<PAGE>

================================================================================

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   ----------

                                    FORM 10-K

[X]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934

                   For the fiscal year ended December 31, 2001

                                       OR

[ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934

              For the transition period from         to
                                            ---------  ------------

                         Commission File Number 1-13676

                             KANKAKEE BANCORP, INC.
             (Exact name of Registrant as specified in its charter)

               Delaware                                  36-3846489
    (State or other jurisdiction of                  (I.R.S. Employer
    incorporation or organization)                  Identification Number)

310 S. Schuyler Avenue, Kankakee, Illinois                   60901
   (Address of principal executive offices)               (Zip Code)

Registrant's telephone number, including area code: (815) 937-4440

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

                                                      Name of Each Exchange
                Title of Each Class                    on which Registered
                -------------------                   ---------------------
    Common Stock, par value $.01 per share           American Stock Exchange
         Preferred Share Purchase Rights             American Stock Exchange

           Securities Registered Pursuant to Section 12(g) of the Act:
                                      NONE
                                (Title of Class)

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

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

================================================================================

<PAGE>

     As of March 4, 2002, the Registrant had issued and outstanding 1,241,793
shares of the Registrant's common stock. The aggregate market value of the
voting stock held by non-affiliates of the Registrant as of March 4, 2002, was
$39,913,403.*

                       DOCUMENTS INCORPORATED BY REFERENCE

     PARTS II and IV of Form 10-K--Portions of the 2001 Annual Report to
     Stockholders.
     PART III of Form 10-K--Portions of the Proxy Statement for the 2002 Annual
     Meeting of Stockholders.

----------
*    Based on the last reported price ($36.75) of an actual transaction in the
     Registrant's common stock on March 4, 2002, and reports of beneficial
     ownership filed by directors and executive officers of the Registrant and
     by beneficial owners of more than 5% of the outstanding shares of common
     stock of the Registrant; however, such determination of shares owned by
     affiliates does not constitute an admission of affiliate status or
     beneficial interest in shares of the Registrant's common stock.

<PAGE>

                             KANKAKEE BANCORP, INC.

                         2001 ANNUAL REPORT ON FORM 10-K

                                Table of Contents

                                                                     Page Number
                                                                     -----------

                                     PART I

Item   1.  Business......................................................   4
Item   2.  Properties....................................................  47
Item   3.  Legal Proceedings.............................................  48
Item   4.  Submission of Matters to a Vote of Security Holders...........  48

                                     PART II

Item   5.  Market for the Registrant's Common Stock and Related
              Stockholder Matters........................................  48
Item   6.  Selected Financial Data.......................................  48
Item   7.  Management's Discussion and Analysis of Financial
              Condition and Results of Operations........................  48
Item   7a. Quantitative and Qualitative Disclosures About Market Risk      48
Item   8.  Financial Statements and Supplementary Data...................  50
Item   9.  Changes in and Disagreements With Accountants on
              Accounting and Financial Disclosure........................  50

                                    PART III

Item  10.  Directors and Executive Officers of the Registrant............  50
Item  11.  Executive Compensation........................................  51
Item  12.  Security Ownership of Certain Beneficial Owners and
              Management.................................................  51
Item  13.  Certain Relationships and Related Transactions................  51

                                     PART IV

Item  14.  Exhibits, Financial Statement Schedules, and Reports on 8-K ..  52

Form 10-K  Signature Page................................................  55

                                        3

<PAGE>

                                     PART I

Item 1. Business

                                   THE COMPANY

General

     Kankakee Bancorp, Inc., a Delaware corporation (the "Company"), is a
savings and loan holding company registered under the Home Owner's Loan Act, as
amended (the "HOLA"). The Company's primary business activity is acting as the
holding company for Kankakee Federal Savings Bank, a federally chartered savings
bank (the "Bank"). The Bank has two subsidiaries, KFS Service Corp., and its
wholly-owned subsidiary, KFS Insurance Agency, Inc., which engage in the
business of providing securities brokerage services and insurance and annuity
products to its customers and appraisal services to the Bank and other lenders
in the Kankakee area. All references to KFS Service Corp. include KFS Insurance
Agency, Inc., unless clearly indicated otherwise. The Company was organized in
1992, in connection with the Bank's conversion from the mutual to the stock form
of organization which was completed on December 30, 1992. As part of the
conversion, the Company issued 1,750,000 shares of its common stock, $.01 par
value per share, at a price of $9.875 per share. On March 24, 1995, the
Company's common stock was listed on the American Stock Exchange under the
symbol "KNK". Prior to March 24, 1995, the Company's common stock was quoted on
The Nasdaq Stock Market under the symbol "KNKB".

     The Bank is the Company's only financial institution subsidiary and was
initially chartered as an Illinois state savings and loan association in 1885.
The Bank converted to a federally chartered savings and loan association in 1937
and changed its name to Kankakee Federal Savings Bank in connection with its
conversion to stock form in 1992. All references to the Company include the Bank
and its subsidiaries unless clearly indicated otherwise.

     The Company and the Bank are subject to comprehensive regulation,
examination and supervision by the Office of Thrift Supervision (the "OTS") and
the Federal Deposit Insurance Corporation (the "FDIC"). The Bank is a member of
the Federal Home Loan Bank System (the "FHLB") and its deposits are insured by
the Savings Association Insurance Fund ("SAIF") to the maximum extent permitted
by the FDIC.

     The Bank serves the financial needs of families and local businesses in its
primary market areas through its main office located at 310 S. Schuyler Avenue,
Kankakee, Illinois and fourteen branch offices located in the communities of
Ashkum, Bourbonnais, Bradley, Braidwood, Champaign, Coal City (2), Diamond,
Dwight, Herscher, Hoopeston, Manteno, Momence and Urbana, Illinois. At December
31, 2001, the Company had consolidated assets of $490.3 million, deposits of
$415.5 million and stockholders' equity of $41.2 million.

                                        4

<PAGE>

     Branch offices in Braidwood, Coal City and Diamond, Illinois were acquired
on January 29, 1998, when the Company completed the acquisition of Coal City
National Bank from Coal City Corporation, a multi-bank holding company
headquartered in Chicago, Illinois. At the time of purchase, the bank had total
assets of $56.0 million, deposits of $51.7 million and stockholders' equity of
$3.7 million. The transaction, which was accounted for as a purchase, resulted
in the recording of approximately $3.8 million in intangible assets.

     The Company engages in a general full service retail banking business and
offers a broad variety of consumer oriented products and services to residents
of its primary market areas. The Company is principally engaged in the business
of attracting deposits from the general public and originating residential
mortgage loans in its primary market areas. The Company also originates
commercial real estate, consumer, multi-family, commercial business and
construction loans. In addition, the Company invests in mortgage-backed
securities, investment securities, certificates of deposit and short-term liquid
assets. The Company also offers a Visa/MasterCard program, debit card services
and, on an agency basis through KFS Service Corp., securities brokerage services
and insurance and annuity products to the Company's customers and provides
appraisal services for the Bank and others.

     Since 1998, the Bank has offered trust services. While the Bank has
authority for full trust services, it has initially focused on personal trust
services and limited employee benefit plan services.

     The Company's revenues are derived from interest on loans, mortgage-backed
and related securities and investments, service charges and loan origination
fees, loan servicing fees and proceeds from the sale, through KFS Service Corp.,
of securities brokerage services, insurance and annuity products and appraisal
services. The Company's operations are materially affected by general economic
conditions, the monetary and fiscal policies of the federal government and the
policies of the various regulatory authorities, including the OTS and the Board
of Governors of the Federal Reserve System (the "FRB"). Historically, the
Company's results of operations have been largely dependent upon its net
interest income, which is the difference between the interest it receives on its
loan and investment securities portfolios and the interest it pays on deposit
accounts and borrowings. However, while the results of operations continue to be
dependent on net interest income, other income sources, such as fees, loan
servicing income, net gain on the sale of loans and other non-interest income,
have and continue to become more significant factors in the results of
operations.

     The executive offices of the Company are located at 310 S. Schuyler Avenue,
Kankakee, Illinois 60901 and its telephone number at that address is (815)
937-4440.

Market Area

     The Bank's main office is located at 310 S. Schuyler Avenue, Kankakee,
Illinois. The bank also has fourteen branch offices located in the communities
of Ashkum, Bourbonnais, Bradley, Braidwood, Champaign, Coal City (2), Diamond,
Dwight, Herscher, Hoopeston,

                                        5

<PAGE>

Manteno, Momence and Urbana. The Company's market areas include Kankakee,
Champaign, Iroquois and Livingston Counties and portions of Will, Grundy and
Vermilion Counties, in Illinois. During 2001, the Company began working with a
consulting firm to determine how to increase the profitability of each branch
location and whether operations in certain market areas should be expanded or
abandoned so that the Company's capital resources may be put to use in other
market areas more profitably. The Company also continues to look for expansion
opportunities, including financial institution and branch acquisitions, that
would increase the Company's return to its stockholders. As a result, the
Company's market area is subject to revision.

     Kankakee is located approximately 35 miles south of the metropolitan
Chicago area. The metropolitan Kankakee area has a population of just under
60,000 and has experienced a slight decrease in population since 1990. Kankakee
County has a mixed agricultural and industrial economy with the largest number
of residents employed in the agricultural, health care, food processing,
chemical and retail redistribution industries. Major employers include Riverside
HealthCare, Provena St. Mary's Hospital, Shapiro Development Center, the Baker
and Taylor Company, CIGNA Companies, Armstrong World Industries, Aventis
Behring, Bunge Edible Oil Corporation, Cognis Corporation, KMART Corporation
Distribution Center, Sears Logistics Services, Inc., American Spring Wire, Crown
Cork and Seal Company, Inc., and Dow Automotive.

     Champaign/Urbana is located approximately 75 miles south of Kankakee. It is
the location of the original campus of the University of Illinois which employs
16,200 people and has a student body of over 30,000. In addition, the economy of
the Champaign/Urbana market area includes several major medical centers and
agricultural and industrial businesses. Major employers in the Champaign/Urbana
area include Carle Clinic Association, Carle Foundation Hospital, Provena
Covenant Medical Center, Parkland College, Kraft Foods, Inc., SuperValu
Champaign Distribution Center, Rantoul Products, Champaign Unit School District
4, Champaign County and Caradco.

     Hoopeston is located approximately 60 miles southeast of Kankakee in
Vermilion County, Illinois. The local economy includes a mix of agriculture and
manufacturing. Other than agriculture, major employers are Silgan Containers,
Inc., Hoopeston Food's, Inc., Food Machinery Corp. (FMC), Hoopeston Community
Memorial Hospital and Schumachers.

     Coal City is located approximately 30 miles northwest of Kankakee in Grundy
County, Illinois. Braidwood is located approximately 25 miles northwest of
Kankakee in Will County, Illinois. Coal City, Braidwood and their surrounding
communities have a population of 12,000 residents. As bedroom communities of the
south Chicago suburbs, the economy in this region is a mix of agricultural,
industrial and service-based businesses. Large corporate employers such as
ComEd, with its Braidwood nuclear power plant, Midwest Generation, with its
Collins Street nuclear plant, Excelon, with its Dresden nuclear plant, Amoco,
Equistar Chemicals, Reichhold Chemicals, Mobil and Caterpillar are within short
driving distances.

                                        6

<PAGE>

Lending Activities

     General. The principal lending activity of the Company is originating first
mortgage loans secured by owner occupied one-to-four family residential
properties located in its primary market areas. In addition, in order to
increase the yield and interest rate sensitivity of its portfolio and in order
to provide more comprehensive financial services to families and community
businesses in the Company's market areas, the Company also originates commercial
real estate, consumer, commercial business, multi-family and construction loans.
From time to time, the Company has also utilized loan purchases to supplement
loan originations.

                                        7

<PAGE>

     Loan and Mortgage-Backed Securities Portfolio Composition. The following
     ---------------------------------------------------------
table provides information concerning the composition of the Company's loan and
mortgage-backed securities portfolios in dollar amounts and in percentages
(before deductions for loans in process, deferred fees and discounts and
allowances for losses) as of the dates indicated. Loans held for sale are
included primarily in one-to-four family real estate loans.

<TABLE>
<CAPTION>
                                                                      December 31,
                              ------------------------------------------------------------------------------------------------------
                                      2001                 2000                 1999                 1998                 1997
                              ------------------   ------------------   ------------------   ------------------   ------------------
                               Amount    Percent    Amount    Percent    Amount    Percent    Amount    Percent    Amount    Percent
                              --------   -------   --------   -------   --------   -------   --------   -------   --------   -------
Real Estate Loans                                                    (Dollars in thousands)
-----------------
<S>                           <C>         <C>      <C>         <C>      <C>         <C>      <C>         <C>      <C>         <C>
  One-to-four family ......   $247,436    60.06%   $211,891    58.73%   $165,089    56.61%   $159,956    59.23%   $157,764    58.22%

  Multi-family ............     11,983     2.91      11,608     3.22       8,923     3.06       5,556     2.06       7,480     2.76

  Commercial ..............     48,543    11.78      39,564    10.97      28,869     9.90      21,291     7.88      20,881     7.71

  Construction or
    development ...........     22,555     5.47      17,797     4.93      14,235     4.88      13,938     5.16       9,004     3.32

  Mortgage-backed
    securities and parti-
    cipation certificates..     11,673     2.83      16,118     4.47      17,600     6.03      18,746     6.94      28,503    10.52
                              --------    -----    --------    -----    --------    -----    --------    -----    --------    -----
    Total real estate loans
      and mortgage-backed
      securities ..........    342,190    83.05     296,978    82.32     234,716    80.48     219,487    81.27     223,632    82.53
                              --------    -----    --------    -----    --------    -----    --------    -----    --------    -----
Other Loans:
-----------

  Consumer Loans:

    Deposit account .......        831     0.20      786        0.22         788     0.27         827     0.31         820     0.30

    Student ...............         --       --       --          --         151     0.05         231     0.09         825     0.30
</TABLE>

                                       8

<PAGE>

<TABLE>
<CAPTION>
                                                                      December 31,
                              ------------------------------------------------------------------------------------------------------
                                      2001                 2000                 1999                 1998                 1997
                              ------------------   ------------------   ------------------   ------------------   ------------------
                               Amount    Percent    Amount    Percent    Amount    Percent    Amount    Percent    Amount    Percent
                              --------   -------   --------   -------   --------   -------   --------   -------   --------   -------
<S>                           <C>        <C>       <C>        <C>       <C>        <C>       <C>        <C>       <C>        <C>
    Automobile...............    7,006     1.70       7,281     2.02       5,541     1.90       3,830     1.42       4,476     1.65

    Home equity..............   18,407     4.47      17,815     4.94      17,028     5.84      17,215     6.37      16,795     6.20

    Home improvement.........       --       --          --       --           2     0.00           7     0.00          13     0.00

    Mobile home..............    1,408     0.34       1,734     0.48       2,158     0.74       2,826     1.05       3,293     1.22

    Credit cards.............    1,213     0.29       1,286     0.36       1,286     0.44       1,376     0.51       1,534     0.57

    Personal.................    9,705     2.36      11,133     3.08       7,946     2.73       6,900     2.55       7,407     2.73
                              --------   ------    --------   ------    --------   ------    --------   ------    --------   ------
      Total consumer loans...   38,570     9.36      40,035    11.10      34,900    11.97      33,212    12.30      35,163    12.97

Commercial business loans....   31,255     7.59      23,750     6.58      22,013     7.55      17,365     6.43      12,185     4.50
                              --------   ------    --------   ------    --------   ------    --------   ------    --------   ------
    Total other loans........   69,825    16.95      63,785    17.68      56,913    19.52      50,577    18.73      47,348    17.47
                              --------   ------    --------   ------    --------   ------    --------   ------    --------   ------
Total loans and mortgage-
  backed securities
  receivable.................  412,015   100.00%    360,763   100.00%    291,629   100.00%    270,064   100.00%    270,980   100.00%
                              --------   ======    --------   ======    --------   ======    --------   ======    --------   ======
Less:
----

  Loans in process...........    2,671                3,341                1,394                1,671                1,121

  Deferred fees and
    discounts................      470                  192                  104                  129                  176
  Allowance for losses
    on loans.................    2,582                2,156                2,171                2,375                2,130
                               -------             --------             --------             --------             --------
  Total loans and mortgage-
    backed securities
    receivable, net.......... $406,292             $355,074             $287,960             $265,889             $267,553
                              ========             ========             ========             ========             ========
</TABLE>

                                        9

<PAGE>

     The following table shows the composition of the Company's loan and
mortgage-backed securities portfolios by fixed and adjustable rate at the dates
indicated. Loans held for sale are included primarily as fixed-rate one-to-four
family residential loans.

<TABLE>
<CAPTION>
                                                                            December 31,
                              ------------------------------------------------------------------------------------------------------
                                      2001                 2000                 1999                 1998                 1997
                              ------------------   ------------------   ------------------   ------------------   ------------------
                               Amount    Percent    Amount    Percent    Amount    Percent    Amount    Percent    Amount    Percent
                              --------   -------   --------   -------   --------   -------   --------   -------   --------   -------
Fixed-Rate Loans and
Mortgage-Back Securities                                               (Dollars in thousands)
------------------------
<S>                           <C>         <C>      <C>         <C>      <C>         <C>      <C>         <C>      <C>         <C>
Real estate:

  One-to-four family .......  $177,253    43.02%   $132,847    36.82%   $ 83,407    28.60%   $ 75,352    27.90%   $ 56,908    21.00%

  Multi-family .............     2,884     0.70       3,206     0.89         693     0.24         390     0.14          --    --

  Commercial ...............    11,410     2.77      11,015     3.06       7,664     2.63       2,076     0.77       1,392     0.51

  Construction or
    development ............     7,142     1.73       2,579     0.71       2,380     0.82       2,708     1.00       1,711     0.63

Mortgage-backed securities .     9,185     2.23      11,813     3.28      11,731     4.02       9,296     3.44      12,502     4.61
                              --------    -----    --------    -----    --------    -----    --------    -----    --------    -----

Total real estate loans and
    mortgage-backed
    securities .............   207,874    50.45     161,460    44.76     105,875    36.31      89,822    33.25      72,513    26.75

Consumer ...................    23,179     5.62      24,092     6.68      18,826     6.46      19,087     7.07      19,918     7.35

Commercial business ........    18,166     4.41      12,709     3.52      11,215     3.85       8,020     2.97       3,005     1.11
                              --------    -----    --------    -----    --------    -----    --------    -----    --------    -----

Total fixed-rate loans and
    mortgage-backed
    securities .............   249,219    60.48     198,261    54.96     135,916    46.62     116,929    43.29      95,436    35.21
                              ========    =====    ========    =====    ========    =====    ========    =====    ========    =====

Adjustable-Rate Loans and
Mortgage-Backed Securities
--------------------------

Real estate:

  One-to-four family .......    70,183    17.04      79,044    21.91      81,682    28.01      84,604    31.33     100,856    37.22
</TABLE>

                                       10

<PAGE>

<TABLE>
<CAPTION>
                                                                            December 31,
                              ------------------------------------------------------------------------------------------------------
                                      2001                 2000                 1999                 1998                 1997
                              ------------------   ------------------   ------------------   ------------------   ------------------
                               Amount    Percent    Amount    Percent    Amount    Percent    Amount    Percent    Amount    Percent
                              --------   -------   --------   -------   --------   -------   --------   -------   --------   -------
<S>                           <C>        <C>       <C>        <C>       <C>        <C>       <C>        <C>       <C>        <C>
  Multi-family .............     9,099     2.21       8,402     2.33       8,230     2.82       5,166     1.92       7,480     2.76

  Commercial ...............    37,133     9.01      28,549     7.91      21,205     7.27      19,215     7.11      19,489     7.19

  Construction or
    development ............    15,413     3.74      15,218     4.22      11,855     4.06      11,230     4.16       7,293     2.69

  Mortgage-backed securities     2,488     0.60       4,305     1.19       5,869     2.01       9,450     3.50      16,001     5.91
                              --------   ------    --------   ------    --------   ------    --------   ------    --------   ------

    Total real estate loans
      and mortgage-backed
      securities ...........   134,316    32.60     135,518    37.56     128,841    44.17     129,665    48.02     151,119    55.77

Consumer ...................    15,391     3.74      15,943     4.42      16,074     5.51      14,125     5.23      15,245     5.63

Commercial business ........    13,089     3.18      11,041     3.06      10,798     3.70       9,345     3.46       9,180     3.39
                              --------   ------    --------   ------    --------   ------    --------   ------    --------   ------

  Total adjustable-rate
    loans and mortgage-
    backed securities ......   162,796    39.52     162,502    45.04     155,713    53.38     153,135    56.71     175,544    64.78
                              --------   ------    --------   ------    --------   ------    --------   ------    --------   ------

  Total loans and mortgage-
    backed securities ......   412,015   100.00%    360,763   100.00%    291,629   100.00%    270,064   100.00%    270,980   100.00%
                              --------   ======    --------   ======    --------   ======    --------   ======    --------   ======

Less:

 Loans in process ..........     2,671                3,341                1,394                1,671                1,121

 Deferred fees and discounts       470                  192                  104                  129                  176

 Allowance for losses on
    loans ..................     2,582                2,156                2,171                2,375                2,130
                              --------             --------             --------             --------             --------

  Total loans and mortgage-
    backed securities
    receivable, net ........  $406,292             $355,074             $287,960             $265,889             $267,553
                              ========             ========             ========             ========             ========
</TABLE>

                                       11

<PAGE>

     The following schedule illustrates the interest rate sensitivity of the
Company's loan and mortgage-backed securities portfolio at December 31, 2001.
Loans that have adjustable or renegotiable interest rates are shown as maturing
in the period during which the contract matures. The schedule does not reflect
the effects of possible prepayments or enforcement of due-on-sale clauses.

<TABLE>
<CAPTION>
                                              Real Estate
                       ----------------------------------------------------------------
                       One-to-four family and
                          Mortgage-Backed        Multi-family and     Construction or
                             Securities             Commercial          Development
                       ----------------------   ------------------   ------------------
                                   Weighted               Weighted             Weighted
                                    Average               Average              Average
                        Amount       Rate        Amount     Rate     Amount      Rate
                       --------   -----------   -------   --------   -------   --------
Due During Twelve                             (Dollars in thousands)
Month Periods
Ending
December 31,
------------
<S>                    <C>            <C>       <C>         <C>      <C>         <C>
2002(1).............   $    335       8.39%     $11,153     6.87%    $17,177     6.88%

2003 and 2004.......      1,443       8.07        5,681     7.84       2,194     5.79

2005 and 2006.......      2,941       7.23        2,764     8.15         920     7.44

2007 and 2011.......     21,446       7.02        6,569     8.22         580     7.48

2012 and 2026.......    138,861       6.87       32,281     7.75       1,552     7.23

2027 and following..     94,083       7.12        2,078     7.80         132     6.25
                       --------                 -------              -------
  Total.............   $259,109                 $60,526              $22,555
                       ========                 =======              =======

<CAPTION>
                                                Commercial
                            Consumer             Business              Total
                       ------------------   ------------------   -------------------
                                 Weighted             Weighted              Weighted
                                  Average              Average               Average
                       Amount      Rate     Amount      Rate      Amount      Rate
                       -------   --------   -------   --------   --------   --------
Due During Twelve                         (Dollars in thousands)
Month Periods
Ending
December 31,
------------
<S>                    <C>        <C>       <C>         <C>      <C>          <C>
2002(1).............   $ 4,514    10.22%    $14,984     6.26%    $ 48,163     7.01%

2003 and 2004.......     9,658     7.14       4,406     7.43       23,382     7.30

2005 and 2006.......    14,972     7.24       8,058     6.68       29,655     7.18

2007 and 2011.......     8,907     7.39       3,015     7.29       40,517     7.32

2012 and 2026.......       519     9.31         792     7.81      174,005     7.05

2027 and following..        --       --          --       --       96,293     7.13
                       -------              -------              --------
  Total.............   $38,570              $31,255              $412,015
                       =======              =======              ========
</TABLE>

----------
(1)  Includes demand loans and loans having no stated maturity.

                                       12

<PAGE>

     As of December 31, 2001, the total amount of loans and mortgage-backed
securities due after December 31, 2002, which had predetermined interest rates
was $222.1 million, while the total amount of loans and mortgage-backed and
related securities due after such date which had floating or adjustable interest
rates was $141.8 million.

     Under the Financial Institutions Reform, Recovery and Enforcement Act of
1989, the aggregate amount of loans that the Bank is permitted to make to any
one borrower is generally limited to 15% of unimpaired capital and surplus (25%
if the security for such loan has a "readily ascertainable" market value or 30%
for certain residential development loans). At December 31, 2001, the Bank's
regulatory loan-to-one borrower limit was $5.4 million. On the same date, the
Bank's largest total of loans to one borrower was $5.0 million.

     All of the Company's lending activities are conducted in accordance with
policies adopted by its board of directors. The Company is an equal opportunity
lender. Decisions on loan applications are made on the basis of detailed
applications and property valuations (consistent with the Company's written
appraisal policy) prepared by qualified appraisers. The loan applications are
designed primarily to determine the borrower's ability to repay and the more
significant items on the application are verified through use of credit reports,
financial statements, tax returns and/or third-party confirmations.

     The Company requires evidence of marketable title and lien position as well
as appropriate title and other insurance on all loans secured by real property
in amounts at least equal to the principal amount of the loan or the value of
improvements on the property, depending on the type of loan.

     One-to-Four Family Residential Real Estate Lending. The cornerstone of the
     --------------------------------------------------
Company's lending program is the origination of loans secured by mortgages on
owner-occupied one-to-four family residences. At December 31, 2001, $247.4
million, or 60.1% of the Company's loan and mortgage-backed securities
portfolio, consisted of loans secured by one-to-four family residences. At that
date, the average outstanding residential loan balance was approximately $65,000
and the largest outstanding residential loan had a book value of $793,000.
Substantially all of the residential loans originated by the Company are secured
by properties located in the Company's primary market areas.

     In order to reduce its exposure to changes in interest rates, the Company
originates Adjustable Rate Mortgages ("ARM"), subject to market conditions and
consumer preference. The Company also originates long term fixed-rate
residential loans.

     Most of the Company's fixed-rate loans are originated with terms which
conform to secondary market standards (i.e., Freddie Mac standards). Most of the
Company's fixed-rate residential loans have contractual terms to maturity of 15
to 30 years. The origination of fixed-rate loans with terms which conform to
secondary market standards allows the Company the option of either retaining
fixed-rate loans for portfolio or selling them in the secondary market.

                                       13

<PAGE>

The option to sell fixed-rate loans has been a part of asset/liability
management and interest rate risk management for the Company since its
formation, and was one of the Bank's strategies prior to the formation of the
Company. The Company continuously reviews its current policy on fixed-rate loan
retention, in light of changing local, regional and national economic
conditions, and with regard to the Company's current interest rate risk and
assets/liability positions. Loans originated with certain terms and certain
interest rates are designated for sale based on a future date, either the
closing date or the application date. All loans either applied for or closed on
or after the pre-determined date, which meet the criteria, are designated for
sale.

     During 1999, the Company sold substantially all fixed-rate residential
loans having terms greater than 20 years. Those loans with terms of 20 years or
less were retained in portfolio. In 2000, the Company implemented an aggressive
growth strategy, during which virtually all originated fixed-rate residential
loans were retained in portfolio. As market interest rates declined during 2001,
the Company again began to sell originated fixed-rate residential loans.
Initially, loans with terms greater than 20 years were designated for sale, then
loans with terms greater than 15 years were designated for sale, and, finally,
in the fourth quarter, virtually all originated fixed-rate residential loans
were designated for sale. Except for Federal Housing Administration and
Veterans' Administration, which are sold with servicing released, the Company
retains servicing on the loans its sells. At December 31, 2001, the Company had
$98.7 million of 15 year fixed-rate residential loans and $78.6 million of 30
year fixed-rate residential loans in its portfolio.

     The Company offers ARM loans at rates, terms and fees determined in
accordance with market and competitive factors. The Company's current
one-to-four family residential ARMs are fully amortizing loans with contractual
maturities of up to 30 years. The interest rates on the ARMs originated by the
Company are subject to adjustment at stated intervals based on a margin over a
specified index and are subject to annual as well as lifetime adjustment limits.
The Company's current ARMs do not permit negative amortization of principal and
carry no prepayment penalty. At December 31, 2001, the Company had $26.9
million, $3.6 million and $39.6 million of one-year, three-year and five-year
ARMs, respectively.

     The Company's delinquency experience on its ARMs has generally been similar
to that on fixed-rate residential loans. Of the $1.5 million of one-to-four
family loans delinquent 60 days or more at December 31, 2001, $1.1 million (or
0.4% of one-to-four family loans) consisted of ARMs and $453,000 (or 0.2% of the
Company's one-to-four family loans) represented fixed-rate loans.

     The Company evaluates both the borrower's ability to make principal,
interest and escrow payments and the value of the property that will secure the
loan. The Company originates residential mortgage loans with loan-to-value
ratios generally up to 95% except for a program applicable to first time home
buyers where this ratio can go up to 97% with private mortgage insurance and/or
other collateral. On any mortgage loan exceeding an 80% loan-to-value ratio at
the time of origination, the Company generally requires private mortgage
insurance in an amount intended to reduce the Company's exposure to 80% or less
of the appraised value of the

                                       14

<PAGE>

underlying property. During 2000, the Company began offering 100% financing on
the purchase of single-family, owner occupied homes. All loans originated under
this program are required to have private mortgage insurance covering the top
35% of the loan balance, and can be either fixed rate or adjustable rate.

     In 1999, the Company announced a $30,000 grant program to assist qualified
first-time home buyers in purchasing owner-occupied single-family homes in the
Company's market areas. The program provides one-time grants of up to $1,000 to
assist qualified applicants who meet low-to-moderate income guidelines. During
2001, the $10,000 which was still available at the start of the year had been
used to assist qualified first-time home buyers. The Company decided to commit
an additional $30,000 to the grant program. At the end of the year, $26,000 of
the additional funds was still available to assist qualified first-time home
buyers.

     The Company, on occasion, originates loans in excess of $275,000 (the
Freddie Mac maximum during 2001). As of December 31, 2001, the Company had 19
residential mortgage loans having an aggregate balance of $7.2 million with
original balances in excess of $275,000 ("jumbo loans"). The Company's
historical delinquency experience on its jumbo loans has been excellent.

     The Company is an approved one-to-four family lender for both the Federal
Housing Administration ("FHA") and the Veterans' Administration ("VA"). The
Company sells, with servicing released, all FHA and VA loans it originates to
other investors, and does not aggressively promote FHA and VA lending. During
2001 there were no FHA or VA loans originated by the Company. Borrowers are
notified at the time of application that their loan will be sold to, and
serviced by, a party other than the Company.

     Multi-Family and Commercial Real Estate Lending. The Company also makes
     -----------------------------------------------
multi-family and commercial real estate loans in its primary market areas. At
December 31, 2001, the Company had $60.5 million in multi-family and commercial
real estate loans, representing 14.7% of the Company's total loan and
mortgage-backed securities portfolio. At December 31, 2001, there were no
participation interests in multi-family and commercial real estate loans which
were purchased from other lenders.

     The Company's multi-family portfolio includes loans secured by residential
buildings (including university student housing) located primarily in the
Company's primary market areas. The Company's commercial real estate portfolio
consists of loans on a variety of non-residential properties including nursing
homes, churches and other commercial buildings.

     The Company has originated both adjustable and fixed-rate multi-family and
commercial real estate loans. Rates on the Company's adjustable-rate
multi-family and commercial real estate loans generally adjust in a manner
consistent with the Company's ARMs. Multi-family and commercial real estate
loans are generally underwritten in amounts of up to 75% of the appraised value
of the underlying property.

                                       15

<PAGE>

     The table below sets forth by type of property taken as collateral, the
number, loan amount and outstanding balance of the Company's multi-family and
commercial real estate loans (including purchased loan participations) at
December 31, 2001 and the amounts of such loans which were non-performing or "of
concern" at December 31, 2001. The amounts shown do not reflect allowances for
losses.

<TABLE>
<CAPTION>
                                                 Original   Outstanding      Amount
                                       Number      Loan      Principal    Non-Performing
                                      of Loans    Amount      Balance      or of Concern
                                      --------   --------   -----------   --------------
                                                 (Dollars in thousands)
<S>                                     <C>       <C>         <C>            <C>
Multi-family residential ........        26       $13,524     $11,983        $   --
Improved real estate ............        13         9,661       3,005           375
Churches ........................        20         4,766       3,818            --
Agricultural related ............        21         2,179       1,907            85
Industrial and warehouse ........        77        19,054      15,389           338
Retail ..........................        48        10,376       7,276            15
Office ..........................        14         3,270       2,051           490
Other ...........................        92        15,781      15,097           405
                                        ---       -------     -------        ------
         Total ..................       311       $78,611     $60,526        $1,708
                                        ===       =======     =======        ======
</TABLE>

     Multi-family residential and commercial real estate loans generally present
a higher level of risk than loans secured by one-to-four family residences. This
greater risk is due to several factors, including the concentration of principal
in a limited number of loans and borrowers, the effects of general economic
conditions on income producing properties and the increased difficulty of
evaluating and monitoring these types of loans.

     Purchased Loan Participations. In order to supplement lending activities
     -----------------------------
during periods of low loan volume, the Company has from time to time purchased
participation interests in multi-family and commercial real estate loans
originated and serviced by other lenders. Prior to purchase, the Company reviews
each participation to ensure that the underlying loan complies with the
Company's lending policy as in effect at the time of purchase. At December 31,
2001, the Bank had $265,000 of purchased loans and participation interests in
one-to-four family loans.

     The purchase of loan participations involves the same risks as the
origination of the same type of loans as well as additional risks related to the
purchaser's lower level of control over the origination and subsequent
administration of the loan. Also, some of the loan participations currently on
the Company's books are on real estate located out-of-state. Out-of-state
investments are considered to carry a higher degree of risk due to the
difficulty of monitoring such investments.

     Commercial Business Lending. Federally chartered savings institutions, such
     ---------------------------
as the Bank, are authorized to make secured or unsecured loans and issue letters
of credit for commercial, corporate, business and agricultural purposes and to
engage in commercial leasing activities, up to a maximum of 20% of total assets.
However, any amount exceeding 10% of total assets must represent small business
loans as defined by the OTS.

                                       16

<PAGE>

     In order to increase the proportion of interest rate sensitive and
relatively high yielding loans in its portfolio, and as a part of its effort to
provide more comprehensive financial services in the communities serviced by its
offices, the Company originates secured and unsecured commercial loans to local
businesses. Currently, the Company's commercial business lending activities
encompass loans with a broad variety of purposes including working capital,
accounts receivable, inventory, equipment and agriculture. The Company does not
have any energy or foreign loans.

     At December 31, 2001, the Company had $31.3 million in commercial business
loans outstanding (representing 7.6% of the Company's total loan and
mortgage-backed securities portfolio) with additional commercial business loan
commitments totaling $16.6 million, most of which were undrawn lines of credit.
In addition, at December 31, 2001, the Company had thirty-three letters of
credit outstanding, in an aggregate amount of $1.7 million. Most of the
Company's commercial business loans have terms to maturity of five years or less
and adjustable or floating interest rates. At December 31, 2001, the Company had
twenty-four commercial business loans with balances of $250,000 or more, in an
aggregate amount of $13.3 million.

     The Company recognizes the generally increased risks associated with
commercial business lending. The Company's commercial business lending policy
emphasizes credit file documentation and analysis of the borrower's character,
management capabilities, capacity to repay the loan, the adequacy of the
borrower's capital and collateral as well as an evaluation of the industry
conditions affecting the borrower. Analysis of the borrower's past, present and
future cash flows is also an important aspect of the Company's credit analysis.

     The following table sets forth information regarding the number and amount
of the Company's commercial business loans and the amounts of such loans which
were non-performing and "of concern" as of December 31, 2001.

<TABLE>
<CAPTION>
                                                             Total      Outstanding       Amount
                                                 Number      Loan        Principal    Non-Performing
                                                of Loans   Commitment    Balance       or of Concern
                                                --------   ----------   -----------   --------------
                                                                (Dollars in thousands)
<S>                                               <C>       <C>           <C>            <C>
Secured Loans:
Accounts receivable .........................      18       $10,282       $ 4,771        $  379
Inventory ...................................       1            49            46            --
Equipment ...................................      69         4,333         3,470            96
Other business assets .......................      52         6,794         6,199         1,823
Stocks and bonds ............................      13         2,276         1,930            --
Heavy duty vehicles .........................     166         9,184         6,266            19
Other motor vehicles ........................      41         1,091           889            15
Crops .......................................      10         3,527         1,466            --
Stand-by letters of credit ..................      19         1,341            --            --
Beneficial interest in real estate trust ....      20         6,357         3,385            --
Unsecured loans .............................      72         3,813         2,833             2
Unsecured stand-by letters of credit ........      13           371            --            --
                                                  ---       -------       -------        ------
Total commercial business loans .............     494       $49,418       $31,255        $2,334
                                                  ===       =======       =======        ======
</TABLE>

                                       17

<PAGE>

     Consumer Lending. Management believes that offering consumer loan products
     ----------------
helps to expand the Company's customer base and to create stronger ties to its
existing customer base. In addition, because consumer loans generally have
shorter terms to maturity and/or adjustable-rates and carry higher rates of
interest than do residential mortgage loans, they can be valuable
asset/liability management tools. The Company currently originates substantially
all of its consumer loans in its market areas. At December 31, 2001, the
Company's consumer loans totaled $38.6 million or 9.4% of the Company's loan and
mortgage-backed securities portfolio.

     The Company offers a variety of secured consumer loans, including home
equity and home improvement loans, loans secured by savings deposits, mobile
home and automobile loans. Although the Company primarily originates consumer
loans secured by real estate, deposits or other collateral, the Company also
makes unsecured personal loans. In addition, the Company offers unsecured
consumer loans through its Visa and MasterCard credit card programs.

     The Company offers mobile home loans in order to provide affordable
housing. All of the Company's mobile home loans have been originated with
fixed-rates of interest and are generally made in amounts of up to a maximum of
80% of the buyer's cost. As of December 31, 2001, mobile home loans totaled $1.4
million or approximately 0.3% of the Company's gross loan and mortgage-backed
securities portfolio.

     Unsecured personal loans are made to borrowers for a variety of personal
needs and are usually limited to a maximum of $3,000, with a minimum loan amount
of $1,000. Lines of credit extended through the Company's Visa and MasterCard
credit card programs are generally limited to $5,000. Underwriting standards for
the Company's credit card program are substantially the same as for personal
loans.

     Consumer loans may entail greater risk than residential mortgage loans,
particularly in the case of consumer loans which are unsecured or secured by
rapidly depreciable assets such as automobiles. The greater risk inherent in
consumer loans has been emphasized by recent nationwide increases in personal
bankruptcies. Although the level of delinquencies in the Company's consumer loan
portfolio has generally been low (at December 31, 2001, $375,000, or
approximately 1.0% of the consumer loan portfolio was 90 days or more
delinquent), there can be no assurance that delinquencies will not increase in
the future.

     Construction Lending. Historically, construction lending was a relatively
     --------------------
minor part of the Company's business activities. However, in light of the
economic climate in its principal market areas and in order to increase the
yield on, and the proportion of, interest rate sensitive loans in its portfolio
and to provide more comprehensive financial services to families and community
businesses within its market areas, the Company expanded its construction
lending. At December 31, 2001, the Company had $5.3 million of residential
construction loans and $1.7 million of lot loans to borrowers intending to live
in the properties upon completion of construction.

                                       18

<PAGE>

     On occasion, the Company also originates construction loans to builders and
developers for the construction of one-to-four family residences, multi-family
residences and commercial real estate and the acquisition and development of
one-to-four family lots in the Company's primary market areas. Construction
loans to builders of one-to-four family residences generally carry terms of up
to one year and may provide for the payment of interest and loan fees from loan
proceeds. At December 31, 2001, the Bank had approximately $4.5 million in loans
to builders of residences, and $5.1 million in loans on commercial construction.
In addition, on the same date, the Company had $5.9 million of subdivision loans
to developers for the development of one-to-four family lots.

     Most of the Company's construction loans have been originated with fixed
rates and terms of 12 months or less. Construction loans to owner occupants are
generally made in amounts of up to a maximum loan-to-value ratio of 80% (75% in
the case of commercial real estate). The Company's construction loans to persons
other than owner occupants generally involve larger principal balances than do
its one-to-four family residential loans. At December 31, 2001, only 10 of the
Company's construction loans had a principal balance in excess of $500,000. The
total principal balances of these loans was $10.6 million.

     The table below sets forth the number and amount of the Company's
construction loans at December 31, 2001, by type of security property.

<TABLE>
<CAPTION>
                                                        Total      Outstanding      Amount
                                            Number      Loan        Principal    Non-Performing
                                           of Loans   Commitment    Balance       or of Concern
                                           --------   ----------   -----------   --------------
                                                        (Dollars in thousands)
<S>                                          <C>       <C>           <C>            <C>
One-to-four family residential ..........     38       $ 6,424       $ 6,144        $   --
Multi-family residential ................      1           659           639            --
Land acquisition and development ........     64        21,746        11,572         3,154
Retail and Industrial ...................      7         4,200         4,200            --
                                             ---       -------       -------        ------
         Total ..........................    110       $33,029       $22,555        $3,154
                                             ===       =======       =======        ======
</TABLE>

     Construction lending to persons other than owner occupants is generally
considered to involve a higher level of credit risk than one-to-four family
residential lending due to the concentration of principal in a limited number of
loans and borrowers and the effects of general economic conditions on
construction projects, real estate developers and managers. In addition, the
nature of these loans is such that they are more difficult to evaluate and
monitor.

     Originations, Purchases and Sales of Loans. The Company originates real
estate and other loans through employees located at each of the Company's
offices. Walk-in customers and referrals from real estate brokers and builders
are also important sources of loan originations. The Company does not generally
utilize the services of mortgage brokers.

     From time to time, in order to supplement its loan production, particularly
during periods of low loan demand, the Company purchases residential and other
loans from third parties. Under its loan purchase policies, prior to purchase,
the Company reviews each loan to assure that it

                                       19

<PAGE>

complies with the Company's normal underwriting standards. While the Company
will continue to evaluate loan purchase opportunities as they arise, the Company
currently anticipates limiting its future purchases of out-of-area
non-residential loans.

     As part of its asset/liability management and interest rate risk
management, the Company continuously evaluates its policy on the sale versus
retention of its fixed-rate loan production. General economic factors and
current strategic objectives are among the factors considered in decisions to
retain or sell loans. During the three year period from 1999 through 2001, there
have been periods of time the Company has retained all fixed-rate loans, no
fixed-rate loans and a portion of fixed-rate loans, determined by rate and term.
The Company's sales during recent years have been made through sales contracts
entered into after the Company has committed to fund the loan. When loans are
designated for sale, the Company attempts to limit interest rate risk created by
forward commitments by limiting the number of days between the commitment and
closing, charging fees for commitments and limiting the amounts of its uncovered
commitments outstanding at any one time.

     When loans have been sold, the Company virtually always retains the
responsibility for servicing such loans. At December 31, 2001, excluding
mortgage-backed securities, approximately $482,000 of the Company's loan
portfolio consisting of purchased loans and purchased participations serviced by
others and the Company serviced $70.8 million of loans for others. During the
year ended December 31, 2001, the Company received fee income of $155,000 in
connection with loans serviced for others.

                                       20

<PAGE>

         The following table shows the loan origination, purchase and repayment
activities of the Company for the periods indicated.

                                                    Year Ended December 31,
                                               --------------------------------
                                                 2001        2000        1999
                                               ---------   --------   ---------
                                                    (Dollars in thousands)
Originations By Type:
--------------------
  Adjustable-Rate:
    Real estate - one-to-four family ......    $  21,089   $ 15,802   $  15,318
                - multi-family ............           --         --          --
                - commercial ..............       32,469     31,577      23,884
    Non-real estate - consumer ............       11,437     11,176      12,976
                - commercial business......       12,511     14,191      16,304
                                               ---------   --------   ---------
          Total adjustable-rate ...........       77,506     72,746      68,482
                                               ---------   --------   ---------
  Fixed-Rate:
    Real estate - one-to-four family ......       98,080     61,096      29,516
                - multi-family ............           --         --          --
                - commercial ..............       13,008     11,192       6,104
    Non-real estate - consumer ............       15,493     17,776      14,600
                - commercial business......       18,202     12,665      14,806
                                               ---------   --------   ---------
          Total fixed-rate ................      144,783    102,729      65,026
                                               ---------   --------   ---------
          Total loans originated ..........      222,289    175,475     133,508
                                               ---------   --------   ---------

Purchases:
---------
  Real estate - one-to-four family ........           --         --          --
                - commercial ..............           --         --       1,366
                                               ---------   --------   ---------
          Total loans .....................           --         --       1,366
  Mortgage-backed securities ..............          301      1,963       6,992

                                               ---------   --------   ---------
          Total purchased .................          301      1,963       8,358
                                               ---------   --------   ---------

Sales and Repayments:
--------------------
Sales:
  Real estate - one-to-four family ........       22,266         77       9,587
                - commercial ..............        1,791         --       1,050
  Non-real estate - consumer ..............           --        251         365
                - commercial business .....           --         --          --
                                               ---------   --------   ---------
          Total loans .....................       24,057        328      11,002
  Mortgage-backed securities ..............           --         --          --
                                               ---------   --------   ---------
          Total sales .....................       24,057        328      11,002
  Principal repayments ....................      146,210    110,018     107,671
                                               ---------   --------   ---------
          Total reductions ................      170,267    110,346     118,673
                                               ---------   --------   ---------
  Increase (decrease) in other items, net..       (1,071)     2,042      (1,628)
                                               ---------   --------   ---------
          Net increase ....................    $  51,252   $ 69,134   $  21,565
                                               =========   ========   =========

                                       21

<PAGE>

     Delinquency Procedures. When a borrower fails to make a required payment on
a loan, the Company attempts to cause the delinquency to be cured by contacting
the borrower. In the event a real estate loan payment is past due for 90 days or
more, the Company performs an in- depth review of the loan status, the condition
of the property and the circumstances of the borrower. Based upon the results of
its review, the Company may negotiate and accept a repayment program with the
borrower, accept a voluntary deed in lieu of foreclosure or, when deemed
necessary, initiate foreclosure proceedings.

     Unsecured consumer loans are charged-off if they remain delinquent for 120
days. Secured consumer loans are liquidated and charged-off to the extent the
debt exceeds the fair value of the collateral. The Company's procedures for
repossession and sale of consumer collateral are subject to various requirements
under Illinois consumer protection laws.

     Delinquencies in the Company's commercial business loan portfolio are
handled on a case-by-case basis under the direction of the chief commercial
banking officer. Generally, personal contact is made with the borrower when the
loan is 15 days past due. Depending on the nature of the loan and the type of
collateral, if any, securing the loan, the Company may negotiate and accept a
modified payment program or take such other actions as the circumstances
warrant.

     Real estate acquired by the Company as a result of foreclosure or by deed
in lieu of foreclosure is classified as real estate owned until it is sold. When
property is acquired, it is recorded at its estimated fair value at the date of
acquisition, and any write-down resulting therefrom is charged to the allowance
for losses on loans. Upon acquisition, all costs incurred in maintaining the
property are expensed. Costs relating to the development and improvement of the
property, however, are capitalized to the extent of its fair value.

                                       22

<PAGE>

     The following table sets forth the Company's loan delinquencies by type, by
amount and by percentage of type at December 31, 2001.

<TABLE>
<CAPTION>
                                       Loans Delinquent For:
                       -------------------------------------------------------     Total 60 Days or More
                                60-89 Days               90 Days and Over                Delinquent
                       --------------------------   --------------------------   --------------------------
                                          Percent                      Percent                      Percent
                                          of Loan                      of Loan                      of Loan
                       Number   Amount   Category   Number   Amount   Category   Number   Amount   Category
                       ------   ------   --------   ------   ------   --------   ------   ------   --------
                                                      (Dollars in thousands)
<S>                      <C>    <C>        <C>        <C>    <C>        <C>        <C>    <C>        <C>
Real Estate:
  One-to-four family..   21     $  964     0.39%      16     $  572     0.23%      37     $1,536     0.62%
  Multi-family .......   --         --       --       --         --       --       --         --       --
  Commercial .........   --         --       --        2         33     0.07        2         33     0.07
  Construction and
    development ......   --         --       --       --         --       --       --         --       --

Consumer .............   13         54     0.14       30        375     0.97       43        429     1.11

Commercial business...    1         11     0.04        5        141     0.45        6        152     0.49
                         --     ------                --     ------                --     ------

       Total .........   35     $1,029     0.26       53     $1,121     0.28       88     $2,150     0.54
                         ==     ======                ==     ======                ==     ======
</TABLE>

     The following table sets forth the Company's loan delinquencies by type, by
amount and by percentage of type at December 31, 2000.

<TABLE>
<CAPTION>
                                       Loans Delinquent For:
                       -------------------------------------------------------     Total 60 Days or More
                                60-89 Days               90 Days and Over                Delinquent
                       --------------------------   --------------------------   --------------------------
                                          Percent                      Percent                      Percent
                                          of Loan                      of Loan                      of Loan
                       Number   Amount   Category   Number   Amount   Category   Number   Amount   Category
                       ------   ------   --------   ------   ------   --------   ------   ------   --------
                                                      (Dollars in thousands)
<S>                      <C>    <C>        <C>        <C>    <C>        <C>        <C>    <C>        <C>
Real Estate:
  One-to-four family...  16     $  682     0.32%      15     $  680     0.32%      31     $1,362     0.64%
  Multi-family ........  --         --       --       --         --       --       --         --       --
  Commercial ..........   4        401     1.01        2         10     0.03        6        411     1.04
  Construction and
    development .......  --         --       --        1        900     5.06        1        900     5.06

  Consumer ............  12         67     0.17       18        156     0.39       30        223     0.56

  Commercial business..   1        150     0.63        3        824     3.47        4        974     4.10
                         --     ------                --     ------                --     ------

     Total ............  33     $1,300     0.38       39     $2,570     0.75       72     $3,870     1.13
                         ==     ======                ==     ======                ==     ======
</TABLE>

                                       23

<PAGE>

     Classification of Assets. Federal regulations require that each savings
institution classify its own assets on a regular basis. In addition, in
connection with examinations of savings institutions, OTS and FDIC examiners
have authority to identify problem assets and, if appropriate, require them to
be classified. There are three classifications for problem assets: Substandard,
Doubtful and Loss. The regulations have also created a Special Mention category,
consisting of assets which do not currently expose a savings institution to a
sufficient degree of risk to warrant classification, but do possess credit
deficiencies or potential weaknesses deserving management's close attention.
Assets classified as Substandard or Doubtful require the institution to
establish prudent general allowances for losses on loans. If an asset or portion
thereof is classified as Loss, the institution must either establish specific
allowances for losses on loans in the amount of 100% of the portion of the asset
classified Loss, or charge off such amount. If an institution does not agree
with an examiner's classification of an asset, it may appeal this determination
to the Regional Director of the OTS. On the basis of management's review of its
assets, at December 31, 2001, on a net basis, the Company had classified $1.5
million of its assets as Special Mention, $7.2 million as Substandard, $10,000
of its assets as doubtful and $92,000 as Loss. The Company's classified assets
consist of the non-performing loans and loans and other assets of concern
discussed herein.

     Non-Performing Assets. The following table sets forth the amounts and
categories of non-performing assets of the Company. Loans are reviewed quarterly
and any loan whose collectibility is doubtful is placed on non-accrual status.
Real estate loans are placed on non-accrual status when either principal or
interest is 90 days or more past due, unless, in the judgment of management,
collectibility is considered highly probable and collection efforts are in
progress, in which case interest would continue to accrue. At December 31, 2001,
there were 33 loans with outstanding principal balances totaling $391,000 which
were 90 days or more past due and continuing to accrue interest.

     Interest accrued and unpaid at the time a consumer loan is placed on
non-accrual status is charged against interest income. Subsequent payments are
either applied to the outstanding principal balance or recorded as interest
income, depending on the assessment of the ultimate collectibility of the loan.
For all years presented, the Company had no troubled debt restructurings other
than those included in the non-performing assets table. Foreclosed assets
include assets acquired in settlement of loans. The loan and foreclosed asset
amounts shown are stated net of the specific reserves which have been
established against such assets.

                                       24

<PAGE>

<TABLE>
<CAPTION>
                                                         December  31,
                                         ------------------------------------------
                                          2001     2000     1999     1998     1997
                                         ------   ------   ------   ------   ------
                                                      (Dollars in thousands)
<S>                                      <C>      <C>      <C>      <C>      <C>
Non-accruing loans:
  One-to-four family(1) ..............   $  572   $  680   $  473   $  606   $  659
  Multi-family .......................       --       --       --       --       --
  Commercial .........................       33       --       80      265      207
  Construction and development .......       --       --       --       --      669
  Consumer ...........................       --       --       --       --       --
  Commercial business ................      125       --       --       90       --
                                         ------   ------   ------   ------   ------
     Total ...........................      730      680      553      962    1,535
                                         ------   ------   ------   ------   ------

Accruing loans delinquent more
 than 90 days:
  One-to-four family(1) ..............       --       --       --       --       --
  Multi-family .......................       --       --       --       --      556
  Commercial .........................       --       10      807       41       73
  Construction and development .......       --      900       --       --      234
  Consumer ...........................      375      156      388      438      399
  Commercial business ................       16      824       --       40       19
                                         ------   ------   ------   ------   ------
     Total ...........................      391    1,890    1,195      519    1,281
                                         ------   ------   ------   ------   ------

Foreclosed assets:
  One-to-four family .................      370      204      344      387       --
  Multi-family .......................       --       48       --       --       --
  Commercial .........................       68      175      157    1,489    1,317
  Construction and development .......       --       --       --       --       --
  Consumer ...........................       31       51       68       --        3
  Commercial business ................       --       --       --       --       --
                                         ------   ------   ------   ------   ------
     Total foreclosed assets .........      469      478      569    1,876    1,320
                                         ------   ------   ------   ------   ------

Troubled debt restructuring
  Real estate:
  One-to-four family .................      249      120      122       --      209
  Commercial .........................      295      319      342       --       --
  Construction and development .......       17       --       --       --       --
  Consumer ...........................       50       --       --       --       --
                                         ------   ------   ------   ------   ------
     Total troubled debt restructuring      611      439      464       --      209
                                         ------   ------   ------   ------   ------

Total non-performing assets ..........   $2,201   $3,487   $2,781   $3,357   $4,345
                                         ======   ======   ======   ======   ======
Total as a percentage of total
  assets .............................     0.45%    0.76%    0.69%    0.82%    1.27%
                                         ======   ======   ======   ======   ======
</TABLE>

----------
(1)  Includes loans held for sale.

     For the years ended December 31, 2001 and 2000, gross interest income which
would have been recorded had the non-accruing loans been current in accordance
with their original terms amounted to $33,000 and $32,000, respectively. The
amount that was included in interest income on such loans was $34,000 and
$33,000 for 2001 and 2000, respectively.

                                       25

<PAGE>

     Analysis of Allowance for Losses on Loans. The following table sets forth
an analysis of the Company's allowance for losses on loans.

<TABLE>
<CAPTION>
                                                      Year Ended
                                                     December  31,
                                      -----------------------------------------------
                                       2001       2000     1999      1998      1997
                                      -------   -------  --------   -------   -------
                                                   (Dollars in thousands)
<S>                                   <C>       <C>       <C>       <C>       <C>
Balance at beginning of period ....   $ 2,156   $ 2,171   $ 2,375   $ 2,130   $ 2,360

Charge-offs:
  One-to-four family ..............        --        --        21        20        --
  Multi-family ....................        --        --        --        --        --
  Commercial real estate ..........        28         3        29        --        --
  Construction ....................        --        --        --        --       160
  Consumer ........................        61       124       114       160       136
  Commercial business .............        14         8       123        44        --
                                      -------   -------   -------   -------   -------
                                          103       135       287       224       296
                                      -------   -------   -------   -------   -------

Recoveries:
  One-to-four family ..............        --        --        --        --        --
  Multi-family ....................        --        --        --        --        --
  Commercial real estate ..........         1        28        16        --        --
  Construction ....................        --        --        --        --        --
  Consumer ........................        24        27        42        71        33
  Commercial business .............         1        15        25        --        --
                                      -------   -------   -------   -------   -------
                                           26        70        83        71        33
                                      -------   -------   -------   -------   -------

Net charge-offs ...................       (77)      (65)     (204)     (153)     (263)
Additions charged to operations ...       503        50        --        --        33
Additions through acquisitions ....        --        --        --       398        --
                                      -------   -------   -------   -------   -------
Balance at end of period ..........   $ 2,582   $ 2,156   $ 2,171   $ 2,375   $ 2,130
                                      =======   =======   =======   =======   =======

Ratio of net charge-offs during the
  period to average loans
  outstanding during the period ...      0.02%     0.02%     0.08%     0.06%     0.11%
                                      =======   =======   =======   =======   =======

Ratio of net charge-offs during the
  period to average non-
  performing assets ...............      3.07%     2.75%     6.65%     3.97%     6.25%
                                      =======   =======   =======   =======   =======
</TABLE>

     The balance in the allowance for losses on loans and the related amount
charged to operations is based upon periodic evaluations of the loan portfolio
by management. These evaluations consider several factors including, but not
limited to, general economic conditions, loan portfolio composition, prior loan
loss experience, and management's estimate of future potential losses.

                                       26

<PAGE>

     While management believes that it uses the best information available to
determine the allowance for estimated losses on loans, unforeseen market
conditions could result in adjustments to the allowance for estimated losses on
loans and net earnings could be significantly affected if circumstances differ
substantially from the assumptions used in making the final determination.

<TABLE>
<CAPTION>
                                                 December 31,
                     ------------------------------------------------------------------
                            2001                    2000                   1999
                     --------------------   --------------------   --------------------
                               Percent of             Percent of             Percent of
                                Loans in               Loans in               Loans in
                                 Each                   Each                   Each
                              Category to            Category to            Category to
                     Amount   Total Loans   Amount   Total Loans   Amount   Total Loans
                     ------   -----------   ------   -----------   ------   -----------

                                                           (Dollars in thousands)
<S>                  <C>        <C>         <C>        <C>         <C>        <C>
One-to-four
  family ........    $  157      61.81%     $  209      61.48%     $  313      60.24%

Multi-family ....         6       2.99          24       3.37          66       3.26

Commercial real
  estate ........       933      12.13         825      11.48         611      10.54

Construction or
  development ...       532       5.63         350       5.16         208       5.19

Consumer ........       225       9.63         167      11.62         207      12.74

Commercial
  business ......       729       7.81         581       6.89         600       8.03

Unallocated .....        --         --          --         --         166         --
                     ------     ------      ------     ------      ------     ------
     Total ......    $2,582     100.00%     $2,156     100.00%     $2,171     100.00%
                     ======     ======      ======     ======      ======     ======

<CAPTION>
                     --------------------------------------------
                            1998                    1997
                     --------------------   ---------------------
                               Percent of             Percent of
                                Loans in               Loans in
                                  Each                   Each
                              Category to            Category to
                     Amount   Total Loans   Amount   Total Loans
                     ------   -----------   ------   ------------
<S>                  <C>        <C>         <C>         <C>
One-to-four
  family ........    $  415      63.65%     $  521       65.06%

Multi-family ....        83       2.21         172        3.09

Commercial real
  estate ........       469       8.47         444        8.61

Construction or
  development ...       301       5.55         150        3.71

Consumer ........       208      13.21         215       14.50

Commercial
  business ......       556       6.91         352        5.03

Unallocated .....       343         --         276          --
                     ------     ------      ------      ------
     Total ......    $2,375     100.00%     $2,130      100.00%
                     ======     ======      ======      ======
</TABLE>

                                       27

<PAGE>

Investment Activities

     The Company has traditionally invested in U.S. Government securities and
agency obligations of both long and short terms to supplement its lending
activities. During recent years, the Company has refocused its investment
activities on short and medium term securities, although the Company has
retained a number of longer term securities in its portfolio which are held for
investment. In addition, from time to time, the Company has acquired securities
for trading purposes, although during 2001, the Company did not hold or acquire
any securities held for trading. When the Company holds securities for trading,
they are recorded on the Company's books at market value. At December 31, 2001,
the Bank did not own any securities of a single issuer which exceeded 10% of the
Bank's stockholder's equity, other than U.S. Government or federal agency
obligations.

     The Company, from time to time, considers other types of investment
opportunities, with the primary goal of improving net income and enhancing
stockholder value. Investments are considered if they are accretive to net
income, carry acceptable levels of interest rate risk, credit risk and other
risk factors, and are an appropriate fit for the Company's balance sheet.
Beginning in the third quarter of 2001, the Company has been evaluating one such
investment opportunity, Bank Owned Life Insurance ("BOLI"), which involves the
purchase of single premium, variable-rate life insurance policies, covering the
lives of a number of employees, usually senior officers. The purpose of this
type of investment is to increase after-tax earnings on the invested funds as a
means to offset costs associated with employee benefit plans or provide
additional benefits for employees. During the first quarter of 2002, having
completed its evaluation, the Company invested $8.0 million in BOLI, covering
the lives of 15 senior officers. The primary goal of this investment is to help
offset increases in the cost of employee health insurance coverage.

     Through March 15, 2001, the Bank was required by federal regulations to
maintain a minimum amount of liquid assets based on a percentage of net
withdrawable savings and current borrowings. This OTS requirement was eliminated
effective March 15, 2001. However, management is required to maintain a level of
liquid assets consistent with safe and sound operation of the Bank. As part of
this requirement, cash flow projections are reviewed on an ongoing basis to
assure that adequate liquidity is provided.

                                       28

<PAGE>

     The following table sets forth the composition of the Company's investment
portfolio at the dates indicated.

<TABLE>
<CAPTION>
                                                                            December 31,
                                                  --------------------------------------------------------------
                                                           2001                 2000                    1999
                                                  ------------------   --------------------   ------------------
                                                    Book      % of       Book       % of         Book      % of
                                                    Value     Total      Value      Total        Value     Total
                                                    -------   ------     -------    -------   ---------   ------
                                                                       (Dollars in thousands)
<S>                                                 <C>       <C>        <C>         <C>        <C>       <C>
Investment Securities (1):
   U.S. government securities ................      $    --       --%    $    --         --%    $13,449    19.85%
   Federal agency obligations ................       34,322    88.77      56,759      92.70      51,307    75.73
   Municipal bonds ...........................        1,465     3.79       1,448       2.36         306     0.45
   Non-marketable equity securities ..........            1     0.00         501       0.82         501     0.74
   Mutual fund shares ........................          433     1.12         411       0.67         377     0.56
                                                    -------   ------     -------     ------     -------   ------
         Subtotal ............................       36,221    93.68      59,119      96.55      65,940    97.33
FHLB Stock ...................................        2,443     6.32       2,112       3.45       1,811     2.67
                                                    -------   ------     -------     ------     -------   ------
         Total investment securities and FHLB
            stock ............................      $38,664   100.00%    $61,231     100.00%    $67,751   100.00%
                                                    =======   ======     =======     ======     =======   ======

Average remaining life or term to repricing of
   investment securities excluding FHLB stock
   and non-marketable securities .............    34 months            32 months              33 months

Other Interest-Earning Assets:
   Federal funds sold ........................      $ 7,113    46.66%    $ 1,330       9.71%    $ 6,322    37.67%
   Money market funds ........................        4,118    27.01       5,110      37.30       4,653    27.72
   FHLB overnight investments ................        3,965    26.00       7,211      52.63       5,759    34.31
   Certificates of deposit ...................           50     0.33          50       0.36          50     0.30
                                                    -------   ------     -------     ------     -------   ------
      Total ..................................      $15,246   100.00%    $13,701     100.00%    $16,784   100.00%
                                                    =======   ======     =======     ======     =======   ======
</TABLE>

----------
(1)  Includes securities available-for-sale.

                                       29

<PAGE>

     The composition and maturities of the investment securities portfolios,
excluding FHLB stock and non-marketable equity securities at December 31, 2001,
are indicated in the following table.

<TABLE>
<CAPTION>
                                                       At December 31, 2001
                                 --------------------------------------------------------------------
                                 Less Than      1 to 5      5 to 10        Over      Total Investment
                                   1 Year        Years        Years      10 Years       Securities
                                 ----------   ----------   ----------   ----------   ----------------
                                 Book Value   Book Value   Book Value   Book Value      Book Value
                                 ----------   ----------   ----------   ----------      ----------
                                                    (Dollars in thousands)
<S>                                <C>         <C>           <C>          <C>             <C>
Securities available-for-
  sale:
U.S. government
 securities ..................     $   --      $    --       $  --        $   --         $    --
Federal agency
 obligations .................      4,650       29,672          --            --          34,322
Mutual fund
 shares ......................        433           --          --            --             433
                                   ------      -------       -----        ------         -------
Total ........................     $5,083      $29,672       $  --        $   --         $34,755
                                   ======      =======       =====        ======         =======
Weighted average
 yield .......................       6.01%        5.27%         --%           --%           5.37%
                                   ======      =======       =====        ======         =======
Securities held-to-
  maturity:
Municipal Bonds ..............     $  560      $   816       $  31        $   58         $ 1,465
                                   ======      =======       =====        ======         =======
Weighted average
 yield .......................       4.90%        4.10%       5.37%         6.40%           4.52%
                                   ======      =======       =====        ======         =======
</TABLE>

Sources of Funds

     General. Deposit accounts have traditionally been the principal source of
the Company's funds for use in lending and for other general business purposes.
In addition to deposits, the Company derives funds from loan repayments and cash
flows generated from operations. Scheduled loan payments are a relatively stable
source of funds, while deposit inflows and outflows and the related cost of such
funds have varied. Other potential sources of funds available to the Bank
include borrowings from the FHLB and reverse repurchase agreements.

     Deposits. The Company attracts both short-term and long-term deposits by
offering a wide assortment of accounts and rates. The Company offers commercial
demand, regular statement savings accounts, NOW accounts, money market accounts,
fixed interest rate certificates of deposit with varying maturities and
individual retirement accounts. Deposit account terms vary, according to the
minimum balance required, the time period the funds must remain on deposit and

                                       30

<PAGE>

the interest rate, among other factors. The Company has not actively sought
deposits outside of its primary market area.

     The following table sets forth the savings flows at the Company during the
periods indicated:

                                                Year Ended December 31,
                                         -------------------------------------
                                            2001          2000         1999
                                         -----------   -----------   ---------
                                                (Dollars in thousands)
Opening balance ....................     $   388,050   $   354,977   $ 346,803
Deposits ...........................       1,226,566     1,188,101     955,019
Withdrawals ........................      (1,217,009)   (1,168,567)   (958,610)
Increase (decrease)
  before  interest
  credited .........................           9,557        19,534      (3,591)
Interest credited ..................          17,860        13,539      11,765
                                         -----------   -----------   ---------
Ending balance .....................     $   415,467   $   388,050   $ 354,977
                                         ===========   ===========   =========
Net increase .......................     $    27,417   $    33,073   $   8,174
                                         ===========   ===========   =========
Percent increase ...................            7.07%         9.32%       2.36%
                                         ===========   ===========   =========

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

                                       31

<PAGE>

<TABLE>
<CAPTION>
                                                                     December 31,
                                             ------------------------------------------------------------------
                                                    2001                     2000                   1999
                                             ------------------       ------------------      -----------------
                                                        Percent                  Percent                Percent
                                                          of                       of                     of
                                             Amount      Total        Amount      Total       Amount     Total
                                             -------    -------       -------    -------      -------   -------
                                                                    (Dollars in thousands)
<S>                                         <C>         <C>          <C>         <C>          <C>       <C>
Transaction and Savings Deposits(1):
-----------------------------------
Commercial Demand 0%.....................   $ 14,642       3.52%     $ 16,855       4.34%    $ 17,011      4.79%
Savings Accounts 2.44%...................     66,892      16.10        56,198      14.48       60,699     17.10
NOW Accounts 2.70%.......................     49,235      11.85        45,374      11.69       44,291     12.48
Money Market Accounts 2.92%..............     30,976       7.46        24,306       6.27       14,566      4.10
                                            --------     ------      --------     ------     --------    ------
Total Non-Certificates...................    161,745      38.93       142,733      36.78      136,567     38.47
                                            --------     ------      --------     ------     --------    ------
Certificates:
------------
0.00-4.99%...............................    126,337      30.41         7,127       1.84       67,699     19.07
5.00-5.49%...............................     38,522       9.27        58,950      15.19       67,810     19.10
5.50-5.99%...............................     25,414       6.12        32,052       8.26       48,156     13.57
6.00-7.99%...............................     63,135      15.19       146,768      37.82       34,386      9.69
8.00-over................................         --         --             7       0.00            6      0.00
                                            --------     ------      --------     ------     --------    ------
Total Certificates.......................    253,408      60.99       244,904      63.11      218,057     61.43
                                            --------     ------      --------     ------     --------    ------
Accrued Interest.........................        314       0.08           413       0.11          353      0.10
                                            --------     ------      --------     ------     --------    ------
Total Deposits...........................   $415,467     100.00%     $388,050     100.00%    $354,977    100.00%
                                            ========     ======      ========     ======     ========    ======
</TABLE>
----------
(1)  Rates on transaction and savings deposits are those in effect on
     December 31, 2001.

                                       32

<PAGE>

     The following table shows rate and maturity information for the Company's
certificates of deposit as of December 31, 2001.

<TABLE>
<CAPTION>
                           0.00-     5.00-     5.50-     6.00-                             Percent
                           4.99%     5.49%     5.99%     7.99%    8% and Over    Total     of Total
                         --------   -------   -------   -------   -----------   --------   --------
                                              (Dollars in thousands)
<S>                      <C>        <C>       <C>       <C>         <C>         <C>         <C>
Certificate Accounts
Maturing
In Quarter Ending:
------------------

March 31, 2002 ......    $ 19,777   $14,935   $ 4,428   $16,806     $  --       $ 55,946     22.08%
June 30, 2002 .......      30,973     3,183     1,584     9,523        --         45,263     17.86
September 30, 2002         14,597     5,554     3,965    15,673        --         39,789     15.70
December 31, 2002 ...      30,016     2,669       173     4,433        --         37,291     14.72
March 31, 2003 ......      17,517     1,848     6,415     8,275        --         34,055     13.44
June 30, 2003 .......       7,648     4,660     4,918        --        --         17,226      6.80
September 30, 2003            935       107       542        --        --          1,584      0.63
December 31, 2003 ...         720       150     1,101        --        --          1,971      0.78
March 31, 2004 ......         115     1,035       679        --        --          1,829      0.72
June 30, 2004 .......         373     1,126         1        --        --          1,500      0.59
September 30, 2004            507       774         2         2        --          1,285      0.50
December 31, 2004 ...         213       233       632       142        --          1,220      0.48
Thereafter ..........       2,946     2,248       974     8,281        --         14,449      5.70
                         --------   -------   -------   -------     -----       --------    ------

   Total ............    $126,337   $38,522   $25,414   $63,135     $  --       $253,408    100.00%
                         ========   =======   =======   =======     =====       ========    ======

   Percent of total .       49.86%    15.20%    10.03%    24.91%       --%
                         ========   =======   =======   =======     =====
</TABLE>

                                       33

<PAGE>

     The following table indicates the amount of the Company's certificates of
deposit and other deposit by time remaining until maturity as of December
31,2001.

<TABLE>
<CAPTION>
                                                 Maturity
                               ---------------------------------------------------
                                            Over      Over
                               3 Months    3 to 6    6 to 12     Over
                               or Less     Months    Months   12 Months     Total
                               --------   -------   --------  ---------   --------
                                             (Dollars in thousands)
<S>                            <C>        <C>       <C>        <C>        <C>
Certificates of deposit less
 than $100,000 (1)..........   $47,375    $34,453   $69,123    $66,062    $217,013
Certificates of deposit of
 $100,000 or more (1).......     4,657      3,741     6,769      8,116      23,283

Public funds (2)............     3,914      7,069     1,188        941      13,112
                               -------    -------   -------    -------    --------
Total certificates of
 deposit                       $55,946    $45,263   $77,080    $75,119    $253,408
                               =======    =======   =======    =======    ========
</TABLE>

----------------
(1)  Excluding public funds.
(2)  Deposits from governmental and other public entities.

     Borrowings. The Company utilizes borrowings primarily for two purposes. The
first is to purchase mortgage-backed securities in order to generate additional
net interest income and as a method of increasing the leverage on its capital.
The second is as part of the management of short term cash requirements. The
decision to borrow money to purchase mortgage-backed securities is based on
several factors, including the current asset/liability mix, the regulatory
capital position of the Bank and the adequacy of available interest rate spreads
available in such transactions, subject to the limits on such transactions
established by the board of directors. Borrowings for such purposes are derived
from securities sold under agreements to repurchase and advances from the FHLB
of Chicago. Borrowings related to short term cash management are in the form of
advances from the FHLB of Chicago. As a member of the FHLB of Chicago, the
Company is authorized to apply for advances from the FHLB of Chicago. Each FHLB
of Chicago credit program has its own interest rate, which may be fixed or
variable, and range of maturities. The FHLB of Chicago may prescribe the
acceptable uses for these advances, as well as limitations on the size of the
advances and repayment provisions. At December 31, 2001, borrowed money totaled
$30.0 million, all of which was in advances from the FHLB of Chicago. Interest
expense on borrowed money totaled $1.3 million during 2001 and $1.1 million
during 2000.

     Capital Management. The Company has employed an aggressive capital
management plan over the last two years. As part of this plan, the Company has
made open market purchases of its own stock, repurchasing 64,200 common shares
at an average cost of $24.03 per share in 2001

                                       34

<PAGE>

and 46,300 common shares at an average cost of $22.11 per share in 2000. Since
converting to a stock organization in 1992, the Company, through December 31,
2001, has repurchased 669,507 common shares at an average cost of $21.44 per
share.

     The Company continuously evaluates balance sheet opportunities to augment
and leverage its strong capital base to maximize stockholders' return on equity.
During the middle part of the 1990's, the Company employed a leveraging
strategy, borrowing and investing funds to enhance net interest income. This
strategy was minimized in 2000 and 2001, when the Company increased leverage
through internally generated growth. Opportunities for internally generated
growth, as well as another leveraging strategy, are in process of development
and implementation.

     As a way to create flexibility in its capital management strategies, the
Company has committed to the issuance of $10.0 million in trust preferred
securities during the second quarter of 2002. Such securities are includable,
within specified limits, in regulatory capital and the interest paid on the
securities is deductible for tax purposes. The funds provided could be used for
a number of purposes including additional leveraging, the repurchase of
additional common shares or the funding of an acquisition.

Service Corporation

     Federal savings associations generally may invest up to 2% of their assets
in service corporations, plus an additional 1% of assets if used for community
purposes. In addition, federal savings associations may invest up to 50% of
their regulatory capital in conforming loans to their service corporations. In
addition to investments in service corporations, federal associations are
permitted to invest an unlimited amount in operating subsidiaries engaged solely
in activities which a federal savings association may engage in directly.

     KFS Service Corp. was organized by the Company to provide appraisal
services to the Company and others. In addition, since 1983, KFS Service Corp.
has offered, on an agency basis, brokerage services to the Company's customers
utilizing the services of INVEST Financial Corporation, a registered
broker-dealer. Finally, it has also invested in an insurance agency. At December
31, 2001, the Company's equity investment in KFS Service Corp. was approximately
$844,000. During 2001, KFS Service Corp. recorded a net consolidated loss of
$333. During 2001 and 2000, gross revenues related to securities and annuities
brokerage, appraisal activities and insurance agency activities totaled
$182,000, $211,000 and $44,000, and $227,000, $159,000 and $77,000,
respectively.

Competition

     The Company faces competition both in originating loans and in attracting
deposits. Competition in originating loans comes primarily from other savings
institutions, commercial banks, credit unions and mortgage bankers who also make
loans secured by real estate located in the Company's primary market areas. The
Company competes for loans principally on the basis

                                       35

<PAGE>

of the interest rates and loan fees it charges, the types of loans it originates
and the quality of services it provides to borrowers.

     The Company faces substantial competition in attracting deposits from other
savings institutions, commercial banks, securities firms, money market and
mutual funds, credit unions, insurance companies and other investment vehicles.
The ability of the Company to attract and retain deposits depends on its ability
to provide an investment opportunity that satisfies the requirements of
investors as to rate of return, liquidity, risk, convenient locations and other
factors. The Company competes for these deposits by offering a variety of
deposit accounts at competitive rates, convenient business hours and a customer
oriented staff. The Company estimates its market share of savings deposits in
the Kankakee, Coal City, Hoopeston and Champaign/Urbana market areas to be
18.2%, 66.2%, 18.6% and 1.3%, respectively.

     Under the Gramm-Leach-Bliley Act, which became effective in 2000,
securities firms and insurance companies that elect to become financial holding
companies may acquire banks and other financial institutions. The
Gramm-Leach-Bliley Act may significantly change the competitive environment in
which the Company and the Bank conduct business. The financial services industry
is also likely to become more competitive as further technological advances
enable more companies to provide financial services. These technological
advances may diminish the importance of depository institutions and other
financial intermediaries in the transfer of funds between parties.

Employees

     As of December 31, 2001, the Company had 147 full-time employees and 48
part-time employees. The Company places a high priority on staff development
which involves extensive training, including customer service and sales
training. New employees are selected on the basis of both technical skills and
customer service capabilities. None of the Company's employees are represented
by any collective bargaining group. The Company offers a variety of employee
benefits and management considers its relations with its employees to be
excellent.

                           SUPERVISION AND REGULATION

General

     Financial institutions and their holding companies are extensively
regulated under federal and state law. As a result, the growth and earnings
performance of the Company can be affected not only by management decisions and
general economic conditions, but also by the requirements of applicable state
and federal statutes and regulations and the policies of various governmental
regulatory authorities, including the OTS, the Board of Governors of the Federal
Reserve System (the "Federal Reserve"), the FDIC, the Internal Revenue Service
and state taxing authorities and the Securities and Exchange Commission (the
"SEC"). The effect of applicable statutes,

                                       36

<PAGE>

regulations and regulatory policies can be significant, and cannot be predicted
with a high degree of certainty.

     Federal and state laws and regulations generally applicable to financial
institutions, such as the Company and the Bank, regulate, among other things,
the scope of business, investments, reserves against deposits, capital levels
relative to operations, the nature and amount of collateral for loans, the
establishment of branches, mergers, consolidations and dividends. The system of
supervision and regulation applicable to the Company and the Bank establishes a
comprehensive framework for their respective operations and is intended
primarily for the protection of the FDIC's deposit insurance funds and the
depositors, rather than the shareholders, of financial institutions.

     The following is a summary of the material elements of the regulatory
framework that applies to the Company and the Bank. It does not describe all of
the statutes, regulations and regulatory policies that apply to the Company and
the Bank, nor does it restate all of the requirements of the statutes,
regulations and regulatory policies that are described. As such, the following
is qualified in its entirety by reference to the applicable statutes,
regulations and regulatory policies. Any change in applicable law, regulations
or regulatory policies may have a material effect on the business of the Company
and the Bank.

Recent Regulatory Developments

     The terrorist attacks in September, 2001, have impacted the financial
services industry and have already led to federal legislation that attempts to
address certain related issues involving financial institutions. On October 26,
2001, President Bush signed into law the Uniting and Strengthening America by
Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of
2001 (the "USA PATRIOT Act"). Among its other provisions, the USA PATRIOT Act
requires each financial institution: (I) to establish an anti-money laundering
program; (ii) to establish due diligence policies, procedures and controls with
respect to its private banking accounts and correspondent banking accounts
involving foreign individuals and certain foreign banks; and (iii) to avoid
establishing, maintaining, administering, or managing correspondent accounts in
the United States for, or on behalf of, foreign banks that do not have a
physical presence in any country. The USA PATRIOT Act also requires the
Secretary of the Treasury to prescribe, by regulations to be issued jointly with
the federal banking regulators and certain other agencies, minimum standards
that financial institutions must follow to verify the identity of customers,
both foreign and domestic, when a customer opens an account. In addition, the
USA PATRIOT Act contains a provision encouraging cooperation among financial
institutions, regulatory authorities and law enforcement authorities with
respect to individuals, entities and organizations engaged in, or reasonably
suspected of engaging in, terrorist acts or money laundering activities. At this
time, the Company is unable to determine whether the provisions of the USA
PATRIOT Act will have a material impact on the business of the Company and its
subsidiaries.

                                       37

<PAGE>

The Company

     General. The Company, as the sole shareholder of the Bank, is a savings and
loan holding company. As a savings and loan holding company, the Company is
registered with, and is subject to regulation by, the OTS under the HOLA. Under
the HOLA, the Company is subject to periodic examination by the OTS. The Company
is also required to file with the OTS periodic reports of the Company's
operations and such additional information regarding the Company and the Bank as
the OTS may require.

     Investments and Activities. The HOLA prohibits a savings and loan holding
company, directly or indirectly, or through one or more subsidiaries from: (I)
acquiring control of, or acquiring by merger or purchase of assets, another
savings association or savings and loan holding company without the prior
written approval of the OTS; (ii) subject to certain exceptions, acquiring more
than 5% of the issued and outstanding shares of voting stock of a savings
association or savings and loan holding company except as part of an acquisition
of control approved by the OTS; or (iii) acquiring or retaining control of a
financial institution that is not FDIC-insured.

     A savings and loan holding company may acquire savings associations located
in more than one state in both supervisory transactions involving failing
savings associations and nonsupervisory acquisitions of healthy institutions.
Interstate acquisitions of healthy savings associations, however, are permitted
only if the law of the state in which the savings association to be acquired is
located specifically authorizes the proposed acquisition, by language to that
effect and not merely by implication. State laws vary in the extent to which
interstate acquisitions of savings associations and savings and loan holding
companies are permitted. Illinois law presently permits savings and loan holding
companies located in any state of the United States to acquire savings
associations or savings and loan holding companies located in Illinois, subject
to certain conditions, including the requirement that the laws of the state in
which the acquiror is located permit savings and loan holding companies located
in Illinois to acquire savings associations or savings and loan holding
companies in the acquiror's state.

     Because the Company controls only one savings association subsidiary and
because the Company acquired control of the Bank, and thus became a savings and
loan holding company, before May 4, 1999, the Company is generally not subject
to any restrictions on the types of non-financial activities that the Company
may conduct either directly or through a non-banking subsidiary, so long as the
Bank constitutes a qualified thrift lender (see "--The Bank--Qualified Thrift
Lender Test"). If the Bank were to fail to meet the qualified thrift lender
test, or if the Company acquired another savings association and maintained it
as a separate subsidiary of the Company, the Company would become subject to
certain restrictions on the non-financial activities in which it may engage. In
any case, however, if the OTS determines that there is reasonable cause to
believe that the continuation by a savings and loan holding company of a
particular activity constitutes a serious risk to the financial safety,
soundness or stability of its savings association subsidiary, the OTS may
require the holding company to cease engaging in

                                       38

<PAGE>

the activity (or divest any subsidiary which engages in the activity) or may
impose such restrictions on the holding company and the subsidiary savings
association as the OTS deems necessary to address the risk. The restrictions the
OTS may impose include limitations on (I) the payment of dividends by the
savings association to the holding company; (ii) transactions between the
savings association and its affiliates; and (iii) any activities of the savings
association that might create a serious risk that liabilities of the holding
company and its affiliates may be imposed on the savings association.

     Federal law also prohibits any person or company from acquiring "control"
of a savings association or a savings and loan holding company without prior
notice to the appropriate federal bank regulator. "Control" is defined in
certain cases as the acquisition of 10% or more of the outstanding shares of a
savings association or savings and loan holding company.

     Dividends. The Delaware General Corporation Law (the "DGCL") allows the
Company to pay dividends only out of its surplus (as defined and computed in
accordance with the provisions of the DGCL) or if the Company has no such
surplus, out of its net profits for the fiscal year in which the dividend is
declared and/or the preceding fiscal year. Additionally, OTS policies provide
that a savings and loan holding company should not pay dividends that are not
supportable by the company's core earnings or that may be funded only by
borrowings or by sales of assets. The OTS also possesses enforcement powers over
savings and loan holding companies to prevent or remedy actions that represent
unsafe or unsound practices or violations of applicable statutes and
regulations. Among these powers is the ability to proscribe the payment of
dividends by savings and loan holding companies.

     Federal Securities Regulation. The Company's common stock is registered
with the SEC under the Securities Act of 1933, as amended, and the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). Consequently, the Company
is subject to the information, proxy solicitation, insider trading and other
restrictions and requirements of the SEC under the Exchange Act.

The Bank

     General. The Bank is a federally chartered savings association, the
deposits of which are insured by the FDIC's SAIF. As a SAIF-insured, federally
chartered savings association, the Bank is subject to the examination,
supervision, reporting and enforcement requirements of the OTS, as the
chartering authority for federal savings associations, and the FDIC as
administrator of the SAIF. The Bank is also a member of the Federal Home Loan
Bank System, which provides a central credit facility primarily for member
institutions.

                                       39

<PAGE>

     Deposit Insurance. As an FDIC-insured institution, the Bank is required to
pay deposit insurance premium assessments to the FDIC. The FDIC has adopted a
risk-based assessment system under which all insured depository institutions are
placed into one of nine categories and assessed insurance premiums based upon
their respective levels of capital and results of supervisory evaluations.
Institutions classified as well-capitalized (as defined by the FDIC) and
considered healthy pay the lowest premium while institutions that are less than
adequately capitalized (as defined by the FDIC) and considered of substantial
supervisory concern pay the highest premium. Risk classification of all insured
institutions is made by the FDIC for each semi-annual assessment period.

     During the year ended December 31, 2001, SAIF assessments ranged from 0% of
deposits to 0.27% of deposits. For the semi-annual assessment period beginning
January 1, 2002, SAIF assessment rates will continue to range from 0% of
deposits to 0.27% of deposits.

     The FDIC may terminate the deposit insurance of any insured depository
institution if the FDIC determines, after a hearing, that the institution: (I)
has engaged or is engaging in unsafe or unsound practices; (ii) is in an unsafe
or unsound condition to continue operations; or (iii) has violated any
applicable law, regulation, order or any condition imposed in writing by, or
written agreement with, the FDIC. The FDIC may also suspend deposit insurance
temporarily during the hearing process for a permanent termination of insurance
if the institution has no tangible capital. Management of the Bank is not aware
of any activity or condition that could result in termination of the deposit
insurance of the Bank.

     FICO Assessments. Since 1987, a portion of the deposit insurance
assessments paid by SAIF members has been used to cover interest payments due on
the outstanding obligations of the Financing Corporation ("FICO"). FICO was
created in 1987 to finance the recapitalization of the Federal Savings and Loan
Insurance Corporation, the SAIF's predecessor insurance fund. As a result of
federal legislation enacted in 1996, beginning as of January 1, 1997, both SAIF
members and members of the FDIC's Bank Insurance Fund ("BIF") became subject to
assessments to cover the interest payments on outstanding FICO obligations until
the final maturity of such obligations in 2019. During the year ended December
31, 2001, the FICO assessment rate for BIF and SAIF members was approximately
0.02% of deposits.

     Supervisory Assessments. All Federal savings associations are required to
pay supervisory assessments to the OTS to fund the operations of the OTS. The
amount of the assessment is calculated using a formula which takes into account
the institution's size, its supervisory condition (as determined by the
composite rating assigned to the institution as a result of its most recent OTS
examination) and the complexity of its operations. During the year ended
December 31, 2001, the Bank paid supervisory assessments to the OTS totaling
$96,000.

     Capital Requirements. Pursuant to the HOLA and OTS regulations, savings
associations, such as the Bank, are subject to the following minimum capital
requirements: a core capital requirement, consisting of a minimum ratio of core
capital to total assets of 3% for savings

                                       40

<PAGE>

associations assigned a composite rating of 1 as of the association's most
recent OTS examination, with a minimum core capital requirement of 4% of total
assets for all other savings associations; a tangible capital requirement,
consisting of a minimum ratio of tangible capital to total assets of 1.5%; and a
risk-based capital requirement, consisting of a minimum ratio of total capital
to total risk-weighted assets of 8% and a minimum ratio of core capital to total
risk-weighted assets of 4%. Core capital consists primarily of permanent
stockholders' equity less (I) intangible assets other than certain supervisory
goodwill, certain loan servicing rights and certain purchased credit card
relationships and (ii) investments in subsidiaries engaged in activities not
permitted for national banks. Tangible capital is substantially the same as core
capital except that all intangible assets other than certain mortgage servicing
rights must be deducted. Total capital consists primarily of core capital plus
certain debt and equity instruments that do not qualify as core capital and a
portion of the Bank's allowances for loan and leases losses.

     The capital requirements described above are minimum requirements. Higher
capital levels will be required if warranted by the particular circumstances or
risk profiles of individual institutions. For example, the regulations of the
OTS provide that additional capital may be required to take adequate account of,
among other things, interest rate risk, the risks posed by concentrations of
credit or nontraditional activities.

     Further, federal law and regulations provide various incentives to
financial institutions to maintain regulatory capital at levels in excess of
minimum regulatory requirements. For example, a financial institution that is
"well-capitalized" may qualify for exemptions from prior notice or application
requirements otherwise applicable to certain types of activities and may qualify
for expedited processing of other required notices or applications. Under the
regulations of the OTS, in order to be "well-capitalized" a savings association
must maintain a ratio of total capital to total risk-weighted assets of 10% or
greater, a ratio of Tier 1 capital to total risk-weighted assets of 6% or
greater and a ratio of Tier 1 capital to total assets of 5% or greater. For
purposes of these provisions of OTS regulations, "Tier 1 capital" is defined to
mean core capital.

     Federal law also provides the federal banking regulators with broad power
to take prompt corrective action to resolve the problems of undercapitalized
institutions. The extent of the regulators' powers depends on whether the
institution in question is "adequately capitalized," "undercapitalized,"
"significantly undercapitalized" or "critically undercapitalized," in each case
as defined by regulation. Depending upon the capital category to which an
institution is assigned, the regulators' corrective powers include: (I)
requiring the institution to submit a capital restoration plan; (ii) limiting
the institution's asset growth and restricting its activities; (iii) requiring
the institution to issue additional capital stock (including additional voting
stock) or to be acquired; (iv) restricting transactions between the institution
and its affiliates; (v) restricting the interest rate the institution may pay on
deposits; (vi) ordering a new election of directors of the institution; (vii)
requiring that senior executive officers or directors be dismissed; (viii)
prohibiting the institution from accepting deposits from correspondent banks;
(ix) requiring the institution to divest certain subsidiaries; (x) prohibiting
the payment of principal or interest on subordinated debt; and (xi) ultimately,
appointing a receiver for the institution.

                                       41

<PAGE>

     As of December 31, 2001: (I) the Bank was not subject to a directive from
the OTS to increase its capital to an amount in excess of the minimum regulatory
capital requirements; (ii) the Bank exceeded its minimum regulatory capital
requirements under OTS capital adequacy guidelines; and (iii) the Bank was
"well-capitalized", as defined by OTS regulations.

     Dividends. OTS regulations require prior OTS approval for any capital
distribution by a savings association that is not eligible for expedited
processing under the OTS's application processing regulations. In order to
qualify for expedited processing, a savings association must: (I) have a
composite examination rating of 1 or 2; (ii) have a Community Reinvestment Act
rating of satisfactory or better; (iii) have a compliance rating of 1 or 2; (iv)
meet all applicable regulatory capital requirements; and (v) not have been
notified by the OTS that it is a problem association or an association in
troubled condition. Savings associations that qualify for expedited processing
are not required to obtain OTS approval prior to making a capital distribution
unless: (a) the amount of the proposed capital distribution, when aggregated
with all other capital distributions during the same calendar year, will exceed
an amount equal to the association's year-to-date net income plus its retained
net income for the preceding two years; (b) after giving effect to the
distribution, the association will not be at least "adequately capitalized" (as
defined by OTS regulation); or (C) the distribution would violate a prohibition
contained in an applicable statute, regulation or agreement with the OTS or the
FDIC or violate a condition imposed in connection with an OTS-approved
application or notice. The OTS must be given prior notice of certain types of
capital distributions, including any capital distribution by a savings
association that, like the Bank, is a subsidiary of a savings and loan holding
company or by a savings association that, after giving effect to the
distribution, would not be "well-capitalized" (as defined by OTS regulation).

     The payment of dividends by any financial institution or its holding
company is affected by the requirement to maintain adequate capital pursuant to
applicable capital adequacy guidelines and regulations, and a financial
institution generally is prohibited from paying any dividends if, following
payment thereof, the institution would be undercapitalized. As described above,
the Bank exceeded its minimum capital requirements under applicable guidelines
as of December 31, 2001. Further, under applicable regulations of the OTS, the
Bank may not pay dividends in an amount which would reduce its capital below the
amount required for the liquidation account established in connection with the
Bank's conversion from the mutual to the stock form of ownership in 1992. As of
December 31, 2001, approximately $8.3 million was available to be paid as
dividends to the Company by the Bank. Notwithstanding the availability of funds
for dividends, however, the OTS may prohibit the payment of any dividends by the
Bank if the OTS determines such payment would constitute an unsafe or unsound
practice.

     Insider Transactions. The Bank is subject to certain restrictions imposed
by federal law on extensions of credit to the Company, on investments in the
stock or other securities of the Company and the acceptance of the stock or
other securities of the Company as collateral for loans. Certain limitations and
reporting requirements are also placed on extensions of credit by the Bank to
its directors and officers, to directors and officers of the Company, to
principal stockholders of the Company, and to "related interests" of such
directors, officers and principal

                                       42

<PAGE>

stockholders. In addition, federal law and regulations may affect the terms upon
which any person becoming a director or officer of the Company or one of its
subsidiaries or a principal stockholder of the Company may obtain credit from
banks with which the Bank maintains a correspondent relationship.

     Safety and Soundness Standards. The federal banking agencies have adopted
guidelines which establish operational and managerial standards to promote the
safety and soundness of federally insured depository institutions. The
guidelines set forth standards for internal controls, information systems,
internal audit systems, loan documentation, credit underwriting, interest rate
exposure, asset growth, compensation, fees and benefits, asset quality and
earnings.

     In general, the safety and soundness guidelines prescribe the goals to be
achieved in each area, and each institution is responsible for establishing its
own procedures to achieve those goals. If an institution fails to comply with
any of the standards set forth in the guidelines, the institution's primary
federal regulator may require the institution to submit a plan for achieving and
maintaining compliance. If an institution fails to submit an acceptable
compliance plan, or fails in any material respect to implement a compliance plan
that has been accepted by its primary federal regulator, the regulator is
required to issue an order directing the institution to cure the deficiency.
Until the deficiency cited in the regulator's order is cured, the regulator may
restrict the institution's rate of growth, require the institution to increase
its capital, restrict the rates the institution pays on deposits or require the
institution to take any action the regulator deems appropriate under the
circumstances. Noncompliance with the standards established by the safety and
soundness guidelines may also constitute grounds for other enforcement action by
the federal banking regulators, including cease and desist orders and civil
money penalty assessments.

     Branching Authority. Federally chartered savings associations which qualify
as "domestic building and loan associations," as defined in the Internal Revenue
Code, or meet the qualified thrift lender test (see "-The Bank -- Qualified
Thrift Lender Test") have the authority, subject to receipt of OTS approval, to
establish or acquire branch offices anywhere in the United States. If a federal
savings association fails to qualify as a "domestic building and loan
association," as defined in the Internal Revenue Code, and fails to meet the
qualified thrift lender test the association may branch only to the extent
permitted for national banks located in the savings association's home state. As
of December 31, 2001, the Bank qualified as a "domestic building and loan
association," as defined in the Internal Revenue Code and met the qualified
thrift lender test.

     Qualified Thrift Lender Test. The HOLA requires every savings association
to satisfy a "qualified thrift lender" ("QTL") test. Under the HOLA, a savings
association will be deemed to meet the QTL test if it either (I) maintains at
least 65% of its "portfolio assets" in "qualified thrift investments" on a
monthly basis in nine out of every 12 months or (ii) qualifies as a "domestic
building and loan association," as defined in the Internal Revenue Code. For
purposes of the QTL test, "qualified thrift investments" consist of mortgage
loans, mortgage-backed securities, education loans, small business loans, credit
card loans and certain other housing and

                                       43

<PAGE>

consumer-related loans and investments. "Portfolio assets" consist of a savings
association's total assets less goodwill and other intangible assets, the
association's business properties and a limited amount of the liquid assets
maintained by the association pursuant to OTS requirements. A savings
association that fails to meet the QTL test must either convert to a bank
charter or operate under certain restrictions on its operations and activities.
Additionally, within one year following the loss of QTL status, the holding
company for the savings association will be required to register as, and will be
deemed to be, a bank holding company. A savings association that fails the QTL
test may requalify as a QTL but it may do so only once. As of December 31, 2001,
the Bank satisfied the QTL test, with a ratio of qualified thrift investments to
portfolio assets of 82.1%, and qualified as a "domestic building and loan
association," as defined in the Internal Revenue Code.

     Federal Reserve System. Federal Reserve regulations, as presently in
effect, require depository institutions to maintain non-interest earning
reserves against their transaction accounts (primarily NOW and regular checking
accounts), as follows: for transaction accounts aggregating $41.3 million or
less, the reserve requirement is 3% of total transaction accounts; and for
transaction accounts aggregating in excess of $41.3 million, the reserve
requirement is $1.239 million plus 10% of the aggregate amount of total
transaction accounts in excess of $41.3 million. The first $5.7 million of
otherwise reservable balances are exempted from the reserve requirements. These
reserve requirements are subject to annual adjustment by the Federal Reserve.
The Bank is in compliance with the foregoing requirements.

Federal and State Taxation

     General. Prior to 1996, savings associations such as the Bank that met
certain definitional tests relating to the composition of assets and income as
defined in the Internal Revenue Code of 1986 were allowed to establish reserves
for bad debts on "qualifying real property loans" based either upon a percentage
of taxable income or the experience method, whichever resulted in a larger
deduction. Reserves for bad debts on nonqualifying loans were based solely upon
the experience method. The experience method reserve amount is calculated as a
function of the actual bad debt experience sustained by the institution over a
period of years, whereas the percentage of taxable income method is a strict
numeric calculation not dependent on actual loss experience.

     The Small Business Job Protection Act of 1996 became law on August 20,
1996. One of the provisions in the new law repealed the special bad debt reserve
methods that had existed for savings associations prior to 1996. The Bank is now
required to compute reserves on all loans under the experience method. The new
law froze the reserves for bad debts that existed at the end of the last tax
year beginning before January 1, 1988 and required the Bank to recapture into
taxable income over a six year period the "applicable excess reserve." For the
Bank, the applicable excess reserve was approximately $648,000 which represented
the difference between the reserve balance at December 31, 1995, and the balance
of the reserve at end of the last tax year beginning before January 1, 1988.
This excess reserve has been recaptured at the rate of

                                       44

<PAGE>

$108,000 per year, into taxable income during the six tax years from 1996
through 2001. Deferred taxes had previously been established on the applicable
excess reserve.

     Retained income of the Bank includes approximately $8,998,000 that
represents tax provisions for losses on loans that have been deducted in excess
of amounts that have been charged against income on the financial statements. No
provision for federal income tax has been made against this amount. If, in the
future, the Bank ceases to qualify as a "bank" for federal income tax purposes
or if these retained earnings are liquidated, federal income taxes may be
imposed at the then-applicable rates. If federal income taxes had been provided,
the deferred liability would have been approximately $3,059,000.

     In addition to the regular income tax, corporations, including savings
associations such as the Bank, generally are subject to a minimum tax. An
alternative minimum tax is imposed at a minimum tax rate of 20% on alternative
minimum taxable income, which is the sum of a corporation's regular taxable
income (with certain adjustments) and tax preference items, less any available
exemption. The alternative minimum tax is imposed to the extent it exceeds
corporation's regular income tax. During the years ended December 31, 1999, 2000
and 2001, the Bank was not required to pay alternative minimum tax.

     The Company, the Bank and its subsidiary file consolidated federal income
tax returns on a calendar year basis using the accrual method of accounting.

     The Bank and its consolidated subsidiaries have been audited by the IRS
with respect to consolidated federal income tax returns through December 31,
1982. With respect to years examined by the IRS, all deficiencies have been
satisfied. In the opinion of management, any examination of still open returns
would not result in a deficiency which could have a material adverse effect on
the financial condition of the Company and its consolidated subsidiaries.

                        EXECUTIVE OFFICERS OF THE COMPANY

     The business experience during the past five years with respect to
executive officers of the Company and the Bank who do not serve on the Company's
board of directors is listed below. Each officer is elected annually to serve
until his or her successor is elected and qualified, or until he or she is no
longer employed by the Company or its subsidiaries or is removed by the board of
directors. There are no arrangements or understandings between the persons named
and any other person pursuant to which such officers were selected.

     Ronald J. Walters, age 52, is Vice President, Treasurer and Chief Financial
Officer of the Company and Senior Vice President, Treasurer and Chief Financial
Officer of the Bank, positions he has held since August 1992 and January 1985,
respectively. As the Chief Financial Officer of the Bank, Mr. Walters is
responsible for the establishment and supervision of the Bank's accounting,
information technology, and buildings and grounds. Mr. Walters joined the Bank
in

                                       45

<PAGE>

1984 as Controller and Chief Financial Officer, was named Vice President and
Treasurer in 1985, and promoted to Senior Vice President in 1996. Mr. Walters is
a certified public accountant.

     Keith M. Roseland, age 52, is a Senior Vice President and Regional
Commercial Lending Officer of the Bank, a position he was appointed to in 1999.
Previously, Mr. Roseland was Regional Branch Manger responsible for the
operation of the Coal City, Diamond and Braidwood, Illinois branches of the Bank
since 1998. He had previously served as President, since 1986, of Coal City
National Bank, which was acquired by the Bank in January, 1998. Mr. Roseland had
been with Coal City National Bank since 1967.

     Carol Hoekstra, age 46, was elected a Senior Vice President of the Bank in
1999. She is also an Assistant Secretary of the Company, a position she has held
since 1992. Previously, she was a Vice President of the Bank since 1995. Mrs.
Hoekstra is responsible for oversight of the Bank's retail operations. Mrs.
Hoekstra first joined the Bank in 1977. She rejoined the Bank in 1991 as
consumer loan manager, following her return to the area from Texas where she
worked at a commercial bank in consumer lending.

     Monte S. Crowl, age 37, has been Vice President of Marketing of the Bank
since January 1993. He is responsible for the Marketing Department. Prior to
joining the Bank in 1989, Mr. Crowl was employed by the Central Bank
Corporation, Cincinnati, Ohio, as a marketing representative from August 1987 to
August 1989.

     Terry L. Ralston, age 52, was elected a Vice President of the Bank in 1998.
He is also Information Technology Manager of the Bank, a position he was
appointed to in 2000. Previously, since joining the Bank in February, 1996, he
was Data Processing Manager. He is responsible for the day-to-day operation of
the Bank's Data Processing Department and Deposit Services Center. He has over
twenty-five years of experience in similar positions with financial institutions
in northern Illinois and southern Wisconsin.

                                       46

<PAGE>

Item 2. Properties
Offices

     The following table sets forth information concerning the main office and
each branch office of the Bank at December 31, 2001. At December 31, 2001, the
Company's premises had an aggregate net book value of approximately $6.6
million.

<TABLE>
<CAPTION>
                                   Year             Owned            Lease                 Net
        Location                Opened (1)        or Leased      Expiration Date       Book Value
------------------------   --------------------   ---------   ---------------------   --------------
                                                                                      (In thousands)
<S>                                <C>             <C>         <C>                       <C>

Main Office
-----------
310 S. Schuyler Avenue             1958             Owned               N/A              $ 1,983
Kankakee, Illinois

Full Service Branches
---------------------
Main Street and U.S. 45            1977             Owned               N/A                  20
Ashkum, Illinois

680 S. Main Street                 1974             Owned               N/A                 255
Bourbonnais, Illinois

990 N. Kinzie Avenue               1998            Leased      October 22, 2013 (2)         142
Bradley, Illinois

180 N. Front Street                1998            Leased       July 24, 2005 (3)            --
Braidwood, Illinois

1001 S. Neil Street                1992             Owned               N/A                 728
Champaign, Illinois

100 S. Broadway                    1998            Leased        July 24, 2005 (3)          110
Coal City, Illinois

660 S. Broadway                    1998             Owned              N/A                  695
Coal City, Illinois

1275 E. Division Street            1998             Owned              N/A                  388
Diamond, Illinois

302 W. Mazon Avenue                1987             Owned              N/A                  376
Dwight, Illinois

654 N. Park Road                   1998             Owned              N/A                  588
Herscher, Illinois

323 E. Main Street                 1994             Owned              N/A                  157
Hoopeston, Illinois

310 Section Line Road              1975             Owned              N/A                  247
Manteno, Illinois

200 W. Washington Street           1995             Owned              N/A                  174
Momence, Illinois

1708 S. Philo Road                 1998             Owned              N/A                  730
Urbana, Illinois
                                                                                         ------
                                                                                         $6,593
                                                                                         =======
</TABLE>

(1)  Year opened refers to the year in which the current facility opened or was
     acquired.
(2)  The Bank has an option to cancel this lease at the end of the fifth and
     tenth year by providing notice consistent with the terms of the lease.
(3)  The Bank has an option to renew this lease for two consecutive five year
     terms.

                                       47

<PAGE>

     The Company believes that its current facilities are adequate to meet
present and immediately foreseeable needs.

     The Company maintains depositor and borrower customer files on an in-house
system. The net book value of the data processing and computer equipment
utilized by the Company at December 31, 2001 was $459,000.

Item 3. Legal Proceedings

     The Company is involved as plaintiff or defendant in various legal actions
arising in the normal course of its business. While the ultimate outcome of
current legal proceedings cannot be predicted with certainty, it is the opinion
of management that the resolution of these legal actions should not have a
material effect on the Company's consolidated financial position or results of
operations.

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

     No matter was submitted to a vote of security holders, through the
solicitation of proxies or otherwise, during the quarter ended December 31,
2001.

                                     PART II

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

     Page 52 of the 2001 Annual Report to Stockholders is incorporated by
reference.

Item 6. Selected Financial Data

     Pages 7 and 8 of the 2001 Annual Report to Stockholders is incorporated by
reference.

Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operation

     Pages 9 through 26 of the 2001 Annual Report to Stockholders are
incorporated by reference.

Item 7a. Quantitative and Qualitative Disclosures About Market Risk

     The Company's net income and net portfolio value ("NPV"), in the normal
course of business, are exposed to interest rate risk, and can vary based on
changes in the general level of interest rates. All financial products carry
some amount of interest rate risk, and substantial portions of both the
Company's assets and liabilities are financial products. These include
investment securities, asset-backed securities, loans, deposits and borrowed
money. Off-balance

                                       48

<PAGE>
sheet items, such as loan commitments, letters of credit, commitments to buy or
sell loans or securities, and derivative financial instruments, also carry some
amount of interest rate risk.

     The Bank's Funds Management Committee, consisting of the president, certain
vice presidents and the controller of the Bank, is responsible for developing
methods and strategies for the Company to manage the sensitivity characteristics
of its assets and liabilities, and for directing the implementation of these
methods and strategies. The Funds Management Committee meets on a weekly basis,
and the boards of both the Bank and the Company review the Company's exposure to
interest rate risk on at least a quarterly basis.

     The Funds Management Committee generally uses two types of analysis in
measuring and reviewing the Company's interest rate sensitivity. These are the
GAP analysis, which is discussed under the heading of Asset/Liability Management
on page 20 of the Annual Report, and the NPV calculation. The NPV calculation
uses information about the Company's assets, liabilities and off-balance sheet
items, market interest rate levels and assumptions about the behavior of the
assets and liabilities, to calculate the Company's NPV. The NPV is the market
value of assets minus the market value of liabilities, adjusted for off-balance
sheet items divided by the market value of assets. The NPV is then subjected to
immediate and permanent changes of 300 basis points in market interest rate
levels, in 100 basis point increments, both upward and downward. The resulting
changes in NPV and net interest income at each increment are measured against
pre-determined, minimum NPV ratios for each incremental rate change, as approved
by the board in the interest rate risk policy.

     The following table presents the Bank's NPV ratios for the various rate
change levels at December 31, 2001 and 2000:

                                                              NPV Ratios
                                                              ----------
Changes in Interest Rates                                2001             2000
--------------------------------------------------------------------------------
300 basis point rise                                     6.21%            4.77%
200 basis point rise                                     7.53%            6.16%
100 basis point rise                                     8.82%            7.49%
Base rate scenario                                      10.04%            8.66%
100 basis point decline                                 10.70%            9.38%
200 basis point decline                                    --            10.20%
300 basis point decline                                    --            11.31%

     The preceding table indicates that at December 31, 2001, in the event of an
immediate and permanent increase in prevailing market interest rates, the Bank's
NPV ratio, would be expected to decrease, and that in the event of an immediate
and permanent decrease in prevailing market interest rates, the Bank's NPV ratio
would be expected to increase. At December 31, 2001, the estimated changes in
the Bank's NPV ratios were within the levels approved by the board of

                                       49

<PAGE>

directors. Due to the low level of market interest rates at December 31, 2001,
calculations for the 200 basis point decline and the 300 basis point decline
were omitted as highly improbable.

     The NPV decreases in a rising rate scenario because the Company's
interest-bearing liabilities generally reprice faster than its interest-earning
assets. This effect is increased by periodic and lifetime limits on changes in
rate on most adjustable-rate, interest-earning assets. The NPV increases in a
falling rate scenario because of the same mismatch between repricing of
interest-bearing liabilities and interest-earning assets. The effect of the
falling rate scenario is somewhat mitigated by several factors, including limits
on the Company's ability to decrease rates on some of its deposit sources, such
as money market accounts and NOW accounts, and by the ability of borrowers to
repay loans ahead of schedule and refinance at lower rates.

     The NPV ratio is calculated by the OTS on a quarterly basis utilizing
information about the Company's assets, liabilities and off-balance sheet items.
This information is provided by the Company. The calculation is designed to
estimate the effects of hypothetical rate changes on the NPV, utilizing
projected cash flows, and is based on numerous assumptions, including relative
levels of market interest rates, loan prepayments speeds and deposit decay
rates. Actual changes in the NPV, in the event of market interest rate changes
of the type and magnitude used in the calculation, could differ significantly.
Additionally, the calculation does not account for possible actions taken by
Funds Management to mitigate the adverse effects of changes in market interest
rates.

Item 8. Financial Statements and Supplementary Data

     Pages 28 through 50 of the 2001 Annual Report to Stockholders are
incorporated by reference.

Item 9. Changes in and Disagreements with Accountants on Accounting and
     Financial Disclosure

     None

                                    PART III

Item 10. Directors and Officers of the Registrant

     Information concerning directors of the Company is incorporated by
reference from the Company's definitive Proxy Statement for the Annual Meeting
of Stockholders to be held in 2002, a copy of which was filed with the
Securities and Exchange Commission on March 11, 2002, as supplemented on March
18, 2002 (the "2002 Proxy Statement").

                                       50

<PAGE>

Executive Officers Who are Not Directors

     Information regarding the business experience during the past five years
with respect to the executive officers of the Company contained in Part I of
this Form 10-K is incorporated by reference.

Compliance with Section 16(a) of the Exchange Act

     Section 16(a) of the Securities Exchange Act of 1934 requires that the
Company's executive officers and directors and persons who own more than 10% of
the Company Common Stock file reports of ownership and changes in ownership with
the SEC and with the exchange on which the Company's shares of Common Stock are
traded. Such persons are also required to furnish the Company with copies of all
Section 16(a) forms they file. Based solely on the Company's review of the
copies of such forms furnished to the Company and, if appropriate,
representations made to the Company by any such reporting person concerning
whether a Form 5 was required to be filed for 2001, the Company is not aware
that any of its directors and executive officers or 10% stockholders failed to
comply with the filing requirements of Section 16(a) during 2001, with the
exception of a late filing reporting a mandatory grant of 400 shares under the
Bank Incentive Plan to Brenda L. Baird.

Item 11. Executive Compensation

     Information concerning executive compensation called for by Item 11 of this
Form 10-K is incorporated by reference from the section in the Company's 2002
Proxy Statement entitled "Executive Compensation." The report of the Company's
Compensation Committee and the stock performance table are not incorporated into
this Form 10-K.

Item 12. Security Ownership of Certain Beneficial Owners and Management

     Information concerning security ownership of certain beneficial owners and
management called for by Item 12 of this Form 10-K is incorporated by reference
from the section in the Company's 2002 Proxy Statement entitled "Voting
Securities and Principal Holders."

Item 13. Certain Relationships and Related Transactions

     Information concerning certain relationships and related transactions
called for by Item 13 of this Form 10-K is incorporated by reference from the
section in the Company's 2002 Proxy Statement entitled "Certain Relationships
and Related Transactions."

                                       51

<PAGE>

                                     PART IV

Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K

     (a)(1) Consolidated Financial Statements:
     ----------------------------------------

     The following information appearing in the Registrant's 2001 Annual Report
to Stockholders is incorporated by reference in this Annual Report on Form 10-K
as Exhibit 13.

                                                                      Pages in
             Annual Report Section                                Annual Report
             ---------------------                                -------------

Selected Financial Data...........................................      7-8

Management's Discussion and Analysis of
  Financial Condition and Results of Operations...................      9-26

Report of Independent Auditors....................................      27

Consolidated Statements of Financial Condition....................      28-29

Consolidated Statements of Income.................................      30

Consolidated Statements of Stockholders' Equity...................      31

Consolidated Statements of Cash Flows.............................      32-33

Notes to Consolidated Financial Statements........................      34-50

Quarterly Financial Information ..................................      50

     With the exception of those sections specifically incorporated by
reference, the Registrant's 2001 Annual Report to Stockholders is not deemed
filed as part of this Annual Report on Form 10-K.

     (a)(2) Financial Statement Schedules:
     -------------------------------------

     Financial statement schedules have been omitted as the required information
is contained in the consolidated financial statements and notes thereto, or
because such schedules are not required or applicable.

                                       52

<PAGE>

     (a)(3) Exhibits:
     ---------------

 Regulation                                           Reference to Prior
S-K Exhibit                                            Filing or Exhibit
   Number                  Document                 Number Attached Hereto
------------   ---------------------------------   -----------------------
    3          Articles of Incorporation                      (1)

    3          Bylaws                                         (1)

    4          Instruments defining the rights                (1)
               of security holders, including
               debentures

   10          Material Contracts

               a. Stock Option Plan
                                                              (2)
               b. Management Recognition
                  Plan and Trusts                             (2)

               c. Employee Stock
                  Ownership Plan
                                                              (1)

               d. Money Purchase Pension
                  Plan
                                                              (1)
               e. 401(k) Plan
                                                              (1)

               f. Kankakee Bancorp, Inc.
                  Bank Incentive Plan and Trust
                                                              (3)

               g. Rights Agreement                            (4)

               h. Form of Change of
                  Control  Agreements for
                  Gerald C. Chantome, Carol S.
                  Hoekstra, Larry D. Huffman,
                  Terry L. Ralston, Michael A.
                  Stanfa and Ronald J. Walters                (5)

               i. Employment Agreement
                  between the Company and Larry
                  D. Huffman                                  (6)

          13   2001 Annual Report to Stockholder              13

          21   Subsidiaries of Registrant                     21

          23   Consent of Independent Auditor                 23

----------
(1)  Filed on September 11, 1992, as exhibits to the Registrant's Registration
     Statement No. 33-51950 on Form S-1. Such previously filed documents are
     hereby incorporated herein by reference in accordance with Item 601 of
     Regulation S-K.

(2)  Filed on March 29, 1993, as exhibits to the Registrant's Annual Report on
     Form 10-K. Such previously filed documents are hereby incorporated herein
     by reference in accordance with Item 601 of Regulation S-K.

(3)  Filed on March 30, 1994, as an exhibit to the Registrant's Annual Report on
     Form 10-K. Such previously filed documents are hereby incorporated herein
     by reference in accordance with Item 601 of Regulation S-K.

(4)  Filed on May 21, 1999, as an exhibit to the Registrant's Form 8-K. Such
     previously filed document is hereby incorporated herein by reference in
     accordance with Item 601 of Regulation S-K.

                                       53

<PAGE>

(5)  Filed on October 23, 2001, as an exhibit to the Registrant's Form 8-K. Such
     previously filed document is hereby incorporated herein by reference in
     accordance with Item 601 of Regulation S-K.

(6)  Filed on May 8, 2001, as an exhibit to the Registrant's Form 10-Q. Such
     previously filed document is hereby incorporated herein by reference in
     accordance with Item 601 of Regulation S-K.

     (b) Reports on Form 8-K:
         -------------------
          On October 11, 2001, the Company filed a report on Form 8-K stating
          under Item 5 that the Company had, on October 10, 2001, issued a news
          release announcing that Thomas Schneider resigned as director of the
          Company and the Bank, effective October 31, 2001, as a result of his
          relocation out of the Kankakee area. The Company also announced that
          on October 9, 2001, the Company's and the Bank's boards of directors
          elected Mark Smith to fill the vacancies created by Mr. Schneider's
          resignation, effective November 1, 2001.

          On October 23, 2001, the Company filed a report on Form 8-K stating
          under Item 5 that the Company had, on October 23, 2001, issued a news
          release announcing its earnings for the quarter ended September 30,
          2001, as well as other recent corporate events; and that effective as
          of October 15, 2001, the Company entered into change of control
          agreements with the following executives: Gerald C. Chantome, Carol S.
          Hoekstra, Larry D. Huffman, Terry L. Ralston, Michael A. Stanfa and
          Ronald J. Walters.

          On February 1, 2002, the Company filed a report on Form 8-K stating
          under Item 5 that the Company had, on February 1, 2002, issued a news
          release announcing its earnings for the quarter ending December 31,
          2001, its payment of a quarterly dividend to its stockholders and the
          date of its annual meeting of stockholders.

                                       54

<PAGE>

                                   SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                           KANKAKEE BANCORP, INC.

Date:  March 25, 2002      By:   /s/ Larry D. Huffman
       --------------            ------------------------------------
                                         Larry D. Huffman
                           Chief Executive Officer and President
                           (Principal Executive Officer)

                           By:   /s/ Ronald J. Walters
                                 ------------------------------------
                                 Ronald J. Walters, Vice President and Treasurer
                                 (Principal Financial and Accounting Officer)

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


 /s/ William Cheffer         3-25-02   Chairman of the Board
----------------------       -------
  William Cheffer             Date


 /s/ Brenda L. Baird         3-25-02   Director
----------------------       -------
  Brenda L. Baird             Date


 /s/ Charles C. Huber        3-25-02   Director
----------------------       -------
  Charles C. Huber            Date


 /s/ Wesley E. Walker        3-25-02   Director
----------------------       -------
  Wesley E. Walker            Date


 /s/ Larry D. Huffman        3-25-02   President, Chief Executive Officer and
----------------------       -------
  Larry D. Huffman            Date     Director


 /s/ Mark L. Smith           3-25-02   Director
----------------------       -------
  Thomas M. Schneider         Date


 /s/ Michael A. Stanfa       3-25-02   Executive Vice President, Secretary and
----------------------       -------
  Michael A. Stanfa           Date     Director

                                       55

<PAGE>

                                INDEX TO EXHIBITS

 Regulation                                           Reference to Prior
S-K Exhibit                                            Filing or Exhibit
   Number                 Document                  Number Attached Hereto
-----------    ---------------------------------   -----------------------
      3        Articles of Incorporation                     (1)

      3        Bylaws                                        (1)

      4        Instruments defining the rights               (1)
               of security holders, including
               debentures

     10        Material Contracts

               a.Stock Option Plan
                                                             (2)
               b.Management Recognition
                 Plan and Trusts                             (2)

               c.Employee Stock
                  Ownership Plan
                                                             (1)

               d.Money Purchase Pension
                 Plan
                                                             (1)
               e.401(k) Plan
                                                             (1)
               f.Kankakee Bancorp, Inc.
                 Bank Incentive Plan and Trust
                                                             (3)

               g.Rights Agreement                            (4)

               h.Form of Change of
                 Control Agreements for Gerald
                 C. Chantome, Carol S.
                 Hoekstra, Larry D. Huffman,
                 Terry L. Ralston, Michael A.
                 Stanfa, and Ronald J. Walters               (5)

               i.Employment Agreement
                 between the Company and Larry
                 D. Huffman                                  (6)

     13        2001 Annual Report to                         13
               Stockholders

     21        Subsidiaries of Registrant                    21

     23        Consent of Independent Auditor                23
----------
(1)  Filed on September 11, 1992, as exhibits to the Registrant's Registration
     Statement No. 33-51950 on Form S-1. Such previously filed documents are
     hereby incorporated herein by reference in accordance with Item 601 of
     Regulation S-K.

(2)  Filed on March 29, 1993, as exhibits to the Registrant's Annual Report on
     Form 10-K. Such previously filed documents are hereby incorporated herein
     by reference in accordance with Item 601 of Regulation S-K.

(3)  Filed on March 30, 1994, as an exhibit to the Registrant's Annual Report on
     Form 10-K. Such previously filed documents are hereby incorporated herein
     by reference in accordance with Item 601 of Regulation S-K.

(4)  Filed on May 21, 1999, as an exhibit to the Registrant's Form 8-K. Such
     previously filed document is hereby incorporated herein by reference in
     accordance with Item 601 of Regulation S-K.

                                       56

<PAGE>

(5)  Filed on October 23, 2001, as an exhibit to the Registrant's Form 8-K. Such
     previously filed document is hereby incorporated herein by reference in
     accordance with Item 601 of Regulation S-K.

(6)  Filed on May 8, 2001, as an exhibit to the Registrant's Form 10-Q. Such
     previously filed document is hereby incorporated herein by reference in
     accordance with Item 601 of Regulation S-K.

                                       57