's level of net loans charged-off
during the year ended December 31, 1998 was $4,000, which represented .01% of
average loans receivable outstanding. This percentage of charge-offs decreased
from the .08% level of charge-offs experienced in 1997. Based on current levels
in the allowance for loan losses in relation to loans receivable and delinquent
loans, management's continued effort to favorably resolve problem loan
situations, and the low level of charge-offs in recent years, management
believes the allowance is adequate at December 31, 1998.

     The financial statements of the Company are prepared in accordance with
generally accepted accounting principles (GAAP) and, accordingly, provisions for
loan losses are based on management's assessment of the factors set forth above.
The Company regularly reviews its loan portfolio, including problem loans, to
determine whether any loans are impaired, require classification and/or the
establishment of appropriate reserves. Management believes it has established
its existing allowance for loan losses in accordance with GAAP; however, future
additions may be necessary if economic conditions or other circumstances differ
substantially from the assumptions used in making the initial determination.

Noninterest Income.

     Noninterest income was $240,000 for 1998 compared $219,000 for 1997. The
$21,000, or 9.4%, increase resulted primarily from an increase in gains
recognized from sales of investment securities and mortgage-backed securities.
As noted previously, the Company transferred $11,064,440 and $10,510,911 of
investment securities and mortgage-backed securities, respectively, classified
as held to maturity to available for sale on October 1, 1998. During the fourth
quarter, management sold $4.5 million of the investment securities transferred
and $250,000 of the mortgage-backed securities transferred which resulted in a
combined net gain on sale of $33,000. During 1998, late charges, deposit account
fees and other fees increased $55,000 as a result of the Company's Cape Girardeu
loan office selling all of its loan production to other financial institutions
for a fee. Management expects this activity to continue in 1999. The $50,000
decline in other noninterest income was primarily the result of fiscal 1997
including a settlement payment for On-Line Financial stock.

Noninterest Expense.

     Noninterest expense decreased $320,000, or 11.3%, for 1998. The decrease in
noninterest expense resulted primarily from a $279,000 decrease in compensation
and employee benefits coupled with a $94,000 decline in occupancy expense.

     Compensation and employee benefits decreased $279,000, or 18.3%, in 1998
due to the 1997 restricted stock award amortization including $305,000 related
to the accelerated vesting of restricted stock awards due to the death of one of
the Company's directors. The impact of this was partially offset by a full
year's amortization of restricted stock awards in 1998 for the other
participants in the plan compared to nine months of amortization in 1997 due to
the establishment of the plan in April 1997. Compensation expense also benefited
from the termination of the Director Emeritus Retirement Plan in June 1998. As a
result of this termination, the deferred compensation accrual related to this
plan was reduced by $60,000 during the second quarter of 1998.

     Occupancy expense decreased $94,000, or 25.6%, in 1998 due primarily to the
write-off in 1997 of leasehold improvements associated with the Carbondale,
Illinois branch location which was closed on June 30, 1997.

Income Tax Expense.

     Income tax expense for 1998 was $514,000 compared to $511,000 for 1997. The
Company's effective tax rate for 1998 and 1997 was 30.9% and 28.1%,
respectively. The effective tax rate for each year was below the statutory
federal rate of 34% due to the Company's investment in tax exempt securities.

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

Net Income.

     The Company's net income for 1997 was $1.3 million compared to $695,000 for
1996. The lower net income level in 1996 was the result of the one-time special
assessment imposed by the Federal Deposit Insurance Corporation (FDIC) on
SAIF-assessable deposits in 1996. The special assessment for the Company totaled
$812,000 and was paid during the quarter ended December 31, 1996. The actual
reduction of net income for 1996 was $617,000, after considering the tax
deductibility of the special assessment. Without considering the impact of the
one-time special assessment, net income for 1996 would have been $1.3 million.
Net income in 1997 was negatively impacted by the accelerated vesting of
restricted

                                       10


<PAGE>   13




stock awards due to the death of one of the Company's directors. The expense
recorded by the Company for the vesting of restricted stock awards totaled
$305,000.

Net Interest Income.

     Net interest income increased $528,000, or 13.2%, to $4.5 million for 1997
from $4.0 million for 1996. This increase was the result of an increase in the
Company's net interest margin from 3.15% for 1996 to 3.60% for 1997. The
improvement in the Company's net interest margin was mainly attributable to the
increase in the ratio of average interest-earning assets to average
interest-bearing liabilities from 110.41% in 1996 to 125.71% in 1997. The
improvement in the ratio was primarily attributable to a full year's impact from
the investment of $19.1 million of net proceeds received from the issuance of
common stock on October 4, 1996.

Interest Income.

     Interest income on loans receivable totaled $5.0 million for 1997 compared
to $4.9 million for 1996. The $173,000, or 3.6%, increase in interest income on
loans receivable resulted primarily from a $2.4 million, or 4.2%, increase in
the average balance of loans receivable. The impact of increased volume was
partially offset by a decline in the average yield on loans receivable from
8.73% in 1996 to 8.67% in 1997. The increase in the average balance resulted
from management's focus on the St. Louis residential lending market and a
renewed emphasis on commercial business lending.

     Interest income on mortgage-backed securities decreased $33,000, or 3.1%,
to $1.05 million for 1997 from $1.08 million for 1996. The decrease in interest
income on mortgaged-backed securities resulted from a decline in the average
yield from 6.60% in 1996 to 6.38% in 1997. The $16.5 million average balance of
mortgaged-backed securities in 1997 was consistent with the 1996 average
balance.

     Interest earned on investment securities was $2.6 million for both 1997 and
1996. The impact of the $1.4 million, or 2.9%, decrease in the average balance
of investment securities was offset by an increase in the average yield. During
1997, management increased the Company's investment in available-for-sale
securities and reduced the level of investments held to maturity. At December
31, 1997, investment securities available for sale comprised 44% of the
investment portfolio, while at December 31, 1996 investment securities available
for sale were only 26% of the investment portfolio. The increased level of
available-for-sale securities resulted from a significant reduction in overnight
deposits and the need to maintain a more liquid investment portfolio.

     Interest income on interest-bearing deposits decreased $270,000, or 33.4%,
during 1997. The decline in interest income on interest-bearing deposits
resulted from a decrease in the average balance of interest-bearing deposits of
$4.4 million, or 30.6%, for 1997. The decline in the average balance was due to:
the investment of overnight deposits into higher yielding investments (e.g.,
loans receivable); the use of overnight deposits to partially fund savings
withdrawals and maturing reverse repurchase agreements; and a full year's impact
related to the reinvestment of proceeds from certificate of deposit maturities
and sales that occurred in 1996 into other investments. The decrease in interest
income on interest-bearing deposits was also impacted by a decrease in the
average yield on interest-bearing deposits from 5.67% in 1996 to 5.45% in 1997.

Interest Expense.

     Interest expense decreased $653,000, or 12.3%, during 1997. Interest
expense on savings deposits decreased $257,000, or 5.6%, to $4.3 million for
1997 from $4.6 million for 1996. This decrease resulted primarily from the $9.4
million, or 8.7%, reduction in the average balance of deposits from $106.9
million for 1996 to $97.6 million for 1997. The decrease in interest expense on
deposits was partially offset by an increase in the average cost of deposits
from 4.26% in 1996 to 4.41% in 1997. The decline in average deposits was mainly
impacted by three factors: (1) management's decision to continue to compete less
aggressively on savings rates; (2) the closing of the Company's Carbondale,
Illinois branch location on June 30, 1997; and (3) the reduction of funds held
in savings accounts which were used by depositors to purchase stock
subscriptions which were sold in accordance with the Bank's stock conversion in
October 1996. Interest expense on reverse repurchase agreements decreased
$396,000, or 53.3%, to $347,000 for 1997 from $743,000 for 1996. This decrease
resulted primarily from the $8.1 million, or 54.1%, reduction in the average
balance of reverse repurchase agreements from $15.1 million for 1996 to $6.9
million for 1997.

Provision for Loan Losses.

     The allowance for loan losses is established through a provision for loan
losses based on management's evaluation of the risk inherent in its loan
portfolio and the general economy. Such evaluation considers numerous factors
including

                                       11


<PAGE>   14




general economic conditions, loan portfolio composition, prior loss experience,
the estimated fair value of the underlying collateral, and other factors that
warrant recognition in providing for an adequate loan loss allowance.

     During 1997, the Company's provision for loan losses was $98,000 compared
to $33,000 in 1996. Management increased the provision in 1997 to compensate for
the growth in the loan portfolio experienced in 1997 and to maintain the loan
loss allowance at a consistent level with 1996.

     The Company's allowance for loan losses was $436,000, or .72%, of loans
outstanding at December 31, 1997, compared to $384,000, or .70%, of loans
outstanding at December 31, 1996. The Company's level of net loans charged-off
during the year ended December 31, 1997 was $46,000, which represented .08% of
average loans receivable. This percentage of charge-offs increased slightly from
the level of charge-offs experienced in 1996.

Noninterest Income.

     Noninterest income was $219,000 for 1997 compared to $168,000 for 1996. The
$51,000, or 30.6%, increase resulted primarily from the impact of the $54,000
loss on sale of certificates of deposit in 1996. The $4.5 million of proceeds
from the sale of certificates of deposit during 1996 resulted from management's
decision to liquidate the certificate of deposit portfolio with one of its
brokers. There were no certificates of deposit sold in 1997. During 1997, late
charges and other fees increased $19,000 as a result of a $2.00 increase in the
monthly service charge on demand deposit accounts. In addition, the gain on sale
of investment securities declined $26,000 in 1997 due to a reduction in the
level of investment securities sold. During 1997, proceeds from the sale of
investment securities available for sale totaled $4.0 million, while 1996
proceeds from the sale of investment securities available for sale totaled $19.0
million.

Noninterest expense.

     Noninterest expense decreased $503,000, or 15.1%, for 1997. In 1996,
noninterest expense included the one-time special assessment by the FDIC on
SAIF-assessable deposits. The special assessment for the Company totaled
$812,000 and was paid during the quarter ended December 31, 1996. The remainder
of the fluctuation in noninterest expense resulted from a $175,000 increase in
compensation and employee benefits, an $81,000 increase in occupancy expense, a
$164,000 reduction in federal insurance premiums, and a $184,000 increase in
other noninterest expense.

     Compensation and employee benefits increased $175,000, or 13.0%, in 1997
due to a full year's impact of the Company's ESOP and the partial year's impact
of the restricted stock award plan which was initiated in April 1997.
Compensation expense related to the ESOP increased $74,000 in 1997, while
restricted stock award amortization during the year totaled $435,000. The
restricted stock award amortization included $305,000 related to the accelerated
vesting of restricted stock awards due to the death of one of the Company's
directors. These increases to compensation were partially offset by the impact
of the amendment made to the Company's retirement plan for members of the Board
of Directors who reach director emeritus status. In the amendment, the benefit
period and the annual benefit multiple covered by the plan were reduced from 10
years and $500, respectively, to 5 years and $300, respectively. As a result of
this amendment, the deferred compensation accrual related to this plan was
reduced by $99,000 during the fourth quarter of 1997.

     Occupancy expense increased $81,000, or 28.1%, in 1997 due to the write-off
of leasehold improvements associated with the Carbondale, Illinois branch
location which was closed on June 30, 1997.

     Federal insurance premiums declined $164,000, or 70.6%, during 1997 due to
a decline in rates charged by the FDIC on SAIF assessable deposits. As a result
of the Deposit Insurance Funds Act of 1996 and the resultant recapitalization of
the SAIF, the annual assessment rate on SAIF deposits decreased on January 1,
1997 from .23% to .0648%.

     The increase in noninterest expense of $184,000 resulted from a $158,000
increase in professional fees and assorted costs associated with being a public
company. Included in this expense amount are professional fees related to the
establishment of the Company's new benefit plans, costs associated with the
administrative responsibilities of maintaining stockholder records, incremental
costs related to required public reporting of financial information, and a
general increase in professional fees due to the additional public reporting
responsibilities. Noninterest expense was also impacted by an increase in losses
from the sale of foreclosed real estate of $22,000.

Income Tax Expense.

     Income tax expense for 1997 was $511,000 compared to $109,000 for 1996. The
Company's effective tax rate for 1997 and 1996 was 28.1% and 13.5%,
respectively. The effective tax rate for each year was below the statutory
federal rate of 34% due to the Company's significant investment in tax exempt
securities.

                                       12


<PAGE>   15




ASSET/LIABILITY MANAGEMENT

     The principal operating objective of the Company is the achievement of a
positive interest rate spread that can be sustained during fluctuations in
prevailing interest rates. Since the Company's principal interest-earning assets
have substantially longer terms to maturity than its primary source of funds,
i.e., deposit liabilities, increases in general interest rates will generally
result in an increase in the Company's cost of funds before the yield on its
asset portfolio adjusts upward. The Company has generally sought to reduce its
exposure to adverse changes in interest rates by attempting to achieve a closer
match between the periods in which their interest-bearing liabilities and
interest-earning assets can be expected to reprice through the origination of
adjustable-rate mortgages and investment in loans and securities with shorter
terms.

     The term "interest rate sensitivity" refers to those assets and liabilities
which mature and reprice periodically in response to fluctuations in market
rates and yields. Many banks have historically operated in a mismatched position
with interest-sensitive liabilities greatly exceeding interest-sensitive assets
in the short-term time periods. As noted above, one of the principal goals of
the Company's asset/liability program is to more closely match the interest rate
sensitivity characteristics of the asset and liability portfolios.

     In order to increase the interest rate sensitivity of its assets, the
Company has originated adjustable rate residential mortgage loans and maintained
a consistent level of short- and intermediate-term investment securities and
interest-bearing deposits. At December 31, 1998, the Company had $11.5 million
of adjustable rate mortgages, $56.8 million of investment securities,
mortgage-backed securities and interest-bearing deposits maturing within one
year, and $12.3 million of investment securities and mortgage-backed securities
maturing within one to five years. In addition, at December 31, 1998, the
Company had $3.5 million of consumer loans which typically have maturities of
five years or less.

     In managing its future interest rate sensitivity, the Company intends to
continue to stress the origination of adjustable rate mortgages and loans with
shorter maturities, the maintenance of a consistent level of short- and
intermediate-term securities, and pricing strategies that will extend the term
of deposit liabilities.

LIQUIDITY AND CAPITAL RESOURCES

     The Company's primary sources of funds consist of deposits, securities sold
under agreements to repurchase, repayments and prepayments of loans and
mortgage-backed securities, maturities of investments and interest-bearing
deposits, and funds provided from operations. While scheduled repayments of
loans and mortgage-backed securities and maturities of investment securities are
predictable sources of funds, deposit flows and loan prepayments are greatly
influenced by general interest rates, economic conditions and competition. The
Company manages the pricing of its deposits to maintain a steady deposit base.
The Company uses its liquidity resources principally to fund existing and future
loan commitments, to fund maturing certificates of deposit and deposit
withdrawals, to invest in other interest-bearing assets, to maintain liquidity,
and to meet operating expenses. Management anticipates that loan repayments and
other sources of funds will be adequate to meet and exceed the Company's
liquidity needs for 1999.

     A major portion of the Company's liquidity consists of cash and cash
equivalents, which include investments in highly liquid, short-term deposits.
The level of these assets is dependent on the Company's operating, investing,
lending and financing activities during any given period. At December 31, 1998,
cash and cash equivalents totaled $16.8 million.

     The primary investing activities of the Company include origination of
loans and purchase of mortgage-backed securities and investment securities.
During the year ended December 31, 1998, purchases of investment securities and
mortgage-backed securities totaled $109.3 million and $17.1 million,
respectively, while loan originations totaled $6.2 million. These investments
were funded primarily from loan and mortgage-backed security repayments of $27.2
million, investment security sales and maturities of $102.3 million, and FHLB
advances of $10.0 million.

     In April 1997, the Company announced its initial repurchase plan to
repurchase 5% of its then outstanding common stock. Since that time the Company
has continued to repurchase shares when it was determined to be advisable by the
Board of Directors and authorized by the appropriate regulatory authorities. As
of December 31, 1998, the Company had repurchased approximately 734,000, or
33.6%, of its common shares. Management expects to continue to repurchase common
shares when it is viewed as a method of increasing value to the Company's
stockholders,

     Liquidity management is both a daily and long-term function of business
management. If the Company requires funds beyond its ability to generate them
internally, the Company believes that it could borrow additional funds from the
Federal Home Loan Bank (FHLB). At December 31, 1998, the Company had $10.0
million of long-term advances from the FHLB.

     At December 31, 1998, the Company exceeded all of its regulatory capital
requirements.

                                       13


<PAGE>   16




IMPACT OF INFLATION AND CHANGING PRICES

     The consolidated financial statements and related data presented herein
have been prepared in accordance with generally accepted accounting principles,
which require the measurement of financial position and results of operations in
terms of historical dollars without considering changes in the relative
purchasing power of money over time because of inflation. Unlike most industrial
companies, virtually all of the assets and liabilities of the Company are
monetary in nature. As a result, interest rates have a more significant impact
on the Company's performance than the effects of general levels of inflation.
Interest rates do not necessarily move in the same direction or in the same
magnitude as the prices of goods and services.

IMPACT OF NEW ACCOUNTING PRONOUNCEMENTS

Reporting Comprehensive Income

     In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income," which establishes standards for reporting and display of comprehensive
income and its components (revenues, expenses, gains, and losses) in a full set
of general purpose financial statements. SFAS No. 130 requires that all items
that are required to be recognized under accounting standards as components of
comprehensive income be reported in a financial statement that is displayed with
the same prominence as other financial statements, and requires an enterprise to
(a) classify items of other comprehensive income by their nature in a financial
statement and (b) display the accumulated balance of other comprehensive income
separately from retained earnings and additional paid-in capital in the equity
section of a statement of financial position. The Company adopted the provisions
of SFAS No. 130 as of December 31, 1998, and now reports comprehensive income on
a separate statement. Application of SFAS No. 130 did not impact amounts
previously reported for net income or affect the comparability of previously
issued financial statements.

Disclosures About Segments of an Enterprise and Related Information

     In June 1997, the FASB issued SFAS No. 131, "Disclosures About Segments of
an Enterprise and Related Information," which requires business segments to be
reported based on the way management organizes segments within the Company for
making operating decisions and assessing performance. SFAS No. 131 is effective
for fiscal years beginning after December 15, 1997. The Company has not included
disclosures regarding specific segments since management makes operating
decisions and assesses performance based on the Company as a whole.

Accounting for Derivative Instruments and Hedging Activities

     In June 1998, the Financial Accounting Standards Board (FASB) issued SFAS
No. 133, "Accounting for Derivative Instruments and Hedging Activities", which
requires all derivative instruments to be recorded on the balance sheet at
estimated fair value. Changes in the fair value of derivative instruments are
recorded each period in current earnings or other comprehensive income,
depending on whether a derivative is designated as part of a hedge transaction
and, if it is, the type of hedge transaction. The Statement also provides that
on the date of initial application, an entity may transfer any held-to-maturity
security into the available-for-sale category. SFAS No. 133 is effective for
fiscal years beginning after June 15, 1999. The Company adopted this Statement
on October 1, 1998. Although the Company does not have any derivative
instruments to record, management reconsidered their ability and intent to hold
certain debt securities to maturity and transferred $11,064,440 and $10,510,911
of investment securities and mortgage-backed securities, respectively, to
available for sale on October 1, 1998. As a result of the transfers: a market
valuation account was established for the available-for-sale debt securities of
$215,565 to increase the recorded balance of such securities to their fair
value; a deferred tax liability of $81,915 was recorded to reflect the tax
effect of the market valuation account; and the net increase resulting from the
market valuation adjustment of $133,650 was recorded as a transition adjustment
in the Consolidated Statements of Comprehensive Income.

YEAR 2000 ISSUES

     Over the next year, many companies, including financial institutions such
as the Company, will face potentially serious issues associated with the
inability of existing data processing hardware and software to appropriately
recognize calendar dates beginning in the year 2000. Many computer programs that
can only distinguish the final two digits of the year entered may read entries
for the year 2000 as the year 1900 and compute payment, interest or delinquency
based on the wrong date or are expected to be unable to compute payment,
interest or delinquency. In 1997, the Company began the process of identifying
the many software applications and hardware devices expected to be impacted by
this issue. The Company outsources its principal data processing activities to a
third party, and purchases most of its software applications from third party
vendors. The Company believes that its vendors are actively addressing the
problems

                                       14


<PAGE>   17




associated with the "Year 2000" issue. The Company has completed the assessment
phase of its program and is currently in the testing phase of determining Year
2000 readiness.

     The Company has spent approximately $7,500 to-date in Year 2000 computer
upgrades and does not expect that the remaining out-of-pocket cost of its Year
2000 compliance effort will be material to its financial condition. The most
significant cost associated with the Company's Year 2000 program has been the
effort put forth by current employees. The internal costs incurred by Company
employees are not maintained separately by the Company.

     The major applications which pose the greatest Year 2000 risk to the
Company if implementation of its readiness program is not successful are the
Company's data services systems supported by third party vendors, loan customers
inability to meet contractual payment obligations in the event the Year 2000
problem has a significant impact on their business, and items processing
equipment which renders customers bank statements and banking transactions. The
potential problems which could result from the inability of these applications
to correctly process the Year 2000 are the inaccurate calculation of interest
income and expense, service delivery interruptions to the Company's banking
customers, credit losses resulting from the Company's loan customers inability
to make contractual credit obligations, interrupted financial data gathering,
and poor customer relations resulting from inaccurate or delayed transaction
processing.

     The Company intends on completing all Year 2000 remediation and testing
activities by early 1999. Although the Company has initiated Year 2000
communications with key vendors, service providers and other parties material to
the Company's operations and is monitoring the progress of such third parties in
their Year 2000 compliance efforts, such third parties nonetheless represent a
risk that cannot be assessed with precision or controlled with certainty. For
that reason, the Company has developed a contingency plan to address
alternatives in the event that Year 2000 failures of automatic systems and
equipment occur.

                                       15


<PAGE>   18




INDEPENDENT AUDITORS' REPORT
--------------------------------------------------------------------------------

The Board of Directors
Chester Bancorp, Inc.
Chester, Illinois:

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

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

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

KPMG LLP

St. Louis, Missouri
January 22, 1999

                                       16


<PAGE>   19




CHESTER BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>

                 DECEMBER 31, 1998 AND 1997                        1998           1997
------------------------------------------------------------------------------------------
<S>                                                             <C>            <C>        
ASSETS
Cash                                                            $ 1,305,850    $ 1,833,006
Interest-bearing deposits                                         8,708,822      3,063,057
Federal funds sold                                                5,788,000      6,395,000
Bankers' acceptances                                                994,167             --
------------------------------------------------------------------------------------------
       Total cash and cash equivalents                           16,796,839     11,291,063
Certificates of deposit                                              95,000        290,000
Investment securities:
  Available for sale, at fair value (cost of $12,467,687 and
    $19,674,051 at December 31, 1998 and 1997, respectively)     12,515,769     19,708,063
  Held to maturity, at cost (fair value of $40,277,481 and
    $25,413,098 at December 31, 1998 and 1997, respectively)     40,116,367     25,232,519
Mortgage-backed securities:
  Available for sale, at fair value (cost of $11,170,541 and
    $1,623,616 at December 31, 1998 and 1997, respectively)      11,275,061      1,641,949
  Held to maturity, at cost (fair value of $10,619,540 and
    $12,179,290 at December 31, 1998 and 1997, respectively)     10,595,289     12,145,702
Loans receivable, net                                            48,208,662     60,467,735
Accrued interest receivable                                         909,953        887,375
Real estate acquired by foreclosure, net                            127,613         38,233
Office properties and equipment, net                              1,684,381      1,766,748
Income taxes receivable                                             155,261        --
Deferred tax asset, net                                             --              16,818
Other assets                                                        316,062        290,444
------------------------------------------------------------------------------------------
                                                               $142,796,257   $133,776,649
==========================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Savings deposits                                                $99,434,579    $95,362,100
Borrowed money                                                   20,880,389      8,380,389
Accrued interest payable                                            215,420        158,899
Advance payments by borrowers for taxes and insurance               419,552        439,274
Income taxes payable                                                --             288,891
Deferred tax liability, net                                          44,174        --
Accrued expenses and other liabilities                               97,055        158,778
------------------------------------------------------------------------------------------
       Total liabilities                                        121,091,169    104,788,331
------------------------------------------------------------------------------------------
Commitments and contingencies
Stockholders' equity:
  Common stock, $.01 par value, 3,000,000 shares authorized,
    2,182,125 shares issued at December 31, 1998 and 1997            21,821         21,821
  Additional paid-in capital                                     21,650,837     21,766,390
  Retained earnings, substantially restricted                    13,803,400     13,088,331
  Accumulated other comprehensive income                             93,610         32,454
  Unearned ESOP shares                                           (1,592,980)    (1,647,920)
  Unamortized restricted stock awards                              (559,674)      (725,868)
  Treasury stock, at cost: 700,137 and 229,079 shares at
    December 31, 1998 and 1997, respectively                    (11,711,926)    (3,546,890)
------------------------------------------------------------------------------------------
       Total stockholders' equity                                21,705,088     28,988,318
------------------------------------------------------------------------------------------
                                                               $142,796,257   $133,776,649
==========================================================================================
</TABLE>

See accompanying notes to consolidated financial statements.

                                       17


<PAGE>   20




CHESTER BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>

            THREE YEARS ENDED DECEMBER 31, 1998                   1998         1997         1996
---------------------------------------------------------------------------------------------------
<S>                                                             <C>          <C>          <C>       
Interest income:
  Loans receivable                                             $4,496,309   $5,039,655   $4,866,508
  Mortgage-backed securities                                    1,145,034    1,050,249    1,083,420
  Investments                                                   2,596,529    2,554,389    2,549,847
  Interest-bearing deposits, federal funds sold, and
     bankers' acceptance                                          839,157      537,704      807,444
---------------------------------------------------------------------------------------------------
       Total interest income                                    9,077,029    9,181,997    9,307,219
---------------------------------------------------------------------------------------------------
Interest expense:
  Savings deposits                                              4,223,085    4,299,985    4,557,361
  Borrowed money                                                  898,580      346,946      742,910
---------------------------------------------------------------------------------------------------
       Total interest expense                                   5,121,665    4,646,931    5,300,271
---------------------------------------------------------------------------------------------------
       Net interest income                                      3,955,364    4,535,066    4,006,948
Provision for loan losses                                          16,800       97,800       32,885
---------------------------------------------------------------------------------------------------
       Net interest income after provision for loan losses      3,938,564    4,437,266    3,974,063
---------------------------------------------------------------------------------------------------
Noninterest income:
  Late charges, deposit account fees, and other fees              188,691      134,078      115,423
  Loss on sale of certificates of deposit                          --           --          (53,714)
  Gain on sale of investment securities, net                       30,318       16,256       42,093
  Gain on sale of mortgage-backed securities, net                   2,352       --           --
  Other                                                            18,448       68,779       63,914
---------------------------------------------------------------------------------------------------
       Total noninterest income                                   239,809      219,113      167,716
---------------------------------------------------------------------------------------------------
Noninterest expense:
  Compensation and employee benefits                            1,241,287    1,520,102    1,344,793
  Occupancy                                                       274,119      368,562      287,726
  Data processing                                                 157,330      174,781      153,507
  Advertising                                                      65,570       64,067       52,298
  Federal deposit insurance premiums                               57,813       68,399      232,579
  SAIF special assessment                                          --           --          812,498
  Other                                                           718,189      638,657      454,520
---------------------------------------------------------------------------------------------------
       Total noninterest expense                                2,514,308    2,834,568    3,337,921
---------------------------------------------------------------------------------------------------
       Income before income tax expense                         1,664,065    1,821,811      803,858
Income tax expense                                                514,338      511,445      108,716
---------------------------------------------------------------------------------------------------
       Net income                                              $1,149,727   $1,310,366    $ 695,142
===================================================================================================
Earnings per common share -- basic                              $     .75    $     .68    $     .19
Earnings per common share -- diluted                            $     .73    $     .67    $     .19
===================================================================================================
</TABLE>

See accompanying notes to consolidated financial statements.

                                       18


<PAGE>   21




CHESTER BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>

            THREE YEARS ENDED DECEMBER 31, 1998                   1998         1997         1996
--------------------------------------------------------------------------------------------------
<S>                                                             <C>          <C>          <C>     
Net income                                                     $1,149,727   $1,310,366    $695,142
Other comprehensive income, net of tax:
  Unrealized holding gain (loss) on securities available for
     sale                                                         (52,239)      57,032     (24,514)
  Transition adjustment from transfer of securities to
     available for sale on October 1, 1998                        133,650         --           --
  Less adjustment for realized gains included in net income
     (net of tax of $12,415, $6,177, and $15,995 for 1998,
     1997, and 1996, respectively)                                (20,255)     (10,079)    (26,098)
--------------------------------------------------------------------------------------------------
       Total other comprehensive income                            61,156       46,953     (50,612)
--------------------------------------------------------------------------------------------------
       Comprehensive income                                    $1,210,883   $1,357,319    $644,530
==================================================================================================
</TABLE>

See accompanying notes to consolidated financial statements.

                                       19


<PAGE>   22




CHESTER BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
--------------------------------------------------------------------------------


<TABLE>
<CAPTION>
                                                                         Retained        Accumulated
                                     Common stock         Additional     earnings,          other         Unearned    Unamortized  
      Three years ended        ------------------------    paid-in     substantially    comprehensive       ESOP       restricted  
      December 31, 1998         Shares       Amount        capital      restricted         income          shares     stock awards 
-----------------------------------------------------------------------------------------------------------------------------------
<S>                            <C>        <C>             <C>           <C>            <C>               <C>           <C>         
BALANCE, DECEMBER 31, 1995        --      $    --         $   --       $11,676,334    $      36,113     $   --        $  --       
Net income                        --                --        --           695,142          --                            --       
                                                                                                            ----
Net proceeds from sale of
 common stock                  2,182,125        21,821    20,860,066       --               --           (1,745,700)      --       
Dividends on common stock at
 $.05 per share                   --           --             --          (100,378)         --               --           --       
Amortization of ESOP awards       --           --              5,092       --               --               29,100       --       
Change in accumulated other
 comprehensive income             --           --             --           --                (50,612)        --           --       
-----------------------------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1996     2,182,125        21,821    20,865,158    12,271,098           (14,499)    (1,716,600)      --       
Net income                        --           --             --         1,310,366          --               --           --       
Issuance of restricted stock
 awards                           --           --          1,160,894       --               --               --        (1,160,894) 
Purchase of treasury stock        --           --             --           --               --               --           --       
Issuance of treasury stock
 for restricted stock awards      --           --           (305,494)      (16,366)         --               --           --       
Amortization of restricted
 stock awards                     --           --             --           --               --               --           435,026  
Amortization of ESOP awards       --           --             39,492       --               --               68,680       --       
Tax benefit from stock
 related compensation             --           --              6,340       --               --               --           --       
Dividends on common stock at
 $.25 per share                   --           --             --          (476,767)         --               --           --       
Change in accumulated other
 comprehensive income             --           --             --           --                 46,953         --           --       
-----------------------------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1997     2,182,125        21,821    21,766,390    13,088,331            32,454     (1,647,920)     (725,868) 
Net income                        --           --             --         1,149,727          --               --           --       
Purchase of treasury stock        --           --             --           --               --               --           --       
Issuance of treasury stock
 for restricted stock awards      --           --           (170,996)       (9,161)         --               --           --       
Amortization of restricted
 stock awards                     --           --             --           --               --               --           166,194  
Amortization of ESOP awards       --           --             40,656       --               --               54,940       --       
Tax benefit from stock
 related compensation             --           --             14,787       --               --               --           --       
Dividends on common stock at
 $.28 per share                   --           --             --          (425,497)         --               --           --       
Change in accumulated other
 comprehensive income             --           --             --           --                 61,156         --           --       
-----------------------------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1998     2,182,125  $     21,821    $21,650,837   $13,803,400    $      93,610    $(1,592,980)   $ (559,674) 
===================================================================================================================================
</TABLE>

<TABLE>
<CAPTION>
                               
                                     Treasury stock            Total
      Three years ended         ------------------------   stockholders'
      December 31, 1998           Shares       Amount          equity
-------------------------------------------------------------------------
<S>                              <C>         <C>             <C>       
BALANCE, DECEMBER 31, 1995          --       $   --         $11,712,447
Net income                          --           --             695,142
                               
Net proceeds from sale of
 common stock                       --           --          19,136,187
Dividends on common stock at
 $.05 per share                     --           --            (100,378)
Amortization of ESOP awards         --           --              34,192
Change in accumulated other
 comprehensive income               --           --             (50,612)
-------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1996          --           --          31,426,978
Net income                          --           --           1,310,366
Issuance of restricted stock
 awards                             --           --             --
Purchase of treasury stock         250,900    (3,868,750)    (3,868,750)
Issuance of treasury stock
 for restricted stock awards       (21,821)      321,860        --
Amortization of restricted
 stock awards                       --           --             435,026
Amortization of ESOP awards         --           --             108,172
Tax benefit from stock
 related compensation               --           --               6,340
Dividends on common stock at
 $.25 per share                     --           --            (476,767)
Change in accumulated other
 comprehensive income               --           --              46,953
-------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1997         229,079    (3,546,890)    28,988,318
Net income                          --           --           1,149,727
Purchase of treasury stock         483,272    (8,345,193)    (8,345,193)
Issuance of treasury stock
 for restricted stock awards       (12,214)      180,157        --
Amortization of restricted
 stock awards                       --           --             166,194
Amortization of ESOP awards         --           --              95,596
Tax benefit from stock
 related compensation               --           --              14,787
Dividends on common stock at
 $.28 per share                     --           --            (425,497)
Change in accumulated other
 comprehensive income               --           --              61,156
-------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1998         700,137  $(11,711,926)   $21,705,088
=========================================================================
</TABLE>

See accompanying notes to consolidated financial statements.

                                       20


<PAGE>   23




CHESTER BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
--------------------------------------------------------------------------------


<TABLE>
<CAPTION>
            THREE YEARS ENDED DECEMBER 31, 1998                     1998           1997           1996
----------------------------------------------------------------------------------------------------------
<S>                                                             <C>             <C>            <C>        
Cash flows from operating activities:
  Net income                                                    $  1,149,727    $ 1,310,366    $   695,142
  Adjustments to reconcile net income to net cash provided
    by operating activities:
    Depreciation and amortization:
      Office properties and equipment                                140,073        130,554        123,311
      Deferred fees, discounts, and premiums                        (648,052)      (665,837)      (163,643)
      Stock plans                                                    261,790        543,198         34,192
    Increase in accrued interest receivable                          (22,578)       (23,683)      (227,100)
    Increase (decrease) in accrued interest payable                   56,521         46,276       (343,375)
    Increase (decrease) in income taxes, net                        (407,474)       291,479       (154,492)
    Loss on sale of certificates of deposit                               --             --         53,714
    Gain on sale of investment securities, net                       (30,318)       (16,256)       (42,093)
    Gain on sale of mortgage-backed securities, net                   (2,352)            --             --
    Provision for loan losses                                         16,800         97,800         32,885
    Net change in other assets and other liabilities                 (87,341)       (36,440)         3,133
----------------------------------------------------------------------------------------------------------
      Net cash provided by operating activities                      426,796      1,677,457         11,674
----------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
  Principal repayments on:
    Loans receivable                                              18,288,784     15,084,638     13,249,189
    Mortgage-backed securities                                     8,919,266      5,513,055      2,519,007
    Investment securities                                            104,682         88,001        157,329
  Proceeds from the maturity of certificates of deposit              195,000        693,000      4,335,000
  Proceeds from the sale of certificates of deposit                       --             --      4,484,286
  Proceeds from the maturity of investment securities
    available for sale                                            14,000,000      5,500,000      3,500,000
  Proceeds from the maturity of investment securities held
    to maturity                                                   83,805,890    102,527,000     70,490,000
  Proceeds from the sale of investment securities available
    for sale                                                       4,527,500      4,006,250     19,011,640
  Proceeds from the sale of mortgage-backed securities               249,779             --             --
  Proceeds from redemption of Federal Reserve Bank stock                  --          6,000             --
  Cash invested in:
    Loans receivable                                              (6,219,094)   (20,706,983)   (11,017,164)
    Mortgage-backed securities held to maturity                  (17,124,741)    (3,331,285)    (2,981,406)
    Investment securities available for sale                        (147,187)   (16,624,424)   (27,473,733)
    Investment securities held to maturity                      (109,114,765)   (91,009,152)   (74,975,877)
    Certificates of deposit                                               --        (95,000)            --
    FHLB stock                                                      (178,700)            --        (17,700)
    Federal Reserve Bank stock                                            --             --       (411,000)
  Proceeds from sales of real estate acquired through
    foreclosure                                                       48,205         73,002         20,000
  Purchase of office properties and equipment                        (57,706)       (29,505)      (229,560)
----------------------------------------------------------------------------------------------------------
      Net cash provided by (used in) investing activities         (2,703,087)     1,694,597        660,011
----------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
  Increase (decrease) in savings deposits                          4,072,479     (6,884,750)    (4,470,999)
  Increase (decrease) in securities sold under agreements to
    repurchase                                                     2,500,000     (2,959,611)    (3,660,000)
  Proceeds from FHLB advances                                     10,000,000             --             --
  Decrease in advance payments by borrowers for taxes and
    insurance                                                        (19,722)        (8,392)      (125,343)
  Proceeds from issuance of common stock, net                             --             --     19,136,187
  Purchase of treasury stock                                      (8,345,193)    (3,868,750)            --
  Dividends paid                                                    (425,497)      (476,767)      (100,378)
----------------------------------------------------------------------------------------------------------
      Net cash provided by (used in) financing activities          7,782,067    (14,198,270)    10,779,467
----------------------------------------------------------------------------------------------------------
      Net increase (decrease) in cash and cash equivalents         5,505,776    (10,826,216)    11,451,152
Cash and cash equivalents, beginning of year                      11,291,063     22,117,279     10,666,127
----------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of year                          $ 16,796,839    $11,291,063    $22,117,279
==========================================================================================================
Supplemental information:
  Interest paid                                                 $  5,065,144      4,600,655    $ 5,643,646
  Income taxes paid                                                  603,609        195,357        231,000
==========================================================================================================
Noncash investing and financing activities:
  Loans transferred to real estate acquired by foreclosure      $    136,577         24,534    $    93,651
  Interest credited to savings deposits                            2,173,699      2,861,760      3,098,000
  Securities transferred to available for sale                    21,575,351             --             --
==========================================================================================================
</TABLE>

See accompanying notes to consolidated financial statements.

                                       21


<PAGE>   24




CHESTER BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
--------------------------------------------------------------------------------

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     Following are the significant accounting policies which Chester Bancorp,
Inc. and subsidiaries (the Company) follow in preparing and presenting their
consolidated financial statements:

Reorganization to a Stock Corporation

     On October 4, 1996, Chester Savings Bank, FSB (the Bank) converted from a
federal mutual savings bank to a federal capital stock savings bank and
simultaneously formed the Company, a Delaware corporation, to act as the holding
company of the converted savings bank. Pursuant to the plan, the Bank converted
to a national bank known as Chester National Bank, and a newly chartered bank
subsidiary was formed by the Company known as Chester National Bank of Missouri
(collectively referred to as the Banks). The stock conversion resulted in the
sale and issuance of 2,182,125 shares of $.01 par value common stock at a price
of $10.00 per share. After reducing gross proceeds for conversion costs of
$939,363, net proceeds totaled $20,881,887. The stock of the Banks will be held
by the Company. In conjunction with the conversion, the Company loaned
$1,745,700 to the Banks' employee stock ownership plan for the purchase of
174,570 shares in the stock conversion.

     Prior to the stock conversion, the Company had not issued any stock, had no
assets or liabilities, and had not engaged in any business activities other than
of an organizational nature. Accordingly, operating activities prior to October
4, 1996 reflect the operations of the Bank only.

Business

     The Company provides a full range of financial services to individual and
corporate customers through its home office in Chester, Illinois, and its three
banking offices in neighboring cities in Southern Illinois and one banking
office in Perryville, Missouri. The Company is subject to competition from other
financial institutions in the area, is subject to the regulations of certain
federal agencies, and undergoes periodic examinations by those regulatory
authorities.

     In June 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 131, Disclosures About
Segments of an Enterprise and Related Information, which requires business
segments to be reported based on the way management organizes segments within
the Company for making operating decisions and assessing performance. SFAS No.
131 is effective for fiscal years beginning after December 15, 1997. The Company
has not included disclosures regarding specific segments since management makes
operating decisions and assesses performance based on the Company as a whole.

Basis of Presentation

     The consolidated financial statements have been prepared in conformity with
generally accepted accounting principles. In preparing the consolidated
financial statements, management is required to make estimates and assumptions
that affect the reported amounts of assets and liabilities as of the date of the
balance sheet and revenues and expenses for the year. Actual results could
differ significantly from those estimates.

     Material estimates that are particularly susceptible to significant change
in the near term relate to the determination of the allowance for loan losses
and the valuation of real estate acquired by foreclosure or in satisfaction of
loans. In connection with the determination of the allowance for losses on
loans, management obtains independent appraisals for significant properties.

Fair Value of Financial Instruments

     SFAS No. 107, Disclosures About Fair Value of Financial Instruments,
requires that the estimated fair value of the Company's financial instruments be
disclosed. Fair value estimates of financial instruments are made at a specific
point in time, based on relevant market information and information about the
financial instruments. These estimates do not reflect any premium or discount
that could result from offering for sale at one time the entire holdings or a
significant portion of a particular financial instrument. Because no market
exists for a significant portion of the Company's financial instruments, some
fair value estimates are subjective in nature and involve uncertainties and
matters of significant
                                       22


<PAGE>   25



CHESTER BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
(CONTINUED)
--------------------------------------------------------------------------------

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 
Fair Value of Financial Instruments (Continued)

judgment. Changes in assumptions could significantly affect these estimates.
Fair value estimates are presented for existing on-balance-sheet and
off-balance-sheet financial instruments without attempting to estimate the value
of anticipated future business and the value of assets and liabilities that are
not considered financial instruments. In addition, the tax ramifications related
to the realization of the unrealized gains and losses can have a significant
effect on fair value estimates and have not been considered in any of the
estimates.

Principles of Consolidation

     The consolidated financial statements include the accounts of Chester
Bancorp, Inc. and its wholly-owned subsidiaries, Chester National Bank and
Chester National Bank of Missouri. All significant intercompany accounts and
transactions have been eliminated in consolidation.

Consolidated Statements of Comprehensive Income

     In June 1997, the FASB issued SFAS No. 130, Reporting Comprehensive Income,
which establishes standards for reporting and display of comprehensive income
and its components (revenues, expenses, gains, and losses) in a full set of
general purpose financial statements. SFAS No. 130 requires that all items that
are required to be recognized under accounting standards as components of
comprehensive income be reported in a financial statement that is displayed with
the same prominence as other financial statements, and requires an enterprise to
(a) classify items of other comprehensive income by their nature in a financial
statement and (b) display the accumulated balance of other comprehensive income
separately from retained earnings and additional paid-in capital in the equity
section of a balance sheet. The Company adopted the provisions of SFAS No. 130
as of December 31, 1998 and now reports comprehensive income on a separate
statement. Application of SFAS No. 130 did not impact amounts previously
reported for net income or affect the comparability of previously issued
financial statements.

Consolidated Statements of Cash Flows

     For purposes of the consolidated statements of cash flows, the Company
considers all interest-bearing deposits and bankers' acceptances with original
maturities of three months or less and federal funds sold to be cash
equivalents.

Investment Securities and Mortgage-Backed Securities

     The Company classifies its debt securities as either: available for sale or
held to maturity. Held-to-maturity securities are those securities in which the
Company has the ability and intent to hold until maturity. All other securities
not included in held to maturity are classified as available for sale.

     Available-for-sale securities are recorded at fair value. Held-to-maturity
securities are recorded at amortized cost, adjusted for the amortization of
premiums or discounts. Unrealized gains and losses, net of the related tax
effect, on available-for-sale securities are excluded from earnings and reported
as other comprehensive income.

     A decline in the market value of any security below cost that is deemed to
be "other than temporary" results in a charge to earnings and the establishment
of a new cost basis for the security.

     Premiums and discounts are amortized over the lives of the respective
securities as an adjustment to yield using the interest method. Dividend and
interest income are recognized when earned. Realized gains and losses are
included in earnings and are derived using the specific-identification method
for determining the cost of securities sold.

     In June 1998, the FASB issued SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities, which requires all derivative instruments to
be recorded on the balance sheet at estimated fair value. Changes in the fair
value of derivative instruments are recorded each period in current earnings or
other comprehensive income, depending on

                                       23


<PAGE>   26



CHESTER BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
(CONTINUED)
--------------------------------------------------------------------------------

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 
Investment Securities and Mortgage-Backed Securities (Continued) 

whether a derivative is designated as part of a hedge transaction and, if it is,
the type of hedge transaction. The Statement also provides that on the date of
initial application, an entity may transfer any held-to-maturity security into
the available-for-sale category. SFAS No. 133 is effective for fiscal years
beginning after June 15, 1999, with earlier application permitted. The Company
adopted this Statement on October 1, 1998. Although the Company does not have
any derivative instruments to record, management reconsidered their ability and
intent to hold certain debt securities to maturity and transferred $11,064,440
and $10,510,911 of investment securities and mortgage-backed securities,
respectively, to available for sale on October 1, 1998. As a result of the
transfers, a market valuation account was established for the available-for-sale
debt securities of $215,565 to increase the recorded balance of such securities
to their fair value, a deferred tax liability of $81,915 was recorded to reflect
the tax effect of the market valuation account, and the net increase resulting
from the market valuation adjustment of $133,650 was recorded as a transition
adjustment in the statement of comprehensive income.

Loans Receivable and Related Fees

     Loans receivable are carried at cost, as management has determined the
Company has the ability to hold them to maturity and because it is management's
intention to hold loans receivable for the foreseeable future. Interest is
credited to income as earned; however, interest receivable is accrued only if
deemed collectible.

     Loan fees and the related incremental direct costs of originating loans are
deferred and are amortized over the lives of the related loans using the
interest method.

     The allowance for loan losses is maintained at an amount considered
adequate to provide for potential losses. The provision for loan losses is based
on periodic analysis of the loan portfolio by management. In this regard,
management considers numerous factors, including, but not necessarily limited
to, general economic conditions, loan portfolio composition, prior loss
experience, and independent appraisals. In addition to the allowance for
estimated losses on identified problem loans, an overall unallocated allowance
is established to provide for unidentified credit losses. In estimating such
losses, management considers various risk factors including geographic location,
loan collateral, and payment history.

     Management believes that the allowance for losses on loans is adequate.
While management uses available information to recognize such losses, future
additions to the allowance may be necessary based upon changes in economic
conditions. In addition, various regulatory agencies, as an integral part of
their examination process, periodically review the Company's allowance for
losses. Such agencies may require the Company to recognize additions to the
allowance based upon their judgment about information available to them at the
time of their examination.

     A loan is considered impaired when it is probable the Company will be
unable to collect all amounts due -- both principal and interest -- according to
the contractual terms of the loan agreement. When measuring impairment, the
expected future cash flows of an impaired loan are discounted at the loan's
effective interest rate. Alternatively, impairment can be measured by reference
to an observable market price, if one exists, or the fair value of the
collateral for a collateral-dependent loan. Regardless of the historical
measurement method used, the Company measures impairment based on the fair value
of the collateral when it determines foreclosure is probable. Additionally,
impairment of loans for which terms have been modified in a troubled-debt
restructuring is measured by discounting the total expected future cash flows at
the loan's effective rate of interest as stated in the original loan agreement.

     The Company applies the recognition criteria for impaired loans to
multi-family residential loans, commercial real estate loans, agriculture loans,
and restructured loans. Smaller balance, homogeneous loans, including
one-to-four family residential loans and consumer loans, are collectively
evaluated for impairment. Interest income on impaired loans is recognized on a
cash basis.

                                       24


<PAGE>   27



CHESTER BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
(CONTINUED)
--------------------------------------------------------------------------------

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 
Real Estate Acquired by Foreclosure

     Real estate acquired by foreclosure is initially recorded on an individual
property basis at estimated fair value, less cost to sell, on the date of
foreclosure, thus establishing a new cost basis. Subsequent to foreclosure, real
estate is periodically evaluated by management and a valuation allowance is
established if the estimated fair value, less cost to sell, of the property
declines. Subsequent increases in fair value are recorded through a reversal of
the valuation allowance, but not below zero. Costs incurred in maintaining the
properties are charged to expense.

     Profit on sales of real estate owned is recognized when title has passed,
minimum down payment requirements have been met, the terms of any notes received
by the Company are such to satisfy continuing payment requirements, and the
Company is relieved of any requirement for continued involvement in the real
estate. Otherwise, recognition of profit is deferred until such criteria are
met.

Office Properties and Equipment

     Office properties and equipment are stated at cost less accumulated
depreciation.

     Depreciation is charged to expense using the straight-line method based on
the estimated useful lives of the related assets. Estimated lives are 10 to 35
years for buildings and improvements and 3 to 15 years for furniture and
equipment.

Securities Sold Under Agreements to Repurchase

     The Company enters into sales of securities under repurchase agreements
(the agreements). The agreements are treated as financings, and the obligation
to repurchase securities sold is reflected as a liability in the consolidated
balance sheets.

Income Taxes

     The Company files a consolidated federal income tax return.

     Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date.

Stock Option Plan

     The Company accounts for its stock option plan in accordance with the
provisions of Accounting Principles Board (APB) Opinion No. 25, Accounting for
Stock Issued to Employees, and related interpretations. As such, compensation
expense is recorded on the date of grant only if the current market price of the
underlying stock exceeds the exercise price. The Company has also adopted SFAS
123, Accounting for Stock-Based Compensation, which permits entities to
recognize as expense over the vesting period the fair value of all stock-based
awards on the date of grant. Alternatively, SFAS 123 allows entities to apply
the provisions of APB Opinion No. 25 and provide pro forma net income and
earnings per share for employee stock option grants made in 1996 and future
years as if the fair-value-based method defined in SFAS 123 had been applied.
The Company has elected to apply the provisions of APB Opinion No. 25 and
provide the pro forma disclosure provisions of SFAS 123.

                                       25


<PAGE>   28



CHESTER BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
(CONTINUED)
--------------------------------------------------------------------------------

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Earnings Per Share

     Effective December 31, 1997, the Company adopted SFAS No. 128, Earnings Per
Share (SFAS 128). SFAS 128 supersedes APB Opinion No. 15, Earnings Per Share
(APB 15) and specifies the computation, presentation, and disclosure
requirements for earnings per share (EPS) for entities with publicly held common
stock or potential common stock. 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 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. (See note 2.)
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.

     The Company completed its initial public stock offering on October 4, 1996.
Earnings per share for 1996 have been computed based upon net income for the
period from October 1, 1996 to December 31, 1996 totaling $382,298. The average
number of common shares outstanding was 2,011,920. The Company had no
potentially dilutive securities during 1996.

Reclassifications

     Certain reclassifications of 1997 and 1996 amounts have been made to
conform with the 1998 financial statement presentation.

(2) EARNINGS PER SHARE

     The computation of EPS at December 31, 1998, 1997, and 1996 follows:


<TABLE>
<CAPTION>
     (in thousands, except per share amounts)            1998         1997         1996
------------------------------------------------------------------------------------------
<S>                                                   <C>          <C>          <C>       
Basic EPS:
  Net income                                          $1,149,727   $1,310,366   $  382,298
==========================================================================================
  Average common shares outstanding                    1,535,617    1,925,475    2,011,920
==========================================================================================
  Basic EPS                                           $      .75   $      .68   $      .19
==========================================================================================
Diluted EPS:
  Net income                                          $1,149,727   $1,310,366   $  382,298
==========================================================================================
  Average common shares outstanding                    1,535,617    1,925,475    2,011,920
  Dilutive potential due to stock options                 39,033       16,983       --
------------------------------------------------------------------------------------------
  Average number of common shares and dilutive
     potential common shares outstanding               1,574,650    1,942,458    2,011,920
==========================================================================================
  Diluted EPS                                         $      .73   $      .67   $      .19
==========================================================================================
</TABLE>

     Nonvested common shares related to the restricted stock awards granted in
1997 were not included in the computation of diluted EPS because to do so would
have been antidilutive for 1998 and 1997.

                                       26


<PAGE>   29



CHESTER BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
(CONTINUED)
--------------------------------------------------------------------------------

(3) INVESTMENT SECURITIES

     The amortized cost and fair value of investment securities classified as
available for sale at December 31, 1998 and 1997 follows:


<TABLE>
<CAPTION>
                                                          December 31, 1998
                                         ---------------------------------------------------
                                                         Gross        Gross
                                          Amortized    unrealized   unrealized      Fair
                                            cost         gains        losses        value
--------------------------------------------------------------------------------------------
<S>                                      <C>            <C>            <C>       <C>        
Securities of U.S. government            $ 2,999,419    $14,643     $ --         $ 3,014,062
Securities of U.S. government agencies     6,960,631     33,439       --           6,994,070
Equity securities                          1,301,937      --          --           1,301,937
Stock in Federal Home Loan Bank              800,700      --          --             800,700
Stock in Federal Reserve Bank                405,000      --          --             405,000
--------------------------------------------------------------------------------------------
                                         $12,467,687    $48,082     $ --         $12,515,769
============================================================================================
</TABLE>


<TABLE>
<CAPTION>
                                                          December 31, 1997
                                         ---------------------------------------------------
                                                         Gross        Gross
                                          Amortized    unrealized   unrealized      Fair
                                            cost         gains        losses        value
--------------------------------------------------------------------------------------------

<S>                                      <C>            <C>          <C>         <C>        
Securities of U.S. government            $17,492,301    $21,061      $(4,299)    $17,509,063
Equity securities                          1,154,750     17,250        --          1,172,000
Stock in Federal Home Loan Bank              622,000      --           --            622,000
Stock in Federal Reserve Bank                405,000      --           --            405,000
--------------------------------------------------------------------------------------------
                                         $19,674,051    $38,311      $(4,299)    $19,708,063
============================================================================================
</TABLE>

     Gross realized gains, gross realized losses, and gross proceeds on sales of
investment securities classified as available for sale follows:


<TABLE>
<CAPTION>
                                                        1998         1997         1996
------------------------------------------------------------------------------------------
<S>                                                  <C>          <C>          <C>        
Gross realized gains                                 $   30,318   $   16,256   $    42,093
Gross realized losses                                    --           --           --
------------------------------------------------------------------------------------------
Net realized gain                                    $   30,318   $   16,256   $    42,093
==========================================================================================
Gross proceeds                                       $4,527,500   $4,006,250   $19,011,640
==========================================================================================
</TABLE>

     The amortized cost and fair value of investment securities classified as
available for sale at December 31, 1998, by contractual maturity, follows:


<TABLE>
<CAPTION>
                                                               Amortized        Fair
                                                                  cost         value
---------------------------------------------------------------------------------------
<S>                                                            <C>          <C>        
Within one year                                                $2,999,419    $3,014,062
Between one and five years                                      6,960,631     6,994,070
---------------------------------------------------------------------------------------
                                                                9,960,050    10,008,132
No stated maturity                                              2,507,637     2,507,637
---------------------------------------------------------------------------------------
                                                              $12,467,687   $12,515,769
=======================================================================================
</TABLE>

                                       27


<PAGE>   30



CHESTER BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
(CONTINUED)
--------------------------------------------------------------------------------

(3) INVESTMENT SECURITIES (CONTINUED)

     The amortized cost and fair value of investment securities classified as
held to maturity at December 31, 1998 and 1997 follows:


<TABLE>
<CAPTION>
                                                          December 31, 1998
                                         ---------------------------------------------------
                                                         Gross        Gross
                                          Amortized    unrealized   unrealized      Fair
                                            cost         gains        losses        value
--------------------------------------------------------------------------------------------
<S>                                      <C>            <C>          <C>         <C>        
Securities of U.S. government agencies   $33,962,412    $  4,152     $(48,424)   $33,918,140
Mortgage-backed bonds                      1,257,603          --       (1,946)     1,255,657
Securities of states and
  municipalities                           4,896,352     207,332           --      5,103,684
--------------------------------------------------------------------------------------------
                                         $40,116,367    $211,484     $(50,370)   $40,277,481
============================================================================================
</TABLE>


<TABLE>
<CAPTION>
                                                          December 31, 1997
                                         ---------------------------------------------------
                                                         Gross        Gross
                                          Amortized    unrealized   unrealized      Fair
                                            cost         gains        losses        value
--------------------------------------------------------------------------------------------
<S>                                      <C>            <C>          <C>         <C>        
Securities of U.S. government
  agencies                               $14,942,096    $    938     $(18,484)   $14,924,550
Mortgage-backed bonds                      2,633,827      --           (2,446)     2,631,381
Securities of states and
  municipalities                           7,656,596     201,606       (1,035)     7,857,167
--------------------------------------------------------------------------------------------
                                         $25,232,519    $202,544     $(21,965)   $25,413,098
============================================================================================
</TABLE>

     The amortized cost and fair value of investment securities classified as
held to maturity at December 31, 1998, by contractual maturity, follows:


<TABLE>
<CAPTION>
                                                               Amortized        Fair
                                                                  cost         value
---------------------------------------------------------------------------------------
<S>                                                            <C>          <C>        
Within one year                                               $36,388,882   $36,350,362
Between one and five years                                      1,973,485     2,026,813
Between five and ten years                                      1,754,000     1,900,306
---------------------------------------------------------------------------------------
                                                              $40,116,367   $40,277,481
=======================================================================================
</TABLE>


                                       28


<PAGE>   31



CHESTER BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
(CONTINUED)
--------------------------------------------------------------------------------

(4) MORTGAGE-BACKED SECURITIES

     The amortized cost and fair value of mortgage-backed securities classified
as available for sale at December 31, 1998 and 1997 follows:


<TABLE>
<CAPTION>
                                                              December 31, 1998
                                            ------------------------------------------------------
                                                             Gross         Gross
                                             Amortized     unrealized    unrealized       Fair
                                               cost          gains         losses         value
--------------------------------------------------------------------------------------------------
<S>                                         <C>             <C>           <C>          <C>        
GNMA                                        $ 1,838,636     $ 39,691      $    --      $ 1,878,327
FNMA                                          3,842,777       26,760           --        3,869,537
FHLMC                                         5,489,128       40,708       (2,639)       5,527,197
--------------------------------------------------------------------------------------------------
                                            $11,170,541     $107,159      $(2,639)     $11,275,061
==================================================================================================
</TABLE>


<TABLE>
<CAPTION>
                                                              December 31, 1997
                                            ------------------------------------------------------
                                                             Gross         Gross
                                            Amortized      unrealized    unrealized        Fair
                                               cost          gains         losses         value
--------------------------------------------------------------------------------------------------
<S>                                         <C>             <C>           <C>           <C>       
GNMA                                        $  381,199      $14,142       $    --       $  395,341
FNMA                                         1,242,417        7,380        (3,189)       1,246,608
--------------------------------------------------------------------------------------------------
                                            $1,623,616      $21,522       $(3,189)      $1,641,949
==================================================================================================
</TABLE>

     Gross realized gains, gross realized losses, and gross proceeds on sales of
investment securities classified as available for sale for the year ended
December 31, 1998 follows:

<TABLE>
<CAPTION>
<S>                                                             <C>     
Gross realized gains                                            $  4,262
Gross realized losses                                             (1,910)
------------------------------------------------------------------------
     Net realized gains                                         $  2,352
========================================================================
Gross proceeds                                                  $249,779
========================================================================
</TABLE>

     There were no sales of mortgage-backed securities during the years ended
December 31, 1997 or 1996.

     The amortized cost and fair value of mortgage-backed securities classified
as available for sale at December 31, 1998, by contractual maturity, are shown
below. Expected maturities will differ from contractual maturities due to
scheduled repayments and because borrowers may have the right to prepay
obligations with or without prepayment penalties. The following table does not
take into consideration the effects of scheduled repayments or the effects of
possible prepayments:


<TABLE>
<CAPTION>
                                                                 Amortized        Fair
                                                                   cost           value
------------------------------------------------------------------------------------------
<S>                                                             <C>            <C>      
Within one year                                                 $ 1,753,848    $ 1,771,951
Between one and five years                                        3,340,125      3,371,211
Between five and ten years                                        4,060,533      4,079,062
After ten years                                                   2,016,035      2,052,837
------------------------------------------------------------------------------------------
                                                                $11,170,541    $11,275,061
==========================================================================================
</TABLE>

                                       29


<PAGE>   32



CHESTER BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
(CONTINUED)
--------------------------------------------------------------------------------

(4) MORTGAGE-BACKED SECURITIES (CONTINUED)

     The amortized cost and fair value of mortgage-backed securities classified
as held to maturity at December 31, 1998 and 1997 follows:


<TABLE>
<CAPTION>
                                                           December 31, 1998
                                          ---------------------------------------------------
                                                          Gross        Gross
                                           Amortized    unrealized   unrealized      Fair
                                             cost         gains        losses        value
---------------------------------------------------------------------------------------------
<S>                                       <C>            <C>          <C>         <C>        
Collateralized mortgage obligations       $10,595,289    $35,495      $(11,244)   $10,619,540
=============================================================================================
</TABLE>


<TABLE>
<CAPTION>
                                                           December 31, 1997
                                          ---------------------------------------------------
                                                          Gross        Gross
                                           Amortized    unrealized   unrealized      Fair
                                             cost         gains        losses        value
---------------------------------------------------------------------------------------------
<S>                                       <C>            <C>          <C>         <C>        
GNMA                                      $ 1,170,128    $44,250      $ --        $ 1,214,378
FNMA                                          100,809      3,272          (601)       103,480
FHLMC                                       3,483,117     19,184        (1,920)     3,500,381
Collateralized mortgage obligations         7,391,648      3,172       (33,769)     7,361,051
---------------------------------------------------------------------------------------------
                                          $12,145,702    $69,878      $(36,290)   $12,179,290
=============================================================================================
</TABLE>

     The amortized cost and fair value of mortgage-backed securities classified
as held to maturity at December 31, 1998, by contractual maturity, are shown
below. Expected maturities will differ from contractual maturities due to
scheduled repayments and because borrowers may have the right to prepay
obligations with or without prepayment penalties. The following table does not
take into consideration the effects of scheduled repayments or the effects of
possible prepayments:


<TABLE>
<CAPTION>
                                                                Amortized        Fair
                                                                  cost           value
-----------------------------------------------------------------------------------------
<S>                                                            <C>            <C>        
Within one year                                                $    34,855    $    34,733
Between five and ten years                                       3,459,561      3,461,087
After ten years                                                  7,100,873      7,123,720
-----------------------------------------------------------------------------------------
                                                               $10,595,289    $10,619,540
=========================================================================================
</TABLE>

                                       30


<PAGE>   33



CHESTER BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
(CONTINUED)
--------------------------------------------------------------------------------

(5) LOANS RECEIVABLE, NET

     A comparative summary of loans receivable follows:


<TABLE>
<CAPTION>
                                                                  1998          1997
---------------------------------------------------------------------------------------
<S>                                                            <C>           <C>        
Loans secured by real estate:
  Residential:
     1-4 family                                               $36,797,825   $47,173,434
     Multifamily                                                  597,123       705,899
---------------------------------------------------------------------------------------
       Total residential                                       37,394,948    47,879,333
  Agriculture and land                                            453,190       722,571
  Commercial                                                    5,456,639     5,082,556
---------------------------------------------------------------------------------------
       Total loans secured by real estate                      43,304,777    53,684,460
---------------------------------------------------------------------------------------
Commercial loans                                                1,874,055     2,526,630
Consumer loans:
  Automobile loans                                                751,440     1,101,681
  Home improvement                                                980,669     1,401,613
  Credit cards                                                    804,673       999,336
  Loans secured by deposits                                       352,286       418,346
  Other                                                           586,935       767,283
---------------------------------------------------------------------------------------
       Total consumer loans                                     3,476,003     4,688,259
---------------------------------------------------------------------------------------
Total loans                                                    48,654,835    60,899,349
---------------------------------------------------------------------------------------
Less:
  Loans in process                                                  8,731        41,675
  Unearned discount, net                                           --             3,967
  Deferred loan fees, net                                         (11,201)      (50,166)
  Allowance for losses                                            448,643       436,138
---------------------------------------------------------------------------------------
                                                                  446,173       431,614
---------------------------------------------------------------------------------------
Loans receivable, net                                         $48,208,662   $60,467,735
=======================================================================================
</TABLE>

     The weighted average interest rate on loans was 8.30% and 8.52% at December
31, 1998 and 1997, respectively.

     A summary of activity in the allowance for losses for the years ended
December 31, 1998, 1997, and 1996 follows:


<TABLE>
<CAPTION>
                                                             1998               1997               1996
-------------------------------------------------------------------------------------------------------------
<S>                                                     <C>                <C>                <C>            
Balance, beginning of year                              $       436,138    $       384,141    $       389,714
Provision charged to expense                                     16,800             97,800             32,885
Charge-offs                                                     (27,896)           (67,360)           (42,073)
Recoveries                                                       23,601             21,557              3,615
-------------------------------------------------------------------------------------------------------------
Balance, end of year                                    $       448,643    $       436,138    $       384,141
=============================================================================================================
</TABLE>

                                       31


<PAGE>   34



CHESTER BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
(CONTINUED)
--------------------------------------------------------------------------------

(5) LOANS RECEIVABLE, NET (CONTINUED)
     A summary of loans receivable contractually in arrears three months or more
is as follows:


<TABLE>
<CAPTION>
                                                                      1998                  1997
-------------------------------------------------------------------------------------------------------
<S>                                                            <C>                   <C>               
Residential real estate loans                                  $          149,916    $           27,303
Consumer loans                                                              6,185                10,296
-------------------------------------------------------------------------------------------------------
                                                               $          156,101    $           37,599
=======================================================================================================
Percent of loans receivable                                                  .32%                  .06%
=======================================================================================================
Number of loans                                                                10                     7
=======================================================================================================
</TABLE>

     There were no impaired loans at December 31, 1998 and 1997.

     The average balance of impaired loans during the year ended December 31,
1997 was $2,105.

(6) ACCRUED INTEREST RECEIVABLE

     A comparative summary of accrued interest receivable follows:


<TABLE>
<CAPTION>
                                                                       1998                  1997
--------------------------------------------------------------------------------------------------------
<S>                                                             <C>                   <C>               
Loans receivable                                                $          322,250    $          401,411
Mortgage-backed securities                                                 109,069                64,265
Investment securities                                                      478,634               397,538
Interest-bearing deposits                                                       --                24,161
--------------------------------------------------------------------------------------------------------
                                                                $          909,953    $          887,375
========================================================================================================
</TABLE>

(7) OFFICE PROPERTIES AND EQUIPMENT, NET

     A comparative summary of office properties and equipment follows:


<TABLE>
<CAPTION>
                                                                       1998                  1997
--------------------------------------------------------------------------------------------------------
<S>                                                             <C>                   <C>               
Land                                                            $          190,434    $          190,434
Office buildings and improvements                                        2,344,278             2,344,278
Furniture, fixtures and equipment                                        1,268,323             1,210,617
--------------------------------------------------------------------------------------------------------
                                                                         3,803,035             3,745,329
Less accumulated depreciation                                            2,118,654             1,978,581
--------------------------------------------------------------------------------------------------------
                                                                $        1,684,381    $        1,766,748
========================================================================================================
</TABLE>

     Depreciation expense for the years ended December 31, 1998, 1997, and 1996
amounted to $140,073, $130,554, and $123,311, respectively.

                                       32


<PAGE>   35



CHESTER BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
(CONTINUED)
--------------------------------------------------------------------------------

(8) DEPOSITS

     A comparative summary of deposits follows:


<TABLE>
<CAPTION>
                                                            1998                         1997
                                                   -----------------------      -----------------------
                                   Stated                         Percent                      Percent
                                    rate             Amount       to total        Amount       to total
-------------------------------------------------------------------------------------------------------
<S>                            <C>                 <C>            <C>           <C>            <C>
Demand deposits:
NOW accounts                           0-2.00%     $ 9,166,456      9.2%        $ 8,086,304      8.5%
  Money market demand                  0-3.90       16,282,063     16.4          15,617,440     16.4
  Passbook                          2.50-2.75        8,534,011      8.6           8,685,305      9.1
-------------------------------------------------------------------------------------------------------
                                                    33,982,530     34.2          32,389,049     34.0
-------------------------------------------------------------------------------------------------------
Certificates of deposit:
                               Less than 3.00           40,000       --              16,716       --
                                    3.00-4.99       12,861,591     13.0           9,740,260     10.2
                                    5.00-6.99       52,512,504     52.8          53,179,693     55.8
                                    7.00-8.99           37,954       --              36,382       --
-------------------------------------------------------------------------------------------------------
                                                    65,452,049     65.8          62,973,051     66.0
-------------------------------------------------------------------------------------------------------
                                                   $99,434,579    100.0%        $95,362,100    100.0%
=======================================================================================================
</TABLE>

     The weighted average interest rate on deposits was 4.36% and 4.43% at
December 31, 1998 and 1997, respectively.

     A summary of the maturities of certificates of deposit at December 31, 1998
and 1997 follows:


<TABLE>
<CAPTION>
                                                         1998                        1997
                                                ----------------------      ----------------------
                                                  Amount       Percent        Amount       Percent
--------------------------------------------------------------------------------------------------
<S>                                             <C>            <C>          <C>            <C>   
Within one year                                 $39,938,882     61.0%       $46,444,432     73.8%
Second year                                      15,360,805     23.5         11,312,839     18.0
Third year                                       10,107,933     15.4          5,114,846      8.1
Fourth year                                          32,173       .1             89,569       .1
Thereafter                                           12,256      --              11,365      --
--------------------------------------------------------------------------------------------------
                                                $65,452,049    100.0%       $62,973,051    100.0%
==================================================================================================
</TABLE>

     Interest expense on savings deposits, by type, for the years ended December
31, 1998, 1997, and 1996 is summarized as follows:


<TABLE>
<CAPTION>
                                                         1998            1997            1996
------------------------------------------------------------------------------------------------
<S>                                                   <C>             <C>             <C>       
Passbook                                              $  243,252      $  260,560      $  367,827
NOW accounts                                             151,666         161,671         174,069
Money market demand                                      546,682         494,391         603,283
Certificates of deposit                                3,281,485       3,383,363       3,412,182
------------------------------------------------------------------------------------------------
                                                      $4,223,085      $4,299,985      $4,557,361
================================================================================================
</TABLE>

     Certificates of deposit of $100,000 or more totaled $10,071,981 and
$6,970,489 at December 31, 1998 and 1997, respectively. Investment securities
and mortgage-backed securities with a carrying value of approximately $4.1
million and $7.5 million at December 31, 1998 and 1997, respectively, were
pledged to secure certain certificates of deposit in excess of insurance of
accounts limitations.

                                       33


<PAGE>   36



CHESTER BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
(CONTINUED)
--------------------------------------------------------------------------------

(8) DEPOSITS (CONTINUED)
     A corporation affiliated with the Chairman of the Board of the Company had
savings deposits of approximately $14.0 million and $10.7 million with the
Company at December 31, 1998 and 1997, respectively.

(9) BORROWED MONEY

     A comparative summary of the borrowed money at December 31, 1998 and 1997
follows:


<TABLE>
<CAPTION>
                                                     1998                    1997
                                            ----------------------   ---------------------
                                                          Weighted                Weighted
                                                          average                 average
                                                          interest                interest
                                              Amount        rate       Amount       rate
------------------------------------------------------------------------------------------
<S>                                         <C>             <C>      <C>           <C>  
Securities sold under agreements to
  repurchase                                $10,880,389     4.59%    $8,380,389    5.30%
Fixed-term advances from FHLB due in 2008    10,000,000     4.76             --       --
------------------------------------------------------------------------------------------
                                            $20,880,389     4.67%    $8,380,389    5.30%
==========================================================================================
</TABLE>

     Securities sold under agreements to repurchase (repurchase agreements) are
treated as financings, and the obligations to repurchase securities sold are
reflected as a liability. The repurchase agreements mature within one year. All
of the repurchase agreements were to repurchase identical securities. The
investment securities and mortgage-backed securities underlying the repurchase
agreements were delivered to a designated safekeeping agent. These investment
securities and mortgage-backed securities had an amortized cost and fair value
of $10,987,000 and $10,964,000, respectively at December 31, 1998 and $8,367,000
and $8,348,000, respectively, at December 31, 1997.

     The repurchase agreements averaged approximately $9,523,000, $6,915,000,
and $15,057,000 during 1998, 1997, and 1996, respectively. The maximum amount
outstanding at any month-end during 1998, 1997, and 1996 was $10,880,000,
$8,380,000, and $18,340,000, respectively. Interest expense on the repurchase
agreements was $475,463, $346,946, and $742,910 for the years ended December 31,
1998, 1997, and 1996, respectively. At December 31, 1998 and 1997, $10,340,000
and $7,840,000, respectively, of the repurchase agreements were with a
corporation affiliated with the Chairman of the Board of the Company.

     Interest expense on fixed-term advances from the FHLB was $423,117 for the
year ended December 31, 1998. There were no fixed-term advances from the FHLB
outstanding during the years ended December 31, 1997 and 1996.

     Advances from the FHLB of Chicago are secured by a blanket lien of
qualifying first mortgage loans equivalent to 165% of outstanding borrowings. As
of December 31, 1998, the Company's available credit from the FHLB cannot exceed
the lesser of 35% of total assets ($50.0 million), or 60% of one-to-four family
residential mortgages not more than 90 days delinquent ($22.0 million).

(10) INCOME TAXES

     The composition of income tax expense for the years ended December 31,
1998, 1997, and 1996 is as follows:


<TABLE>
<CAPTION>
                                                                  1998        1997        1996
-------------------------------------------------------------------------------------------------
<S>                                                             <C>         <C>         <C>      
Current:
  Federal                                                       $468,345    $527,218    $ 220,436
  State                                                           24,228       6,030      (11,531)
Deferred                                                          21,765     (21,803)    (100,189)
-------------------------------------------------------------------------------------------------
                                                                $514,338    $511,445    $ 108,716
=================================================================================================
</TABLE>

                                       34


<PAGE>   37



CHESTER BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
(CONTINUED)
--------------------------------------------------------------------------------

(10) INCOME TAXES (CONTINUED)
     The reasons for the difference between expected federal income tax expense
computed at the federal statutory rate of 34% and the actual amount are as
follows:


<TABLE>
<CAPTION>
                                                   1998                  1997                   1996
                                            ------------------    -------------------    -------------------
                                             Amount    Percent     Amount     Percent     Amount     Percent
------------------------------------------------------------------------------------------------------------
<S>                                         <C>        <C>        <C>         <C>        <C>           <C>  
Computed "expected" income tax expense      $565,782    34.0%     $ 619,416    34.0%     $ 273,312     34.0%
Items affecting federal income tax rate:
  Amortization of ESOP awards                 13,823      .8         13,427      .8          1,731       .2
  State income taxes, net of federal
     benefit                                  15,990     1.0          3,980      .2         (7,610)    (1.0)
  Tax-exempt interest                        (91,405)   (5.5)      (131,179)   (7.2)      (155,157)   (19.3)
  Other                                       10,148      .6          5,801      .3         (3,560)     (.4)
------------------------------------------------------------------------------------------------------------
                                            $514,338    30.9%     $ 511,445    28.1%     $ 108,716     13.5%
============================================================================================================
</TABLE>

     The components of deferred tax assets and deferred tax liabilities at
December 31, 1998 and 1997 are summarized as follows:


<TABLE>
<CAPTION>
                                                                  1998         1997
--------------------------------------------------------------------------------------
<S>                                                             <C>          <C>      
Deferred tax assets:
  General loan loss allowance                                   $ 161,781    $ 156,486
  Deferred compensation                                                --       21,213
  Restricted stock awards                                          48,320       50,181
  Other                                                             2,695       22,500
--------------------------------------------------------------------------------------
  Total deferred tax assets                                       212,796      250,380
--------------------------------------------------------------------------------------
Deferred tax liabilities:
  Available-for-sale securities market valuation                  (59,118)     (19,891)
  Excess of tax bad debt reserves over base year                 (104,464)    (104,464)
  Tax depreciation in excess of that recorded for book
     purposes                                                     (58,553)     (54,675)
  FHLB stock dividends                                            (25,993)     (25,993)
  Other                                                            (8,842)     (28,539)
--------------------------------------------------------------------------------------
  Total deferred tax liabilities                                 (256,970)    (233,562)
--------------------------------------------------------------------------------------
  Net deferred tax asset (liability)                            $ (44,174)   $  16,818
======================================================================================
</TABLE>

     If certain conditions were met, the Bank, in determining taxable income,
was allowed a special bad debt deduction based on specified experience formulas
or on a percentage of taxable income before such deduction. The special bad
deduction accorded thrift institutions was covered under Section 593 of the
Internal Revenue Code. On August 20, 1996, the Small Business Job Protection Act
of 1996 (the Act) was signed into law. This Act included the repeal of Section
593 effective for tax years beginning after December 31, 1995. The repeal of the
thrift reserve method generally requires thrift institutions to recapture into
income the portion of bad debt reserves that exceed the base year reserve. The
recapture will generally be taken into income ratably over six tax years.
However, if the Company met a residential loan requirement for the tax years
beginning in 1996 and 1997, recapture of the reserve could be deferred until the
tax year beginning in 1998. At December 31, 1998, the Company had bad debts
deducted for tax purposes in excess of the base year reserve of approximately
$270,000. The Company has recognized a deferred income tax liability for this
amount.

     Certain events covered by IRC Section 593(e), which was not repealed, will
trigger a recapture of the base year reserve. The base year reserve of thrift
institutions would be recaptured if a thrift ceases to qualify as a bank for
federal

                                       35


<PAGE>   38



CHESTER BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
(CONTINUED)
--------------------------------------------------------------------------------

(10) INCOME TAXES (CONTINUED)
income tax purposes. The base year reserves of thrift institutions also remain
subject to income tax penalty provisions which, in general, require recapture
upon certain stock redemptions of, and excess distributions to, stockholders. At
December 31, 1998, retained earnings included approximately $2.1 million of base
year reserves for which no deferred federal income tax liability has been
recognized.

(11) REGULATORY MATTERS

     The Company and the Banks are subject to various regulatory capital
requirements administered by the federal banking agencies. Failure to meet
minimum capital requirements can initiate certain mandatory -- and possibly
additional discretionary -- actions by regulators that, if undertaken, could
have a direct material effect on the Company's consolidated financial
statements. Under capital adequacy guidelines and the regulatory framework for
prompt corrective action, the Company and the Banks must meet specific capital
guidelines that involve quantitative measures of the Company and the Banks'
assets, liabilities, and certain off-balance-sheet items as calculated under
regulatory accounting practices. The Company's and the Banks' capital amounts
and classification are also subject to qualitative judgments by the regulators
about components, risk weightings, and other factors.

     Quantitative measures established by regulations to ensure capital adequacy
require the Company and the Banks to maintain minimum amounts and ratios (set
forth in the table below) of total and Tier I capital (as defined in the
regulations) to risk-weighted assets (as defined), and of Tier I capital (as
defined) to average assets (as defined). Management believes, as of December 31,
1998, the Company and the Banks meet all capital adequacy requirements to which
they are subject.

     As of March 31, 1997, the most recent notification from regulatory agencies
categorized the Banks as well capitalized under the regulatory framework for
prompt correction action. To be categorized as well capitalized, the Banks must
maintain minimum total risk-based, Tier I risk-based, and Tier I leverage ratios
of 10%, 6%, and 5%, respectively. There are no conditions or events since that
notification that management believes have changed the Banks' category.

                                       36


<PAGE>   39



CHESTER BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
(CONTINUED)
--------------------------------------------------------------------------------

(11) REGULATORY MATTERS (CONTINUED)

     The Company's and the Banks' actual and required capital amounts and ratios
as of December 31, 1998 and 1997 are as follows:


<TABLE>
<CAPTION>
                                                               December 31, 1998
                                                      -----------------------------------
                                                                              Capital
                                                           Actual          requirements
                                                      ----------------    ---------------
              (Dollars in thousands)                  Amount     Ratio    Amount    Ratio
-----------------------------------------------------------------------------------------

<S>                                                   <C>        <C>      <C>       <C>
Total capital (to risk-weighted assets):
     Company                                          $22,060    42.7%    $4,136    8.00%
     Chester National Bank                             17,565    40.0      3,550    8.00
     Chester National Bank of Missouri                  3,290    49.7        530    8.00
Tier I capital (to risk-weighted assets):
     Company                                          $21,611    41.8%    $2,068    4.00%
     Chester National Bank                             17,197    38.7      1,775    4.00
     Chester National Bank of Missouri                  3,209    48.5        265    4.00
Tier I capital (to average assets):
     Company                                          $21,611    14.9%    $4,346    3.00%
     Chester National Bank                             17,197    13.2      3,918    3.00
     Chester National Bank of Missouri                  3,209    25.6        375    3.00
<CAPTION>


                                                               December 31, 1997
                                                      -----------------------------------
                                                                              Capital
                                                           Actual          requirements
                                                      ----------------    ---------------
              (Dollars in thousands)                  Amount     Ratio    Amount    Ratio
-----------------------------------------------------------------------------------------
<S>                                                   <C>        <C>      <C>       <C>
Total capital to risk-weighted assets):
     Company                                          $29,392    59.1%    $3,976    8.00%
     Chester National Bank                             24,357    57.8      3,368    8.00
     Chester National Bank of Missouri                  3,162    46.4        546    8.00
Tier I capital (to risk-weighted assets):
     Company                                          $28,956    58.3%    $1,988    4.00%
     Chester National Bank                             23,992    57.0      1,684    4.00
     Chester National Bank of Missouri                  3,091    45.3        273    4.00
Tier I capital (to average assets):
     Company                                          $28,956    21.3%    $4,086    3.00%
     Chester National Bank                             23,992    20.1      3,587    3.00
     Chester National Bank of Missouri                  3,091    24.1        384    3.00
</TABLE>

                                       37


<PAGE>   40



CHESTER BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
(CONTINUED)
--------------------------------------------------------------------------------

(12) PENSION PLAN

     Substantially all employees are included in a trusteed defined benefit
pension plan. The benefits contemplated by the plan are funded through payments
to the Financial Institutions Retirement Fund, which operates as an
industry-wide plan and does not report relative plan assets and actuarial
liabilities of the individual participating associations. The cost of funding is
charged to current operations. There is no unfunded liability for past service.
Expense for the years ended December 31, 1998, 1997, and 1996 was $2,438,
$6,395, and $38,726, respectively.

(13) EMPLOYEE STOCK OWNERSHIP PLAN

     During 1996, the Company established a tax-qualified ESOP. The plan covers
substantially all employees who have attained the age of 21 and completed one
year of service. In connection with the conversion to a stock corporation, the
ESOP purchased 174,570 shares of the Company's common stock at a subscription
price of $10.00 per share using funds loaned by the Company. In January 1997,
the Company loan was restructured to be repaid with level principal payments
over 25 years. In January 1998, the Company loan was restructured again and is
now being repaid with level principal payments over 30 years. All shares are
held in a suspense account for allocation among the participants as the loan is
repaid. Shares released from the suspense account are allocated among the
participants based upon their pro rata annual compensation. The purchases of the
shares by the ESOP were recorded by the Company as unearned ESOP shares in a
contra equity account. As ESOP shares are committed to be released to compensate
employees, the contra equity account is reduced and the Company recognizes
compensation expense equal to the fair market value of the shares committed to
be released. Dividends on allocated ESOP shares are recorded as a reduction of
retained earnings; dividends on unallocated ESOP shares are recorded as a
reduction of debt. Compensation expense related to the ESOP was $95,596,
$108,172, and $34,192 for the years ended December 31, 1998, 1997, and 1996,
respectively.

     The ESOP shares as of December 31, 1998 and 1997 are as follows:


<TABLE>
<CAPTION>
                                                                   1998          1997
----------------------------------------------------------------------------------------
<S>                                                             <C>           <C>       
Allocated shares                                                    15,272         9,778
Committed to be released shares                                         --            --
Unreleased shares                                                  159,298       164,792
----------------------------------------------------------------------------------------
Total ESOP shares                                                  174,570       174,570
========================================================================================
Fair value of unreleased shares                                 $2,678,198    $2,925,058
========================================================================================
</TABLE>

(14) DIRECTOR EMERITUS RETIREMENT PLAN

     On January 18, 1996, the Company adopted a retirement plan for directors
who reached director emeritus status. Eligibility for director emeritus status
was achieved when a director reached age 81 or upon retirement, if the director
has served as a director for 15 years or more. Originally, a director emeritus,
upon the later of the first anniversary of designation as a director emeritus,
or the date on which the director emeritus attained age 65, was to receive, on
an annual basis for a period of 10 years following designation as a director
emeritus, an amount equal to $500 multiplied by the number of full years of
service as a director of the Company or any predecessor institution that was
previously merged with the Company. In an amendment to the plan dated December
9, 1997, the benefit period was changed from 10 years to five years and the
annual benefit multiple was changed from $500 to $300. Vesting for past service
as a director occurred on December 31, 1996. In June 1998, the Company
terminated the director emeritus retirement plan and eliminated the
corresponding deferred compensation accrual of $59,700. Expense related to the
plan was $17,393 and $207,324 for the years ended December 31, 1997 and 1996,
respectively.

                                       38


<PAGE>   41



CHESTER BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
(CONTINUED)
--------------------------------------------------------------------------------

(15) RESTRICTED STOCK AWARDS

     On April 4, 1997, the Company adopted the 1997 Management Recognition and
Development Plan. The plan provides that common stock totaling 82,921 shares can
be issued to directors and employees in key management positions to encourage
such directors and key employees to remain with the Company. Interest in the
plan for each participant vests in five equal installments beginning April 4,
1998. The adoption of the plan in 1997 was recorded in the consolidated
financial statements through a $1,160,894 credit to additional paid-in capital
with a corresponding charge to a contra equity account for the restricted
shares. The contra equity account will be amortized to compensation expense over
the period of vesting. Compensation expense was $166,194 and $435,026 for the
years ended December 31, 1998 and 1997, respectively. Included in the 1997
amount was $305,494 related to full vesting of one participant's interest upon
his death in 1997.

(16) STOCK OPTION PLAN

     On April 4, 1997, the Company adopted the 1997 Stock Option Plan which
provided for the granting of options for a maximum of 218,212 shares of common
stock to directors, key officers, and employees. Interest in the plan for each
participant vests in five equal installments beginning April 4, 1998. On April
4, 1997 and December 8, 1998, 200,754 and 17,458 shares were granted at a price
per share of $14.00 and $17.00, respectively. Activity within the plan is
summarized as follows:


<TABLE>
<CAPTION>
                                                                 Number
                                                                of shares      Price
-------------------------------------------------------------------------------------
<S>                                                              <C>          <C>   
Balance at December 31, 1997                                      200,754      $14.00
Granted                                                            17,458       17.00
Exercised                                                          --            --
Cancelled                                                          --            --
-------------------------------------------------------------------------------------
Balance at December 31, 1998                                      218,212      $14.24
=====================================================================================
</TABLE>

     The Company applies APB opinion No. 25 in accounting for stock options and,
accordingly, no compensation cost has been recognized in the consolidated
financial statements. Had the Company determined compensation cost for stock
options granted in 1998 and 1997 based on the fair value at the grant date under
SFAS No. 123, the Company's net income in 1998 and 1997 would have been reduced
to the pro forma amount indicated below:


<TABLE>
<CAPTION>
                                                                     1998            1997
--------------------------------------------------------------------------------------------
<S>                                                               <C>             <C>       
Net income:
  As reported                                                     $1,149,727      $1,310,366
  Pro forma                                                          915,125       1,155,050
============================================================================================
Earnings per share -- basic:
  As reported                                                     $      .75      $      .68
  Pro forma                                                              .60             .60
============================================================================================
Earnings per share -- diluted:
  As reported                                                     $      .73      $      .67
  Pro forma                                                              .58             .59
============================================================================================
</TABLE>

     The per share fair value of stock options granted in 1998 and 1997 were
estimated on the date of grant at $5.60 and $5.80, respectively, using the
Black-Scholes option-pricing model. The following assumptions were used to
determine the
                                       39


<PAGE>   42



CHESTER BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
(CONTINUED)
--------------------------------------------------------------------------------

(16) STOCK OPTION PLAN (CONTINUED)
per share fair value of the stock options granted in 1998: dividend yield of
 .14%; risk-free interest rate of 6.00%; expected volatility of 4.2%; and an
estimated life of 7 years. The following assumptions were used to determine the
per share fair value of the stock options in 1997: dividend yield of .14%;
risk-free interest rate of 6.00%; expected volatility of 24.9%; and an estimated
life of 7 years.

(17) FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK

     The Company is a party to financial instruments with off-balance-sheet risk
in the normal course of business to meet the financing needs of its customers.
These financial instruments include commitments to extend credit and financial
guarantees.

     The Company's exposure to credit loss in the event of nonperformance by the
other party to the financial instrument for commitments to extend credit and
financial guarantees written is represented by the contractual amount of these
instruments. The Company uses the same credit policies in making commitments and
conditional obligations as it does for on-balance-sheet instruments.

     Commitments to extend credit are agreements to lend to a customer as long
as there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination clauses
and may require payment of a fee. Since certain of the commitments are expected
to expire without being drawn upon, the total commitment amounts do not
necessarily represent future cash requirements. The Company evaluates each
customer's creditworthiness on a case-by-case basis. The amount of collateral
obtained if deemed necessary by the Company upon extension of credit is based on
management's credit evaluation of the counterparty.

     At December 31, 1998, the Company had outstanding commitments to originate
residential loans of approximately $902,000, all of which were at fixed rates.
In addition, the Company had commitments to fund commercial loans and
outstanding credit lines of approximately $940,000 and $1,551,000, respectively,
at December 31, 1998. Commitments to extend credit may involve elements of
interest rate risk in excess of the amount recognized in the consolidated
balance sheets. Interest rate risk on commitments to extend credit results from
the possibility that interest rates may have moved unfavorably from the position
of the Company since the time the commitment was made.

(18) LITIGATION

     The Company is involved in various litigation arising in the ordinary
course of business. In the opinion of management, at the present time,
disposition of the suits and claims will not have a material effect on the
financial position of the Company.

(19) LIQUIDATION ACCOUNT

     At the time of conversion to a stock corporation, the Bank established a
liquidation account for the benefit of eligible savings account holders who
continue to maintain their savings accounts with the Bank after conversion. In
the event of a complete liquidation of the Bank (and only in such event),
eligible savings account holders who continue to maintain their accounts with
the Bank shall be entitled to receive a distribution from the liquidation
account after payment to all creditors but before any liquidation distribution
with respect to common stock. The initial liquidation account was established at
approximately $11.9 million. This account is proportionately reduced for any
subsequent reduction in the eligible holders' deposit accounts. The creation and
maintenance of the liquidation account will not restrict the use or application
of any of the capital accounts of the Company, except that the Company may not
declare or pay a cash dividend on, or repurchase any of, its capital stock, if
the effect of such dividend or repurchase would be to cause the Company's net
worth to be reduced below the aggregate amount then required for the liquidation
account, or the amount required by federal or state law.

                                       40


<PAGE>   43



CHESTER BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
(CONTINUED)
--------------------------------------------------------------------------------

(20) FAIR VALUES OF FINANCIAL INSTRUMENTS

     The estimated fair values of the Company's interest-earning assets and
interest-bearing liabilities at December 31, 1998 and 1997 are as follows:


<TABLE>
<CAPTION>
                                         December 31, 1998           December 31, 1997
                                     -------------------------   -------------------------
                                      Carrying      Estimated     Carrying      Estimated
                                        value      fair value       value      fair value
------------------------------------------------------------------------------------------
<S>                                 <C>           <C>           <C>           <C>         
Interest-earning assets:
  Cash and cash equivalents          $16,796,839   $16,796,839   $11,291,063   $11,291,063
  Certificates of deposit                 95,000        95,000       290,000       290,000
  Investment securities               52,632,136    52,793,250    44,940,582    45,121,161
  Mortgage-backed securities          21,870,350    21,894,601    13,787,651    13,821,239
  Loans receivable                    48,208,662    49,154,000    60,467,735    61,124,000
------------------------------------------------------------------------------------------
                                    $139,602,987  $140,733,690  $130,777,031  $131,647,463
==========================================================================================
Interest-bearing liabilities:
  Deposits:
     Checking, money market demand,
       and passbooks                 $33,982,530   $33,982,530   $32,389,049   $32,389,049
     Certificates of deposit          65,452,049    65,201,000    62,973,051    62,934,000
     Securities sold under
       agreements to repurchase       10,880,389    10,880,389     8,380,389     8,380,389
     Fixed-term advances from FHLB    10,000,000    10,000,000       --            --
------------------------------------------------------------------------------------------
                                    $120,314,968  $120,063,919  $103,742,489  $103,703,438
==========================================================================================
</TABLE>

     The following methods and assumptions were used to estimate the fair value
of each class of financial instrument listed above:

Cash and Cash Equivalents

     Cash and cash equivalents consist of cash, interest-bearing deposits and
bankers' acceptances with maturities of three months or less, and federal funds
sold. The carrying value is considered a reasonable estimate of fair value of
these financial instruments due to their short-term nature.

Certificates of Deposit

     The carrying value is considered a reasonable estimate of fair value of the
financial instrument due to original maturities not exceeding one year.

Investment and Mortgage-Backed Securities

     Fair values are based on quoted market prices or dealer quotes.

Loans Receivable

     Fair values are estimated for portfolios of loans with similar financial
characteristics. Loans are segregated by type, such as residential real estate,
commercial real estate, and consumer loans. Each loan category is further
segmented into fixed and adjustable rate interest terms and by performing and
nonperforming categories.

     The fair value of loans is calculated by discounting scheduled cash flows
through the estimated maturity using estimated market discount rates that
reflect the credit and interest rate risk inherent in the loan. The estimate of
maturity

                                       41


<PAGE>   44



CHESTER BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
(CONTINUED)
--------------------------------------------------------------------------------

(20) FAIR VALUES OF FINANCIAL INSTRUMENTS (CONTINUED)

Loans Receivable (Continued)

is based on the Company's historical experience, with repayments for each loan
classification modified, as required, by an estimate of the effect of current
economic and lending conditions.

Stock in Federal Home Loan Bank and Federal Reserve Bank

     Stock in Federal Home Loan Bank and stock in Federal Reserve Bank are
valued at cost, which represents redemption value.

Deposits

     The fair value of deposits with no stated maturity, such as checking, money
market demand, and passbook, is equal to the amount payable on demand at
December 31, 1998.

     The fair value of certificates of deposit, all of which have stated
maturities, is based on the discounted value of contractual cash flows. The
discount rate is estimated using the rates currently offered for deposits of
similar remaining maturities.

Securities Sold Under Agreements to Repurchase

     The carrying value is considered a reasonable estimate of fair value of
this financial instrument due to original maturities not exceeding one year.

Fixed-term Advances From FHLB

     The fair value of FHLB advances is based on the discounted value of
contractual cash flows. The discount rate is estimated using rates currently
available to the Company for similar terms to maturity.

(21) REGULATORY DEVELOPMENTS

     On September 30, 1996, the Deposit Insurance Funds Act of 1996 (DIFA) was
signed into law. DIFA authorized the FDIC to impose a one-time special
assessment on SAIF-assessable deposits of depository institutions. This special
assessment, which was based on SAIF-assessable deposits at March 31, 1995, was
intended to recapitalize the SAIF. The one-time special assessment for the
Company totaled $812,498. The actual reduction of net income was approximately
$504,000, after considering the tax deductibility of the special assessment.

                                       42


<PAGE>   45



CHESTER BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
(CONTINUED)
--------------------------------------------------------------------------------

(22) PARENT COMPANY FINANCIAL INFORMATION

     The following are condensed balance sheets as of December 31, 1998 and 1997
and condensed statements of income and cash flows for the years ended December
31, 1998, 1997, and 1996 for Chester Bancorp, Inc. (parent company only):

                            CONDENSED BALANCE SHEETS


<TABLE>
<CAPTION>
                       (in thousands)                          1998      1997
-------------------------------------------------------------------------------
<S>                                                           <C>       <C>    
Assets:
  Cash                                                        $    49   $    58
  Investment securities                                         1,566     1,801
  Investment in subsidiaries                                   20,514    27,105
  Other assets                                                     71        52
-------------------------------------------------------------------------------
                                                              $22,200   $29,016
===============================================================================
Liabilities and stockholders' equity:
  Other liabilities                                           $   495   $    28
  Stockholders' equity                                         21,705    28,988
-------------------------------------------------------------------------------
                                                              $22,200   $29,016
===============================================================================
</TABLE>

                         CONDENSED STATEMENTS OF INCOME


<TABLE>
<CAPTION>
                       (in thousands)                          1998     1997      1996
----------------------------------------------------------------------------------------
<S>                                                           <C>      <C>       <C>    
Interest income                                               $   53   $   218   $    66
Interest expense                                                  18        14        --
----------------------------------------------------------------------------------------
                                                                  35       204        66
Operating expenses                                               295       435        12
----------------------------------------------------------------------------------------
  Income (loss) before income tax expense (benefit) and
     equity in undistributed earnings of subsidiaries           (260)     (231)       54
Income tax expense (benefit)                                     (84)     (108)       22
----------------------------------------------------------------------------------------
  Income (loss) before equity in undistributed earnings of
     subsidiaries                                               (176)     (123)       32
Equity in undistributed earnings of subsidiaries               1,326     1,433       663
----------------------------------------------------------------------------------------
  Net income                                                  $1,150   $ 1,310   $   695
========================================================================================
</TABLE>

                                       43


<PAGE>   46



CHESTER BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
(CONTINUED)
--------------------------------------------------------------------------------

(22) PARENT COMPANY FINANCIAL INFORMATION (CONTINUED)

                       CONDENSED STATEMENTS OF CASH FLOWS


<TABLE>
<CAPTION>
                       (in thousands)                          1998      1997      1996
-----------------------------------------------------------------------------------------
<S>                                                           <C>       <C>       <C>    
Operating activities:
  Net income                                                  $ 1,150   $ 1,310   $   695
  Equity in undistributed earnings of subsidiaries             (1,326)   (1,433)     (663)
  Other, net                                                      710       575        22
-----------------------------------------------------------------------------------------
  Net cash provided by operating activities                       534       452        54
-----------------------------------------------------------------------------------------
Investing activities:
  Capital contributions to subsidiaries                            --        --   (13,337)
  Decrease (increase) in investment securities                    235     3,687    (5,488)
-----------------------------------------------------------------------------------------
  Net cash provided by (used in) investing activities             235     3,687   (18,825)
-----------------------------------------------------------------------------------------
Financing activities:
  Proceeds from issuance of stock                                  --        --    19,136
  Dividends received from subsidiaries                          7,992        --        --
  Purchase of treasury stock                                   (8,345)   (3,869)       --
  Dividends paid                                                 (425)     (477)     (100)
-----------------------------------------------------------------------------------------
  Net cash (used in) provided by financing activities            (778)   (4,346)   19,036
-----------------------------------------------------------------------------------------
  Net change in cash and cash equivalents                          (9)     (207)      265
Cash and cash equivalents at beginning of year                     58       265        --
-----------------------------------------------------------------------------------------
Cash and cash equivalents at end of year                      $    49   $    58   $   265
=========================================================================================
</TABLE>

                                       44


<PAGE>   47



CHESTER BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
(CONTINUED)
--------------------------------------------------------------------------------

(23) SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

     Selected quarterly financial data for the year ended December 31, 1998 is
as follows:


<TABLE>
<CAPTION>
                                                             Quarter ended
                                         ------------------------------------------------------
(thousands of dollars,                   March 31,    June 30,    September 30,    December 31,
except per share data)                     1998         1998          1998             1998
-----------------------------------------------------------------------------------------------

<S>                                       <C>          <C>           <C>              <C>   
Total interest income                     $2,305       $2,288        $2,259           $2,225
Total interest expense                     1,214        1,282         1,288            1,338
-----------------------------------------------------------------------------------------------
  Net interest income                      1,091        1,006           971              887
Provision for loan losses                     12            5            --               --
-----------------------------------------------------------------------------------------------
  Net interest income after provision
     for loan losses                       1,079        1,001           971              887
Noninterest income                            55           50            53               82
Noninterest expense                          678          578           642              616
-----------------------------------------------------------------------------------------------
  Income before income tax expense           456          473           382              353
Income tax expense                           135          146           116              117
-----------------------------------------------------------------------------------------------
  Net income                              $  321       $  327        $  266           $  236
===============================================================================================
Earnings per share-- basic                $  .18       $  .21        $  .18           $  .18
===============================================================================================
Earnings per share-- diluted              $  .18       $  .20        $  .17           $  .18
===============================================================================================
</TABLE>

     Selected quarterly financial data for the year ended December 31, 1997 is
as follows:


<TABLE>
<CAPTION>
                                                             Quarter ended
                                         ------------------------------------------------------
(thousands of dollars,                   March 31,    June 30,    September 30,    December 31,
except per share data)                     1997         1997          1997             1997
-----------------------------------------------------------------------------------------------

<S>                                       <C>          <C>           <C>              <C>   
Total interest income                     $2,304       $2,344        $2,272           $2,262
Total interest expense                     1,173        1,179         1,154            1,141
-----------------------------------------------------------------------------------------------
  Net interest income                      1,131        1,165         1,118            1,121
Provision for loan losses                     15           15            29               39
-----------------------------------------------------------------------------------------------
  Net interest income after provision
     for loan losses                       1,116        1,150         1,089            1,082
Noninterest income                            65           64            54               36
Noninterest expense                          669          680           967              518
-----------------------------------------------------------------------------------------------
  Income before income tax expense           512          534           176              600
Income tax expense                           145          157            19              191
-----------------------------------------------------------------------------------------------
  Net income                              $  367       $  377        $  157           $  409
===============================================================================================
Earnings per share-- basic                $  .18       $  .19        $  .08           $  .23
===============================================================================================
Earnings per share-- diluted              $  .18       $  .19        $  .08           $  .22
===============================================================================================
</TABLE>

                                       45


<PAGE>   48




STOCKHOLDER INFORMATION
--------------------------------------------------------------------------------

BOARD OF DIRECTORS              TRANSFER AGENT
Michael W. Welge, Chairman      Registrar and Transfer Company
John R. Beck, M.D.              10 Commerce Drive
Edward K. Collins               Cranford, NJ 07016
James C. McDonald               (800) 368-5948
Allen R. Verseman
Thomas E. Welch, Jr.            GENERAL INQUIRIES AND REPORTS
Carl H. Welge
                                A copy of the Company's 1998 Annual Report to
CORPORATE HEADQUARTERS          the Securities and Exchange Commission, Form
                                10-K, may be obtained without charge by written
1112 State Street               request of shareholders to:
Chester, IL 62233               Michael W. Welge, President
(618) 826-5038                  Chester Bancorp, Inc.
                                1112 State Street
ANNUAL MEETING                  Chester, IL 62233
Friday, April 2, 1999           
10:00 A.M.                      OFFICERS
American Legion Hall
500 E. Opdyke St.               Michael W. Welge
Chester, IL 62233               President and Chief Financial Officer

                                Edward K. Collins
STOCK LISTING                   Secretary and Treasurer
Nasdaq National Market          
Symbol: CNBA                    FDIC DISCLAIMER

                                This Annual Report has not been
GENERAL COUNSEL                 reviewed, or confirmed for
                                accuracy or relevance, by the FDIC.

Bryan Cave LLP
One Metropolitan Square
Suite 3600
St. Louis, MO 63102-2750

INDEPENDENT AUDITORS
KPMG Peat Marwick LLP
10 South Broadway
St. Louis, MO 63102


<PAGE>   49




[CHESTER BANCORP, INC. LOGO]

                             CHESTER BANCORP, INC.

     1112 State Street - Chester, Illinois 62233 - Telephone (618) 826-5038