<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, 1996

                                          OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
    EXCHANGE ACT OF 1934
         For the transition period from _______ to _______

                            Commission File Number 0-20804


                                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


             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.  [X]

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


<PAGE>

    As of March 3, 1997, the Registrant had issued and outstanding 1,420,168 of
the Registrant's Common Stock.  The aggregate market value of the voting stock
held by non-affiliates of the Registrant as of March 3, 1997, was $33,984,502.*




                         DOCUMENTS INCORPORATED BY REFERENCE

    PARTS II and IV of Form 10-K--Portions of the 1996 Annual Report to
Stockholders.
    PART III of Form 10-K--Portions of the Proxy Statement for the 1997 Annual
Meeting of Stockholders.





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

*   Based on the last reported price ($27.375) of an actual transaction in the
    Registrant's Common Stock on March 3, 1997, 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.

                           1996 ANNUAL REPORT ON FORM 10-K

                                  Table of Contents

                                                                     PAGE NUMBER

                                        PART I

Item  1.  Business............................................................ 4
Item  2.  Properties......................................................... 46
Item  3.  Legal Proceedings.................................................. 47
Item  4.  Submission of Matters to a Vote of Security Holders................ 47

                                       PART II

Item  5.  Market for the Registrant's Common Stock and Related
          Security Holder Matters............................................ 47
Item  6.  Selected Financial Data............................................ 47
Item  7.  Management's Discussion and Analysis of Financial
          Condition and Results of Operations................................ 47
Item  8.  Financial Statements and Supplementary Data........................ 47
Item  9.  Changes in and Disagreements With Accountants on
          Accounting and Financial Disclosure................................ 47

                                       PART III

Item 10.  Directors and Executive Officers of the Registrant................. 48
Item 11.  Executive Compensation............................................. 48
Item 12.  Security Ownership of Certain Beneficial Owners and
          Management......................................................... 48
Item 13.  Certain Relationships and Related Transactions..................... 49
Item 14.  Exhibits, Financial Statement Schedules, and Reports on 8-K........ 49

Form 10-K Signature Page......................................................51


                                          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. ("KFS"),
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 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 (the "Conversion") 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 (the "Common Stock"), at a price of $9.875 per share.
On March 24, 1995, the Company's Common Stock was listed on the American Stock
Exchange ("AMEX") under the symbol "KNK".  Prior to March 24, 1995, the
Company's Common Stock was quoted on the NASDAQ National 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 KFS unless clearly indicated otherwise, except that references to the
Company at or before December 30, 1992 refer to the Bank and KFS on a
consolidated basis.

    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 System") 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 eight branch offices located in the communities of
Bourbonnais, Herscher, Hoopeston, Manteno, Momence, Ashkum, Dwight, and
Champaign, Illinois.  At December 31, 1996, the Company had consolidated assets
of $350.6 million, deposits of $277.3 million and stockholders' equity of $36.5
million.


                                          4


<PAGE>

    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 and, on an agency
basis through KFS, securities brokerage services and insurance and annuity
products to the Company's customers and provides appraisal services for the Bank
and others.

    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, 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").  The Company's results of operations are
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.

    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 eight branch offices located in the communities of
Bourbonnais, Herscher, Hoopeston, Momence, Manteno, Ashkum, Dwight, and
Champaign.  The Company's market areas include Kankakee, Champaign, Iroquois and
Livingston Counties and portions of Will, Grundy and Vermilion Counties,
Illinois.

    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, St. Mary's Hospital, the Baker and Taylor Company, CIGNA
Companies, Armstrong World Industries, CENTEON, Heinz Pet Products, Bunge Edible
Oil Corporation, Henkel Corporation and CBI Services.  Kankakee County
experienced economic difficulties in the late 1970s and early 1980s when Roper
Corporation, Kroehler Furniture, A.O. Smith and others closed or moved their
plants causing a loss of approximately 5,000 jobs.  The local economy has slowly
improved through the addition of service industry and manufacturing jobs and the
recovery of the agricultural sector, although household income and unemployment
remain less favorable than the national averages.  The Company's future
performance will be highly dependent upon local economic conditions.


                                          5


<PAGE>

    Champaign is located approximately 75 miles south of Kankakee.  It is the
location of the original campus of the University of Illinois which employs
17,000 people and has a student body of over 30,000.  In addition, the economy
of the Champaign market area includes several major medical centers and
agricultural and industrial businesses.  Major employers in the Champaign area
include Carle Clinic, Covenant Medical Center, Parkland College, Kraft General
Foods, Supervalu, Hobbico, and Solo Cup.

    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., Stokely U.S.A., Inc., Hoopeston Food, Food Machinery Corp. (FMC),
Hoopeston Community Memorial Hospital and Schumachers.

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.


                                          6

<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>
                                                                 December 31,
                                ------------------------------------------------------------------------------                    
                                       1996                1995                1994                1993                1992
                                ------------------   -----------------  ------------------  ------------------  ------------------
                                Amount     Percent   Amount    Percent  Amount     Percent  Amount     Percent  Amount     Percent
                                ------     -------   ------    -------  ------     -------  ------     -------  ------     -------
<S>                             <C>        <C>      <C>        <C>      <C>        <C>      <C>        <C>      <C>        <C>

REAL ESTATE LOANS                                                     (Dollars in thousands)

  One-to-four family . . . . .  $149,544    54.74%  $147,007    54.28%  $136,735    61.13%  $122,522    59.55%  $108,636    59.14%
  Multi-family . . . . . . . .    14,172     5.19     14,475     5.35     14,551     6.51     13,336     6.48     14,064     7.66
  Commercial . . . . . . . . .    28,721    10.51     28,273    10.44     25,300    11.31     25,404    12.35     22,195    12.08
  Construction or
    development. . . . . . . .     5,525     2.02      8,248     3.05     11,730     5.24     11,177     5.43     10,755     5.85
  Mortgage-backed
    securities and
    participation
    certificates . . . . . . .    34,713    12.71     36,481    13.47      6,357     2.84      8,488     4.12      3,807     2.07 
                                --------   ------   --------   ------   --------   ------   --------   ------   --------   ------ 
    Total real estate
      loans and mortgage-
      backed securities. . . .   232,675    85.17    234,484    86.59    194,673    87.03    180,927    87.93    159,457    86.80
                                --------   ------   --------   ------   --------   ------   --------   ------   --------   ------
OTHER LOANS:

  Consumer Loans:
    Deposit account. . . . . .       588     0.21        745     0.27        504     0.23        593     0.29        573     0.31
    Student. . . . . . . . . .       918     0.34      1,151     0.43      1,733     0.77      1,606     0.78      1,917     1.04
    Automobile . . . . . . . .     4,033     1.48      3,219     1.19      2,232     1.00      1,228     0.60      1,107     0.60


                                       7
<PAGE>

<CAPTION>

                                                                 December 31,
                                -----------------------------------------------------------------------------                     
                                       1996                1995                1994                1993                1992
                                ------------------   -----------------  ------------------  ------------------  ------------------
                                Amount     Percent   Amount    Percent  Amount     Percent  Amount     Percent  Amount     Percent
                                ------     -------   ------    -------  ------     -------  ------     -------  ------     -------
<S>                             <C>        <C>      <C>        <C>      <C>        <C>      <C>        <C>      <C>        <C>

    Home equity. . . . . . . .    14,166     5.19     12,847     4.74      8,881     3.97      7,033     3.42      5,828     3.17
    Home improvement . . . . .        56     0.02        208     0.08        327     0.15        127     0.06        161     0.09
    Mobile home. . . . . . . .     3,161     1.16      3,122     1.15      3,207     1.43      3,099     1.50      3,296     1.80
    Credit cards . . . . . . .     1,705     0.62      1,870     0.69      1,804     0.81      1,988     0.97      2,219     1.21
    Personal . . . . . . . . .     5,942     2.17      3,919     1.45      2,246     1.00      1,506     0.73      1,442     0.79
                                --------            --------            --------            --------            -------- 

    Total consumer loans . . .    30,569    11.19     27,081    10.00     20,934     9.36     17,180     8.35     16,543     9.01

Commercial business loans. . .     9,943     3.64      9,246     3.41      8,074     3.61      7,649     3.72      7,703     4.19 
                                --------            --------            --------            --------            -------- 
    Total other loans. . . . .    40,512    14.83     36,327    13.41     29,008    12.97     24,829    12.07     24,246    13.20 
                                --------            --------            --------            --------            -------- 
Total loans and mortgage-
  backed securities
  receivable . . . . . . . . .   273,187   100.00%   270,811   100.00%   223,681   100.00%   205,756   100.00%   183,703   100.00%
                                --------            --------            --------            --------            -------- 

LESS:
  Loans in process . . . . . .     1,726                 957               1,705               2,622               1 970 
  Deferred fees and
    discounts. . . . . . . . .       425                 517                 555                 627                 590 
  Allowance for losses
    on loans . . . . . . . . .     2,360               2,388               2,251               2,166               2,391 
                                --------            --------            --------            --------            -------- 
  Total loans and mortgage-
    backed securities
    receivable, net  . . . . .  $268,676            $266,949            $219,170            $200,341            $178,752 
                                --------            --------            --------            --------            -------- 
                                --------            --------            --------            --------            -------- 
</TABLE>

                                        8 
<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>
                                                                 December 31,
                                ------------------------------------------------------------------------------                    
                                       1996                1995                1994                1993                1992
                                ------------------   -----------------  ------------------  ------------------  ------------------
                                Amount     Percent   Amount    Percent  Amount     Percent  Amount     Percent  Amount     Percent
                                ------     -------   ------    -------  ------     -------  ------     -------  ------     -------
<S>                             <C>        <C>      <C>        <C>      <C>        <C>      <C>        <C>      <C>        <C>
FIXED-RATE LOANS AND
MORTGAGE-BACK SECURITIES                                             (Dollars in thousands)  
Real estate:               
  One-to-four family . . . . .  $ 50,758    18.58%  $ 51,620    19.06%  $ 55,299    24.72%  $ 61,499    29.89%  $ 46,086    25.09%
  Multi-family . . . . . . . .       ---      ---        ---      ---         37     0.02         97     0.05        163     0.09 
  Commercial . . . . . . . . .     3,520     1.29      6,128     2.26      2,984     1.33      4,209     2.05      5,853     3.19 
  Construction or
      development. . . . . . .       690     0.25      1,583     0.58      8,844     3.96      7,817     3.80      4,965     2.70 
Mortgage-backed securities . .    17,489     6.40     18,341     6.77      6,357     2.84      8,488     4.12      3,807     2.07 
                                --------   ------   --------   ------   --------   ------   --------   ------   --------   ------ 
Total real estate loans
   and mortgage-backed
   securities. . . . . . . . .    72,457    26.52     77,672    28.67     73,521    32.87     82,110    39.91     60,874    33.14 
Consumer . . . . . . . . . . .    17,065     6.25     14,876     5.49     12,789     5.72      9,425     4.58     10,715     5.83 
Commercial business. . . . . .     2,867     1.05      2,665     0.98      2,359     1.05      1,870     0.91      1,908     1.04 
                                --------   ------   --------   ------   --------   ------   --------   ------   --------   ------ 
   Total fixed-rate loans and
      mortgage-backed
      securities . . . . . . .    92,389    33.82     95,213    35.14     88,669    39.64     93,405    45.40     73,497    40.01 
                                --------   ------   --------   ------   --------   ------   --------   ------   --------   ------ 
                                --------   ------   --------   ------   --------   ------   --------   ------   --------   ------ 

ADJUSTABLE-RATE LOANS AND
MORTGAGE-BACKED SECURITIES 
  Real estate:
    One-to-four family . . . .    98,786    36.16     95,387    35.22     81,436    36.41     61,023    29.66     62,550    34.05 

                                        9 
<PAGE>

<CAPTION>

                                                                 December 31,
                                ------------------------------------------------------------------------------                    
                                       1996                1995                1994                1993                1992
                                ------------------   -----------------  ------------------  ------------------  ------------------
                                Amount     Percent   Amount    Percent  Amount     Percent  Amount     Percent  Amount     Percent
                                ------     -------   ------    -------  ------     -------  ------     -------  ------     -------
<S>                             <C>        <C>      <C>        <C>      <C>        <C>      <C>        <C>      <C>        <C>
    Multi-family . . . . . . .    14,172     5.19     14,475     5.35     14,514     6.49     13,239     6.43     13,901     7.57 
    Commercial . . . . . . . .    25,201     9.22     22,145     8.18     22,316     9.97     21,195    10.30     16,342     8.90 
    Construction or
      development. . . . . . .     4,835     1.77      6,665     2.47      2,886     1.29      3,360     1.63      5,790     3.15 
    Mortgage-backed 
      securities . . . . . . .    17,224     6.31     18,140     6.70        ---      ---        ---      ---        ---      --- 
                                --------   ------   --------   ------   --------   ------   --------   ------   --------   ------ 
       Total real estate loans
        and mortgage-backed
        securities . . . . . .   160,218    58.65    156,812    57.92    121,152    54.16     98,817     48.02    98,583    53.67 
Consumer . . . . . . . . . . .    13,504     4.94     12,205     4.51      8,145     3.64      7,755      3.77     5,828     3.17 
Commercial business. . . . . .     7,076     2.59      6,581     2.43      5,715     2.56      5,779      2.81     5,795     3.15 
                                --------   ------   --------   ------   --------   ------   --------   ------   --------   ------ 
       Total adjustable-rate
        loans and mortgage-
        backed securities. . .   180,798    66.18    175,598    64.86    135,012    60.36    112,351     54.60   110,206    59.99 
                                --------   ------   --------   ------   --------   ------   --------   ------   --------   ------ 
Total loans and mortgage-
 backed securities . . . . . .   273,187   100.00%   270,811   100.00%   223,681   100.00%   205,756    100.00%  183,703   100.00%
                                --------   ------   --------   ------   --------   ------   --------   ------   --------   ------ 
                                           ------              ------              ------              ------              ------ 

Less:             
  Loans in process . . . . . .     1,726                 957               1,705               2,622               1,970          
  Deferred fees and 
   discounts . . . . . . . . .       425                 517                 555                 627                 590          
  Allowance for losses on
   loans . . . . . . . . . . .     2,360               2,388               2,251               2,166               2,391          
                                --------            --------            --------            --------            --------          
     Total loans and mortgage-
      backed securities
      receivable, net. . . . .  $268,676            $266,949            $219,170            $200,341            $178,752          
                                --------            --------            --------            --------            --------          
                                --------            --------            --------            --------            --------          

</TABLE>


                                      10 
<PAGE>

     The following schedule illustrates the interest rate sensitivity of the 
Company's loan and mortgage-backed securities portfolio at December 31, 1996. 
 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>
                                      Real Estate                      
                  ---------------------------------------------------- 
                    One-to-four   
                    family and    
                  Mortgage-Backed     Multi-family    Construction or                           Commercial                       
                    Securities       and Commercial     Development         Consumer             Business             Total      
                  ----------------  ----------------  ----------------   ----------------    -----------------   ----------------
                          Weighted          Weighted          Weighted           Weighted             Weighted           Weighted
                           Average           Average           Average            Average              Average           Average 
                  Amount    Rate    Amount    Rate    Amount    Rate     Amount    Rate      Amount     Rate     Amount    Rate  
                  ------  --------  ------  --------  ------  --------   ------  --------    ------   --------   ------  --------
                                                           (Dollars in thousands) 
<S>               <C>     <C>       <C>     <C>       <C>     <C>        <C>     <C>         <C>      <C>        <C>     <C>     
Due During Twelve 
Month Periods 
Ending
December 31, 
------------
1997(1). . . . . $  3,696    6.34%  $ 9,296    8.31%  $4,109    8.57%    $ 4,132   11.24%    $6,098     9.34%  $  27,331   8.75%
1998 and 1999. .      825    8.38     1,732    9.89      ---     ---       6,592    9.33      2,262     9.32      11,411   9.34 
2000 and 2001. .    2,083    8.37     2,810    7.80       91    9.25      11,385    9.47        993     9.31      17,362   9.06 
2002 and 2006. .   15,206    7.88     8,895    8.57      298    8.51       6,494    9.94        498     9.37      31,391   8.53 
2007 and 2021. .   71,586    7.28    19,349    9.26      210    9.64       1,966   10.29         92     9.25      93,203   7.76 
2022 and 
 following . . .   90,861    7.12       811    9.19      817    7.17         ---     ---        ---      ---      92,489   7.14 
                 --------           -------           ------             -------             ------             --------        
   Total . . . . $184,257           $42,893           $5,525             $30,569             $9,943             $273,187        
                 --------           -------           ------             -------             ------             --------        
                 --------           -------           ------             -------             ------             --------        
</TABLE>

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

                                      11 
<PAGE>

      As of December 31, 1996, the total amount of loans and mortgage-backed 
securities due after December 31, 1997, which had predetermined interest 
rates was $83.7 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 $162.2 million.

     Under the Financial Institutions Reform, Recovery and Enforcement Act of 
1989 ("FIRREA"), 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, 1996, the Bank's regulatory loan-to-one borrower limit was $4.8 million.  
On the same date, the Bank's largest total of loans to one borrower was $3.5 
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, 
1996, $149.5 million, or 54.7% 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 $42,700 and the largest outstanding residential loan had a 
book value of $488,800.  Substantially all of the residential loans 
originated by the Company are secured by properties located in the Company's 
primary market areas.

     Historically, the Company originated for retention in its own portfolio 
25-year fixed-rate loans secured by one-to-four family residential real 
estate.  Beginning in 1980, in order to reduce its exposure to changes in 
interest rates, the Company began to originate Adjustable Rate Mortgages 
("ARM"), subject to market conditions and consumer preference.  While the 
Company continues to originate long term fixed-rate residential loans, the 
Company has adopted a policy of selling substantially all of such loans in 
the secondary market except as consistent with its asset/liability management 
objectives.  Currently, the Company retains most of its fixed-rate 
residential loans having terms of 15 years or less.

     The Company's fixed-rate loans are originated with terms which conform 
to secondary market standards (I.E., Federal Home Loan Mortgage Corporation 
("FHLMC") standards).  Most of the 

                                      12 
<PAGE>

Company's fixed-rate residential loans have contractual terms to maturity of 
15 to 30 years.  Although, under the Company's current policy, the Company 
sells most of the fixed-rate loans with terms of more than 15 years that it 
originates, the Company typically retains the servicing of loans that it 
sells.  At December 31, 1996, the Company had $37.3 million of 15 year 
fixed-rate residential loans and $13.5 million of 30 year fixed-rate 
residential loans in its portfolio.

     Since 1980, the Company has offered ARM loans at rates, terms and fees 
determined in accordance with market and competitive factors.  The programs 
currently offered generally meet the standards and requirements of the 
secondary market for residential loans.  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, 
1996, the Company had $67.7 million, $13.0 million, and $18.1 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 $703,000 of 
one-to-four family loans delinquent 60 days or more at December 31, 1996, 
$294,000 (or .2% of one-to-four family loans) consisted of ARMs and $409,000 
(or .3% 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 90% except for a program applicable to 
first time homebuyers where this ratio can go up to 100% 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 underlying 
property.

     In view of the prevailing level of real estate values in the Company's 
market areas, the Company rarely originates loans in excess of $207,000 (the 
FHLMC maximum).  As of December 31, 1996, the Company had 33 residential 
mortgage loans having an aggregate balance of $8.8 million with original 
balances in excess of $207,000 ("Jumbo Loans").  The Company's delinquency 
experience on its Jumbo Loans has been similar to its experience on its other 
residential loans.

     During 1995, the Company requested and received approval as a 
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.  During 
1996, twelve such loans totaling $872,000 were originated and sold.  
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, 1996, the Company had $42.9 million in multi-family and 
commercial real estate loans, representing 15.7% of the 

                                      13 
<PAGE>

Company's total loan and mortgage-backed securities portfolio.  Included in 
such loans were $5.6 million of 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 bowling alleys.

     The Company has originated both adjustable and fixed-rate multi-family 
and commercial real estate loans, although most recent originations have been 
adjustable-rate 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.

     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, 1996 and the amounts of such loans which were non-performing or 
"of concern" at December 31, 1996.  The amounts shown do not reflect 
allowances for losses.

<TABLE>
                                            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 . . . .     29     $15,437      $14,172         $1,718 
Nursing homes. . . . . . . . . .      2       2,065          579            --- 
Churches . . . . . . . . . . . .     17       2,664        1,772            --- 
Mobile home park . . . . . . . .      1         608          580            --- 
Motels . . . . . . . . . . . . .      2       1,325          849            --- 
Agricultural related . . . . . .      9         906          764            --- 
Industrial and warehouse . . . .     40      16,961       14,190            --- 
Recreation facilities. . . . . .      3       3,962        2,751            --- 
Retail . . . . . . . . . . . . .     20       3,805        2,999          1,396 
Office . . . . . . . . . . . . .      8       2,336        1,735            436 
Other. . . . . . . . . . . . . .     20       3,939        2,502            590 
                                    ---     -------      -------         ------ 
   Total . . . . . . . . . . . .    151     $54,008      $42,893         $4,140 
                                    ---     -------      -------         ------ 
                                    ---     -------      -------         ------ 
</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 

                                      14 
<PAGE>

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.

     The following table presents information regarding the Bank's 
multi-family and commercial real estate loan participations at December 31, 
1996.  At December 31, 1996, the Bank had $1.3 million of purchased loans and 
participation interests in one-to-four family loans.

<TABLE>
                                                                Original       Outstanding       Unfunded         Amount      
                                  Month of    Original Loan   Participation    Balance at     Commitment at   Non-Performing  
Type of Security/Location       Origination      Amount          Amount       Dec. 31, 1996   Dec. 31, 1996   or of Concern   
-------------------------       -----------   -------------   -------------   -------------   -------------   --------------  
                                                    (Dollars in thousands)                                                    
<S>                             <C>           <C>             <C>             <C>             <C>             <C>             
APARTMENT BUILDINGS:
  Pleasant Hills, California      09/10/86       $11,900          $  726          $  668          $ ---            $  --- 
  Santa Ana, California           08/26/86        13,750             839             753            ---               --- 
  Everett, Washington             09/12/86         5,500           1,375           1,161            ---             1,161 
  Seabrook, Maryland              09/01/87        18,000           1,800           1,678            ---               --- 
MOTELS:
  Gainesville, Florida            12/19/88         1,350             675             277            ---               --- 
  Spring Lake, North Carolina     12/19/88         1,300             650             572            ---               --- 
NURSING HOME:
  Arlington Heights, Illinois     03/01/73         1,980             990             175            ---               --- 
WAREHOUSE:
  Bethune, South Carolina         12/30/93           725             551             296            ---               --- 
                                                                                  ------          -----            ------ 
                                                                                  $5,580          $ ---            $1,161 
                                                                                  ------          -----            ------ 
                                                                                  ------          -----            ------ 
</TABLE>

     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, many of the loan participations purchased 
by the Company in the past have been on projects 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 
10% of total assets.

     Since 1988, 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 has significantly increased 
its origination of 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, 1996, the Company had $9.9 million in commercial business 
loans outstanding (representing 3.6% of the Company's total loan and 
mortgage-backed securities portfolio) with additional commercial business 
loan commitments totaling $4.6 million, most of which were undrawn lines of 
credit.  In addition, at December 31, 1996, the Company had thirteen letters 
of credit 

                                      15 
<PAGE>

outstanding, in an aggregate amount of $1.0 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, 1996, the Company had 
nine commercial business loans with balances of $200,000 or more, in an 
aggregate amount of $2.9 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, 1996.

<TABLE>
                                            Original
                                              Loan     Outstanding       Amount     
                                  Number    Commit-     Principal    Non-Performing 
                                 of Loans    ment     Balance      or of Concern  
                                 --------   --------   -----------   -------------- 
                                              (Dollars in thousands) 
<S>                              <C>        <C>        <C>           <C>            
SECURED LOANS:
  Accounts receivable. . . . . .     14     $ 1,203       $   775          $--- 
  Inventory. . . . . . . . . . .     16         748           520           --- 
  Equipment. . . . . . . . . . .     41       2,135         1,421           --- 
  Other business assets. . . . .      6       1,459           705           --- 
  Certificates of deposits . . .      4         157            78           --- 
  Stocks and bonds . . . . . . .      8         812           569           --- 
  Heavy duty vehicles. . . . . .     43       1,817         1,141            25 
  Other motor vehicles . . . . .     17         856           434           --- 
  Crops. . . . . . . . . . . . .      7       1,546         1,026           --- 
  Livestock. . . . . . . . . . .      1          35            15           --- 
  Life insurance . . . . . . . .      3          86            59           --- 
  Stand-by letters of credit . .      7         897           ---           --- 
  Beneficial interest in 
   real estate trust . . . . . .     21       3,888         2,364           --- 
UNSECURED LOANS. . . . . . . . .     53       1,288           836            45 
UNSECURED STAND-BY LETTERS 
 OF CREDIT . . . . . . . . . . .      6         144           ---           --- 
                                    ---     -------        ------          ---- 
   Total commercial business 
    loans. . . . . . . . . . . .    247     $17,071        $9,943          $ 70 
                                    ---     -------        ------          ---- 
                                    ---     -------        ------          ---- 
</TABLE>

     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, 
1996, the Company's consumer loans totaled $30.6 million or 11.2% 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, education loans (which carry a guaranty 
from a State agency), loans secured by 

                                      16 
<PAGE>

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, 
beginning in 1988, the Company began to offer 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 90% of the buyer's cost.  As of December 31, 1996, mobile home loans 
totaled $3.2 million or approximately 1.2% of the Company's gross loan and 
mortgage-backed securities portfolio.

     The Company also offers student loans in compliance with the guidelines 
established by the Federal Family Education Loan Program.  Historically, such 
loans were 100% guaranteed as to principal and interest by the Illinois 
Student Assistance Commission. Loans originated after October 1, 1993, 
however, are 100% guaranteed as to interest and 98% guaranteed as to 
principal.  As of December 31, 1996, the Company held $918,000 of such loans, 
which represents 0.3% of the Company's 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, 1996, $177,000, or 
approximately .58% 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 recovery 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 area, the Company 
expanded its construction lending.  At December 31, 1996, the Company had 
$2.0 million of residential construction loans and $19,000 of lot loans to 
borrowers intending to live in the properties upon completion of construction.

     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 

                                      17 
<PAGE>

one year and may provide for the payment of interest and loan fees from loan 
proceeds.  At December 31, 1996, the Bank had approximately $1.4 million in 
loans to builders of residences, and $876,000 million in loans on commercial 
construction.  In addition, on the same date, the Company had $1.2 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, 1996, only one of the Company's construction loans had a 
principal balance in excess of $500,000.  The principal balance of this loan 
was $550,000.

     The table below sets forth by type of security property the number and 
amount of the Company's construction loans at December 31, 1996.

<TABLE>
                                                              Outstanding      Amount      
                                     Number     Total Loan     Principal    Non-Performing 
                                    of Loans    Commitment      Balance     or of Concern  
                                    --------    ----------    -----------   -------------- 
                                                  (Dollars in thousands)  
<S>                                  <C>        <C>            <C>          <C>            
One-to-four family residential. . .    13         $1,958         $1,958         $--- 
Land acquisition and development. .    30          3,935          2,867          336 
Church. . . . . . . . . . . . . . .     2            700            700          --- 
                                       --         ------         ------         ---- 
   Total. . . . . . . . . . . . . .    45         $6,593         $5,525         $336 
                                       --         ------         ------         ---- 
                                       --         ------         ------         ---- 
</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 
complies with its 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.

     Consistent with the Company's asset/liability management strategy, the 
Company sells a majority of its 30-year, fixed-rate loan production in the 
secondary market.  The Company's recent 

                                      18 
<PAGE>

sales have been made through sales contracts entered into after the Company 
has committed to fund the loan.  The Company attempts to limit any 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, 1996, excluding 
mortgage-backed securities, approximately $6.9 million of the Company's loan 
portfolio consisting of purchased loans and purchased participations was 
serviced by others and the Company serviced $35.4 million of loans for 
others.  During the year ended December 31, 1996, the Company received fee 
income of $91,000 in connection with loans serviced for others.

















                                      19 
<PAGE>

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

<TABLE>
                                                       Year Ended December 31,      
                                                  --------------------------------- 
                                                   1996         1995         1994   
                                                  -------      -------      ------- 
                                                       (Dollars in thousands)       
<S>                                              <C>           <C>         <C>      
ORIGINATIONS BY TYPE:
  Adjustable-Rate:
    Real estate - one-to-four family. . . . .     $21,433      $26,494      $30,763 
                - multi-family. . . . . . . .         ---        2,100        2,250 
                - commercial. . . . . . . . .       7,745        4,417        7,377 
    Non-real estate - consumer. . . . . . . .      13,536       10,137        4,602 
                    - commercial business . .       6,767        6,644        9,661 
                                                  -------      -------      ------- 
      Total adjustable-rate . . . . . . . . .      49,481       49,792       54,653 
Fixed-Rate:           
  Real estate - one-to-four family. . . . . .      13,728        6,657       12,516 
              - multi-family. . . . . . . . .         ---          ---          --- 
              - commercial. . . . . . . . . .       1,829        1,126       10,217 
  Non-real estate - consumer. . . . . . . . .      14,525       13,395       11,694 
                  - commercial business . . .       2,336        2,717        2,818 
                                                 --------      -------      ------- 
      Total fixed-rate  . . . . . . . . . . .      32,418       23,895       37,245 
      Total loans originated  . . . . . . . .      81,899       73,687       91,898 

PURCHASES:                                                                                                  
  Real estate - one-to-four family  . . . . .         ---            3          150 
              - commercial. . . . . . . . . .       1,120          375          --- 
  Non-real estate - consumer  . . . . . . . .         ---          ---          --- 
                  - commercial business . . .         ---          ---          --- 
                                                 --------      -------      ------- 
      Total loans . . . . . . . . . . . . . .       1,120          378          150 
  Mortgage-backed securities. . . . . . . . .      12,999       34,707          --- 
                                                 --------      -------      ------- 
      Total purchased . . . . . . . . . . . .      14,119       35,085          150 
                                                 --------      -------      ------- 

SALES AND REPAYMENTS:
  Sales:
    Real estate - one-to-four family. . . . .       4,834        2,246        6,922 
                - commercial. . . . . . . . .         ---          ---          --- 
    Non-real estate - consumer. . . . . . . .         792        1,129          589 
                    - commercial business . .         ---          ---          --- 
Loans sold with branch. . . . . . . . . . . .       3,845          ---          --- 
                                                 --------      -------      ------- 
      Total loans . . . . . . . . . . . . . .       9,471        3,375        7,511 
Mortgage-backed securities. . . . . . . . . .       4,913          ---          --- 
                                                 --------      -------      ------- 
      Total sales . . . . . . . . . . . . . .      14,384        3,375        7,511 
Principal repayments. . . . . . . . . . . . .      79,269       57,159       65,592 
                                                 --------      -------      ------- 
      Total reductions. . . . . . . . . . . .      93,653       60,534       73,103 
Increase (decrease) in other items, net . . .          11       (1,108)         (29)
                                                 --------      -------      ------- 
      Net increase. . . . . . . . . . . . . .    $  2,376      $47,130      $18,916 
                                                 --------      -------      ------- 
                                                 --------      -------      ------- 
</TABLE>

                                      20 
<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 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 lending 
officer.  Generally, personal contact is made with the borrower when the loan 
is 6 to 7 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 estimated loan losses.  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.



















                                      21 
<PAGE>

      The following table sets forth the Company's loan delinquencies by 
type, by amount and by percentage of type at December 31, 1996.

<TABLE>
                                               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. . . .    6      $179      0.12%      12     $  524     0.35%       18    $  703     0.47% 
  Multi-family. . . . . . .  ---       ---       ---        1        557     3.93         1       557     3.93  
  Commercial. . . . . . . .  ---       ---       ---        6      2,401     8.36         6     2,401     8.36  
  Construction and  
   development . . . . . .     2       163      2.95        2        170     3.08         4       333     6.03  
  Consumer . . . . . . . .    19       138      0.45       38        177     0.58        57       315     1.03  
  Commercial business. . .   ---       ---       ---        1         45     0.45         1        45     0.45  
                             ---      ----                ---     ------                ---    ------           
    Total. . . . . . . . .    27      $480      0.20       60     $3,874     1.63        87    $4,354     1.83  
                             ---      ----                ---     ------                ---    ------           
                             ---      ----                ---     ------                ---    ------           
</TABLE>

     The following table sets forth the Company's loan delinquencies by type, 
by amount and by percentage of type at December 31, 1995.

<TABLE>
                                               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. . . .    7      $147      0.10%      18     $  515     0.35%       25    $  662     0.45% 
  Multi-family. . . . . . .  ---       ---       ---        1        557     3.85         1       557     3.85  
  Commercial. . . . . . . .  ---       ---       ---        1        111     0.39         1       111     0.39  
  Construction and  
   development. . . . . . .  ---      ---        ---        2        170     2.06         2       170     2.06  
Consumer. . . . . . . . . .   14      108       0.40       23        108     0.40        37       216     0.80  
Commercial business . . . .  ---      ---        ---      ---        ---      ---       ---       ---      ---  
                             ---      ----                ---     ------                ---    ------           
    Total . . . . . . . . .   21     $255       0.11       45     $1,461     0.62        66    $1,716      .73  
                             ---      ----                ---     ------                ---    ------           
                             ---      ----                ---     ------                ---    ------           
</TABLE>



                                      22 
<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 
loan losses.  If an asset or portion thereof is classified as Loss, the 
institution must either establish specific allowances for loan losses 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, 1996, on a net basis, the Company had classified $2.3 million of 
its assets as Special Mention, $4.1 million as Substandard and $248,000 as 
Loss.  No assets were classified as Doubtful at December 31, 1996.  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, 1996, there were 45 loans with outstanding principal 
balances totaling $2.0 million 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 
and discussed herein.  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. 

                                     23
<PAGE>

                                                  December 31,
                                      ------------------------------------
                                      1996    1995    1994    1993    1992
                                      ----    ----    ----    ----    ----
                                              (Dollars in thousands)

Non-accruing loans:
  One-to-four family(1)............. $  524  $  516  $  485  $  298  $  372
  Multi-family......................    ---     ---     557     ---     ---
  Commercial........................  1,396     111     111     116     399
  Construction and development......    ---     ---     ---     ---     ---
  Consumer..........................    ---     ---     ---     ---     ---
  Commercial business...............    ---     ---     ---     ---     ---
                                     ------  ------  ------  ------   -----
     Total..........................  1,920     627   1,153     414     771
                                     ------  ------  ------  ------   -----
Accruing loans delinquent more
 than 90 days:
  One-to-four family(1).............    ---     ---     ---     ---     ---
  Multi-family......................    557     557     296     ---     ---
  Commercial........................  1,005     ---     ---     ---     378
  Construction and development......    170     169     ---     ---     ---
  Consumer..........................    177     108     133     113     208
  Commercial business...............     45     ---     ---     ---       7
                                     ------  ------  ------  ------   -----
    Total...........................  1,954     834     429     113     593
                                     ------  ------  ------  ------   -----
Foreclosed assets:
  One-to-four family................     96      84      27     132     264
  Multi-family......................    ---     675     579     448     ---
  Commercial........................     69      69      73     251     151
  Construction and development......    ---     ---     ---     ---     ---
  Consumer..........................     28     ---      16      15       7
  Commercial business...............    ---     ---     ---     ---     ---
                                     ------  ------  ------  ------   -----
    Total foreclosed assets.........    193     828     695     846     422
                                     ------  ------  ------  ------   -----
  Total non-performing assets....... $4,067  $2,289  $2,277  $1,373  $1,786
                                     ------  ------  ------  ------   -----
                                     ------  ------  ------  ------   -----
  Total as a percentage of total
   assets...........................   1.16%   0.64%   0.75%   0.49%   0.65%
                                     ------  ------  ------  ------   -----
                                     ------  ------  ------  ------   -----
_________________________
(1)  Includes loans held for sale.

     For the year ended December 31, 1996 and the year ended December 31, 
1995, gross interest income which would have been recorded had the 
non-accruing loans been current in accordance with their original terms 
amounted to $37,648 and $37,488, respectively.  The amount that was included 
in interest income on such loans was $29,147 and $24,707 for the year ended 
December 31, 1996 and the year ended December 31, 1995, respectively.

     The Company's non-performing assets at December 31, 1996 included the 
following:  (i) an automobile dealership in Kankakee, Illinois; (ii) an 
apartment complex in Kankakee, Illinois;  (iii) a residential subdivision in 
Bourbonnais, Illinois; (iv) a residential subdivision in Champaign, Illinois; 
and (v) a commercial retail building in Champaign, Illinois.

                                         24
<PAGE>

     LOAN LOSS RESERVE ANALYSIS.  The following table sets forth an analysis 
of the Company's allowance for loan losses.

                                                                          Nine
                                                                         Months
                                               Year Ended                Ended
                                               December 31,             Dec 31,
                                      -------------------------------   -------
                                      1996     1995     1994     1993     1992
                                      ----     ----     ----     ----    ------
                                                 (Dollar in thousands)
Balance at beginning of period.....  $2,388   $2,251   $2,165   $2,391  $1,735
Charge-offs:
  One-to-four family...............     ---      ---       31       20     ---
  Multi-family.....................     ---      ---      108      176     ---
  Commercial real estate...........     ---      ---       17      ---     145
  Construction.....................     ---      ---      ---      ---     ---
  Consumer.........................     125       59       74      106      84
  Commercial business..............       1      ---       15      364     278
                                     ------   ------   ------   ------  ------
                                        126       59      245      666     507
                                     ------   ------   ------   ------  ------
Recoveries:
  One-to-four family...............     ---      ---      ---      ---     ---
  Multi-family.....................     ---      ---      ---      ---     ---
  Commercial real estate...........     ---      ---      ---      ---     312
  Construction.....................     ---      ---      ---      ---     ---
  Consumer.........................      56       20       33       20      13
  Commercial business..............     ---        3        2      ---     ---
                                     ------   ------   ------   ------  ------
                                         56       23       35       20     325
                                     ------   ------   ------   ------  ------
Net charge-offs....................     (70)     (36)    (210)    (646)   (182)
Additions charged to operations....      42      173      296      420     838
                                     ------   ------   ------   ------  ------
Balance at end of period...........  $2,360   $2,388   $2,251   $2,165  $2,391
                                     ------   ------   ------   ------  ------
                                     ------   ------   ------   ------  ------
Ratio of net charge-offs during 
 the period to average loans
 outstanding during the period.....    0.03%    0.02%    0.11%    0.36%   0.10%
                                     ------   ------   ------   ------  ------
                                     ------   ------   ------   ------  ------
Ratio of net charge-offs during 
 the period to average 
 non-performing assets.............    2.20%    1.58%   11.51%   40.90%  13.31%
                                     ------   ------   ------   ------  ------
                                     ------   ------   ------   ------  ------

     The balance in the allowance for loan losses 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.

                                      25
<PAGE>

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

<TABLE>
                                                                           December 31, 
                       -------------------------------------------------------------------------------------------------------------
                               1996                   1995                     1994                1993                 1992  
                       --------------------   --------------------   --------------------  --------------------  -------------------

                                Percent of             Percent of              Percent of            Percent of           Percent of
                                 Loans in               Loans in                Loans in              Loans in             Loans in
                                   Each                   Each                    Each                  Each                 Each
                                Category to            Category to            Category to           Category to          Category to
                       Amount   Total Loans   Amount   Total Loans   Amount   Total Loans  Amount   Total Loans  Amount  Total Loans
                       ------   -----------   ------   -----------   ------   -----------  ------   -----------  ------  -----------
                                                             (Dollars in thousands)
<S>                    <C>         <C>        <C>         <C>        <C>         <C>       <C>        <C>        <C>        <C>
One-to-four family...  $  408      62.71%     $  403      62.74%     $  506      62.92%    $  299     62.11%     $  301     60.39%
Multi-family.........     451       5.94         437       6.18         460       6.70        399      6.76         536      7.82
Commercial real 
 estate..............     496      12.04         561      12.07         470      14.34        519     12.88         463     12.34

Construction.........     294       2.32         272       3.52         424       2.70        264      5.66         262      5.98
Consumer.............     185      12.82         170      11.56         150       9.63        135      8.71         155      9.19
Commercial business..     276       4.17         259       3.95         241       3.71        234      3.88         477      4.28

Unallocated..........     250        ---         286        ---         ---        ---        315       ---         197       ---
                       ------     ------      ------     ------      ------     ------     ------    ------      ------    ------
  Total..............  $2,360     100.00%     $2,388     100.00%     $2,251     100.00%    $2,165    100.00%     $2,391    100.00%
                       ------     ------      ------     ------      ------     ------     ------    ------      ------    ------
                       ------     ------      ------     ------      ------     ------     ------    ------      ------    ------
</TABLE>

                                    26
<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 Bank has acquired 
securities  for trading purposes.  The Company's securities held for trading  
are recorded on the Company's books at market value.  At December 31, 1996, 
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 is required by federal regulations to maintain a minimum 
amount of liquid assets that may be invested in specified securities and is 
also permitted to make certain other securities investments.  Cash flow 
projections are regularly reviewed and updated to assure that adequate 
liquidity is provided.  As of December 31, 1996, the Bank's liquidity ratio 
(liquid assets as a percentage of net withdrawable savings and current 
borrowings) was 14.8% as compared to the OTS requirement of 5%.



                                      27

<PAGE>

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

<TABLE>
                                                                          December 31,
                                                     ----------------------------------------------------
                                                          1996                1995              1994
                                                     ---------------     --------------     -------------
                                                     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....................   $ 9,628    17.87%   $12,961   25.98%   $20,407   33.90%
   Federal agency obligations....................    41,386    76.82     34,426   69.01     36,806   61.14
   Municipal bonds...............................        72     0.13         75    0.15         77    0.13
   Non-marketable equity securities..............       501     0.93        551    1.11        551    0.91
   Mutual fund shares............................       331     0.62        324    0.65        960    1.59
                                                    -------    -----    -------  ------    -------   -----
      Subtotal...................................    51,918    96.37     48,337   96.90     58,801   97.67
FHLB Stock.......................................     1,956     3.63      1,546    3.10      1,401    2.33
                                                    -------    -----    -------  ------    -------   -----
      Total investment securities and FHLB
       stock.....................................   $53,874   100.00%   $49,883  100.00%   $60,202  100.00%
                                                    -------    -----    -------  ------    -------   -----
                                                    -------    -----    -------  ------    -------   -----
Average remaining life or term to repricing of
 investment securities excluding FHLB stock
 and non-marketable securities................... 64 months           45 months          46 months
Other Interest-Earning Assets:
   Federal funds sold............................   $ 7,985    55.59%   $13,090   59.19%   $ 2,340   23.60%
   Money market funds............................     4,883    33.99      3,755   16.98      1,592   16.06
   FHLB overnight investments....................     1,446    10.07      4,982   22.53      4,434   44.73
   Certificates of deposit.......................        50     0.35        288    1.30      1,548   15.61
                                                    -------    -----    -------  ------    -------   -----
      Total......................................   $14,364   100.00%   $22,115  100.00%   $ 9,914  100.00%
                                                    -------    -----    -------  ------    -------   -----
                                                    -------    -----    -------  ------    -------   -----
</TABLE>
_____________________
(1)  Includes securities held for sale.

                                             28
<PAGE>

     The composition and maturities of the investment securities portfolios, 
excluding Federal Home Loan Bank of Chicago ("FHLB of Chicago") stock and 
non-marketable equity securities at December 31, 1996, are indicated in the 
following table.

<TABLE>

                                                           At December 31, 1996
                                    ------------------------------------------------------------------
                                    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..........   $2,007     $ 7,621       $  ---       $   ---       $ 9,628
Federal agency obligations..........    2,002      22,639        9,979         6,766        41,386
Mutual fund shares..................      331         ---          ---           ---           331
                                       ------     -------       ------       -------       -------
Total...............................   $4,340     $30,260       $9,979       $ 6,766       $51,345
                                       ------     -------       ------       -------       -------
                                       ------     -------       ------       -------       -------
Weighted average yield..............     6.92%       5.82%        7.05%         7.15%         6.33%
                                       ------     -------       ------       -------       -------
                                       ------     -------       ------       -------       -------
SECURITIES HELD-TO-MATURITY:
Municipal Bonds.....................      ---         ---          ---       $    72       $    72
                                       ------     -------       ------       -------       -------
                                       ------     -------       ------       -------       -------
Weighted average yield..............         %           %            %         6.74%         6.74%
                                       ------     -------       ------       -------       -------
                                       ------     -------       ------       -------       -------
</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 of Chicago 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 deposits 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 the interest rate, among other factors. The Company has 
not actively sought deposits outside of its primary market area.

                                    29
<PAGE>

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

                                                 Year Ended December 31,
                                           ---------------------------------
                                             1996         1995        1994
                                           --------     --------    --------
                                                (Dollars in thousands) 

Opening balance........................    $286,080     $265,570    $242,703
Deposits...............................     562,775      517,300     620,613
Withdrawals............................     573,994      522,551     621,390
Purchased deposits.....................         ---       16,071      16,568
Sold deposits..........................      (8,608)         ---         ---
Increase (decrease) before interest
 credited..............................     (19,827)      10,820      15,791
Interest credited......................      11,095        9,690       7,076
                                           --------     --------    --------
Ending balance.........................    $277,348     $286,080    $265,570
                                           --------     --------    --------
                                           --------     --------    --------
Net increase (decrease)................    $ (8,732)    $ 20,510    $ 22,867
                                           --------     --------    --------
                                           --------     --------    --------
Percent increase (decrease)............       (3.05)%       7.72%       9.42%
                                           --------     --------    --------
                                           --------     --------    --------

                                         30
<PAGE>

     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.

<TABLE>
                                                    December 31,
                               -----------------------------------------------------------
                                     1996               1995                 1994
                               ------------------  ------------------   ------------------
                                       Percent of          Percent of           Percent 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%........  $  7,644    2.76%   $  7,850      2.75%   $  6,892     2.60%
Passbook Accounts 2.66%.....    51,966   18.74      53,760     18.79      60,324    22.71
NOW Accounts 3.47%..........    34,756   12.53      34,842     12.18      40,109    15.10
Money Market Accounts 2.83%.     6,612    2.38       8,937      3.12      11,650     5.39
                              --------  ------    --------    ------    --------   ------
Total Non-Certificates......   100,978   36.41     105,389     36.84     118,975    44.80
                              --------  ------    --------    ------    --------   ------
Certificates:        
-------------
0.00 - 3.99%................         3    0.00       1,325      0.46      27,835    10.48
4.00 - 4.99%................     6,560    2.37      15,528      5.43      54,566    20.55
5.00 - 5.49%................    65,714   23.69      40,919     14.31      22,148     8.34
5.50 - 5.99%................    64,930   23.41      45,292     15.83      20,703     7.80
6.00 - 7.99%................    38,666   13.94      76,729     26.82      17,001     6.40
8.00 - 9.99%................       273    0.10         572      0.20       3,858     1.45
10.00 and over..............       ---     ---         ---       ---         287     0.11
                              --------  ------    --------    ------    --------   ------
Total Certificates..........   176,146   63.51     180,365     63.05     146,398    55.13
                              --------  ------    --------    ------    --------   ------
Accrued Interest............       224    0.08         326      0.11         197     0.07
                              --------  ------    --------    ------    --------   ------
Total Deposits..............  $277,348  100.00%   $286,080    100.00%   $265,570   100.00%
                              --------  ------    --------    ------    --------   ------
                              --------  ------    --------    ------    --------   ------
</TABLE>
____________
(1)  Rates on transaction and savings deposits are those in effect on 
December 31, 1996.

                                       31
<PAGE>

     The following table shows rate and maturity information for the 
Company's certificates of deposit as of December 31, 1996.

<TABLE>
                                0.00-      5.00-       5.50-   6.00-   8% and              Percent
                                4.99%      5.49%       5.99%   7.99%    Over      Total    of Total
                                -----      -----       -----   -----    ----      -----    --------
<S>                             <C>        <C>         <C>     <C>      <C>       <C>       <C>
                (Dollars in thousands) 
Certificate Accounts
Maturing
In Quarter Ending:        
------------------
March 31, 1997.............     $4,507    $19,601    $ 6,207  $ 8,672   $ 13    $ 39,000    22.14%
June 30, 1997..............        927     16,811      7,489    3,335     24      28,586    16.23
September 30, 1997.........        263     10,899      6,382    3,014     37      20,595    11.69
December 31, 1997..........        482      8,437     10,432    1,102    110      20,563    11.67
March 31, 1998.............        252      3,884      5,925    1,478     45      11,584     6.58
June 30, 1998..............         38      2,196      8,766      536     13      11,549     6.56
September 30, 1998.........         43      1,547      1,480      732     11       3,813     2.16
December 31, 1998..........         37        652      4,878      278    ---       5,845     3.32
March 31, 1999.............         11      1,008      9,767    1,150     15      11,951     6.79
June 30, 1999..............        ---        433        684    1,154    ---       2,271     1.29
September 30, 1999.........        ---         64        441    1,949    ---       2,454     1.39
December 31, 1999..........        ---         78        116    1,958    ---       2,152     1.22
Thereafter.................          3        104      2,363   13,308      5      15,783     8.96
                                ------    -------    -------  -------   ----    --------   ------
  Total....................     $6,563    $65,714    $64,930  $38,666   $273    $176,146   100.00%
                                ------    -------    -------  -------   ----    --------   ------
                                ------    -------    -------  -------   ----    --------   ------
  Percent of total.........       3.73%     37.31%     36.86%   21.95%  0.15%       
                                ------    -------    -------  -------   ----  
                                ------    -------    -------  -------   ----  
</TABLE>

                                              32
<PAGE>


      The following table indicates the amount of the Company's certificates 
of deposit and other deposits by time remaining until maturity as of December 
31, 1996.

<TABLE>
                                                  Maturity 
                                   ----------------------------------------
                                                 Over     Over  
                                    3 Months    3 to 6   6 to 12    Over 
                                     or Less    Months    Months  12 Months    Total 
                                     -------    ------    ------  ---------    -----
                                                       (In thousands)       
<S>                                  <C>        <C>       <C>       <C>       <C>
Certificates of deposit less
 than $100,000 . . . . . . . . . .   $35,211    $26,432   $38,291   $61,341   $161,275
Certificates of deposit of
 $100,000 or more(1) . . . . . . .     2,956      1,693     2,222     5,192     12,063
Public funds(2). . . . . . . . . .       833        461       645       869      2,808
                                     -------    -------   -------   -------   --------
Total certificates of
 deposit . . . . . . . . . . . . .   $39,000    $28,586   $41,158   $67,402   $176,146
                                     -------    -------   -------   -------   --------
                                     -------    -------   -------   -------   --------
</TABLE>

-------------
(1)  Excluding public funds of $100,000 or more.
(2)  Deposits from governmental and other public entities.


     BORROWINGS.  During 1996, the Company continued its program of borrowing 
money to purchase mortgage-backed securities in order to generate additional 
net interest income and as a method of increasing the leverage on its 
capital.  A portion of these borrowings was derived from securities sold 
under agreements to repurchase and the remainder was in advances from the 
FHLB of Chicago. Additionally, the Company borrowed money from the FHLB of 
Chicago as part of the management of short term cash requirements.  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, 1996, borrowed money totaled $34.5 million, of 
which $19.8 million was related to securities sold under agreements to 
repurchase, and $14.7 million was in advances from the FHLB of Chicago. 
Interest expense on borrowed money totaled $1.7 million during 1996 and 
$630,000 during 1995 as the result of these borrowings.

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


                                    33
<PAGE>


permitted to invest an unlimited amount in operating subsidiaries engaged 
solely in activities which a federal savings association may engage in 
directly.

     KFS was organized by the Company to provide appraisal services to the 
Company and others.  In addition, since 1983, KFS 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, KFS 
has also invested in an insurance agency.  At December 31, 1996, the 
Company's equity investment in KFS was approximately $853,000.  During the 
year ended December 31, 1996, KFS recorded net consolidated income of 
$125,000.  During the years ended December 31, 1996 and December 31, 1995, 
gross revenues related to securities and annuities brokerage, appraisal 
activities and insurance agency activities totaled approximately $205,000, 
$201,000 and $47,000, and $124,000, $184,000 and $38,000, 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 area.  The Company competes for loans principally on the basis 
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 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 and Champaign market areas to be 15.6% and less than 
1%, respectively.

     The authority to offer money market deposits, and the expanded lending 
and other powers authorized for savings institutions by federal legislation, 
has resulted in increased competition for both deposits and loans between 
savings institutions and other financial institutions such as commercial 
banks.  Competition may increase further as a result of the continuing 
reduction of restrictions on the interstate operations of financial 
institutions.

EMPLOYEES

     As of December 31, 1996, the Company had 103 full-time employees and 25 
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 


                                      34
<PAGE>

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, but not limited to, the OTS, 
the FRB, the FDIC, the Internal Revenue Service and state taxing authorities 
and the Securities and Exchange Commission (the "SEC"). The effect of such 
statutes, regulations and 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 its subsidiaries, 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 its subsidiaries 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 references to material statutes and regulations affecting 
the Company and its subsidiaries are brief summaries thereof and do not 
purport to be complete, and are qualified in their entirety by reference to 
such statutes and regulations.  Any change in applicable law or regulations 
may have a material effect on the business of the Company and its 
subsidiaries.

RECENT REGULATORY DEVELOPMENTS

     On September 30, 1996, President Clinton signed into law the "Economic 
Growth and Regulatory Paperwork Reduction Act of 1996" (the "Regulatory 
Reduction Act").  Subtitle G of the Regulatory Reduction Act consists of the 
"Deposit Insurance Funds Act of 1996" (the "DIFA").  The DIFA provides for a 
one-time special assessment on each depository institution holding deposits 
subject to assessment by the FDIC for the SAIF in an amount which, in the 
aggregate, will increase the designated reserve ratio of the SAIF (I.E., the 
ratio of the insurance reserves of the SAIF to total SAIF-insured deposits) 
to 1.25% on October 1, 1996.  Subject to certain exceptions, the special 
assessment was payable in full on November 27, 1996.  As a SAIF-member, the 
Bank was subject to the special assessment.

     Under the DIFA, the amount of the special assessment payable by an 
institution was determined on the basis of the amount of SAIF-assessable 
deposits held by the institution on March


                                         35
<PAGE>

31, 1995, or acquired by the institution after March 31, 1995 from another 
institution which held the deposits on March 31, 1995, but was no longer in 
existence on November 27, 1996.  The DIFA provides for a 20% discount in 
calculating the SAIF-assessable deposits of certain "Oakar" banks (I.E., Bank 
Insurance Fund ("BIF") member banks that hold deposits acquired from a SAIF 
member that remain SAIF insured) and certain  "Sasser" banks (I.E., 
institutions that converted from thrift to bank charters but remain SAIF 
members).  The DIFA also exempts certain institutions from payment of the 
special assessment (including institutions that are undercapitalized or that 
would become undercapitalized as a result of payment of the special 
assessment), and allows an institution to pay the special assessment in two 
installments if there is a significant risk that by paying the special 
assessment in a lump sum, the institution or its holding company would be in 
default under or in violation of terms or conditions of debt obligations or 
preferred stock issued by the institution or its holding company and 
outstanding on September 13, 1995.

     On October 8, 1996, the FDIC adopted a final regulation implementing the 
SAIF special assessment.  In that regulation, the FDIC set the special 
assessment rate at 0.657% of SAIF-assessable deposits held on March 31, 1995. 
The amount of the special assessment paid by the Bank was $1.7 million, the 
full amount of which was recorded as a charge against earnings for the 
quarter ended September 30, 1996.  As discussed below, however, the 
recapitalization of the SAIF resulting from the special assessment should 
significantly reduce the Bank's ongoing deposit insurance expense.

     In light of the recapitalization of the SAIF pursuant to the special 
assessment authorized by the DIFA, the FDIC, on December 11, 1996, took 
action to reduce regular semi-annual SAIF assessments from the range of 0.23% 
- 0.31% of deposits to a range of 0% -0.27% of deposits.  The new rates were 
effective October 1, 1996 for Oakar and Sasser banks, but did not take effect 
for other SAIF-assessable institutions until January 1, 1997.  From October 
1, 1996 through December 31, 1996, assessments payable by SAIF-assessable 
institutions other than Oakar and Sasser banks ranged from 0.18% to 0.27% of 
deposits, which represents the amount the FDIC calculates as necessary to 
cover the interest due for that period on outstanding obligations of the 
Financing Corporation (the "FICO"), discussed below.  Because SAIF-assessable 
institutions were previously assessed at higher rates (I.E., 0.23% - 0.31% of 
deposits) for the semi-annual period ending December 31, 1996, the FDIC will 
refund or credit back the amount collected from such institutions for the 
period from October 1, 1996 through December 31, 1996 which exceeds the 
amount due for that period under the reduced assessment schedule.  As a 
result of the FDIC's action, the deposit insurance assessments payable by the 
Bank have been reduced significantly.

     Prior to the enactment of the DIFA, a substantial amount of the SAIF 
assessment revenue was used to pay the interest due on bonds issued by the 
FICO, the entity created in 1987 to finance the recapitalization of the 
Federal Savings and Loan Insurance Corporation (the "FSLIC"), the SAIF's 
predecessor insurance fund.   Pursuant to the DIFA, the interest due on 
outstanding FICO bonds will be covered by assessments against both SAIF and 
BIF member institutions beginning January 1, 1997.  Between January 1, 1997 
and December 31, 1999, FICO assessments against BIF-member institutions 
cannot exceed 20% of the FICO assessments charged SAIF-member institutions.  
From January 1, 2000 until the FICO bonds mature in 2019, FICO assessments 
will be shared by all FDIC-insured institutions on a PRO RATA basis.  It has 
been estimated that the FICO assessments for the 


                                       36
<PAGE>

period January 1, 1997 through December 31, 1999 will be approximately 0.013% 
of deposits for BIF members versus approximately 0.064% of deposits for SAIF 
members, and will be less than 0.025% of deposits thereafter.

     The DIFA also provides for a merger of the BIF and the SAIF on January 
1, 1999, provided there are no state or federally chartered, FDIC-insured 
savings associations existing on that date.  To facilitate the merger of the 
BIF and the SAIF, the DIFA directs the Treasury Department to conduct a study 
on the development of a common charter and to submit a report, along with 
appropriate legislative recommendations, to the Congress by March 31, 1997.

     In addition to the DIFA, the Regulatory Reduction Act includes a number 
of statutory changes designed to eliminate duplicative, redundant or 
unnecessary regulatory requirements.  Among other things, the Regulatory 
Reduction Act  removes the percentage of assets limitations on the aggregate 
amount of credit card and education loans that may be made by a savings 
association, such as the Bank; increases from 10% to 20% of total assets the 
aggregate amount of commercial loans that a savings association may make, 
provided that any amount in excess of 10% of total assets represents  small 
business loans; allows education, small business and credit card loans to be 
counted in full in determining a savings association's compliance with the 
qualified thrift lender ("QTL") test; and provides that a savings association 
may be deemed to meet the QTL test if it qualifies as a domestic building and 
loan association under the Internal Revenue Code.  The Regulatory Reduction 
Act also clarifies the liability of a financial institution, when acting as a 
lender or in a fiduciary capacity, under the federal environmental laws. 
Although the full impact of the Regulatory Reduction Act on the operations of 
the Company and the Bank cannot be determined at this time, management 
believes that the legislation may reduce compliance costs to some extent and 
allow the Company and the  Bank somewhat greater operating flexibility.

     On August 10, 1996, President Clinton signed into law the Small Business 
Job Protection Act of 1996 (the "Job Protection Act"). Among other things, 
the Job Protection Act eliminates the percent-of-taxable-income ("PTI") 
method for computing additions to a savings association's tax bad debt 
reserves for tax years beginning after December 31, 1995, and requires all 
savings associations that have used the PTI method to recapture, over a six 
year period, all or a portion of their tax bad debt reserves added since the 
last taxable year beginning before January 1, 1988.  The Job Protection Act 
allows a savings association to postpone the recapture of bad debt reserves 
for up to two years if the institution meets a minimum level of mortgage 
lending activity during those years. The Bank believes that it will engage in 
sufficient mortgage lending activity during 1996 and 1997 to be able to 
postpone any recapture of its bad debt reserves until 1998.  As a result of 
these provisions of the Job Protection Act, the Bank will determine additions 
to its tax bad debt reserves using the same method as a commercial bank of 
comparable size, and, if the Bank were to decide to convert to a commercial 
bank charter, the changes in the tax bad debt recapture rules enacted in the 
Job Protection Act should make such conversion less costly.


                                   37
<PAGE>

THE COMPANY

     GENERAL.  The Company, as the sole stockholder 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 and 
is required to file with the OTS periodic reports of its operations and such 
additional information 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 does not have SAIF or BIF 
insurance of accounts.

     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, subject to the requirement that in any nonsupervisory 
transaction, the law of the state in which the savings association to be 
acquired is located must specifically authorize 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 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.

     A savings and loan holding company that controls only one savings 
association subsidiary is generally not subject to any restrictions on the 
non-banking activities that the holding company may conduct either directly 
or through a non-banking subsidiary, so long as the holding company's savings 
association subsidiary constitutes a qualified thrift lender.  If, however, 
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 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, including imposing 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 legislation also prohibits acquisition of "control" of a savings 
association or savings and loan holding company, such as the Company, without 
prior notice to certain federal bank 


                                     38
<PAGE>

regulators.  "Control" is defined in certain cases as acquisition of 10% of 
the outstanding shares of a savings association or savings and loan  holding 
company.

     DIVIDENDS.   The OTS 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. In addition to the restrictions on 
dividends that may be imposed by the OTS, the Delaware General Corporation 
Law would allow the Company to pay dividends only out of its surplus, 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.

     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 SAIF of the FDIC.  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 FHLB System, 
which provides a central credit facility primarily for member institutions.

     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 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 period January 1, 1996 through September 30, 1996, SAIF 
assessment rates ranged from 0.23% of deposits to 0.31% of deposits.  As a 
result of the recapitalization of the SAIF on October 1, 1996, SAIF 
assessment rates were reduced, effective October 1, 1996, to a range of 0.18% 
of deposits to 0.27% of deposits and were further reduced, effective January 
1, 1997, to a range of 0% of deposits to 0.27% of deposits.  SEE "--Recent 
Regulatory Developments."

     The FDIC may terminate the deposit insurance of any insured depository 
institution if the FDIC determines, after a hearing, that the institution has 
engaged or is engaging in unsafe or unsound practices, is in an unsafe or 
unsound condition to continue operations or has violated any applicable law, 
regulation, order, or any condition imposed in writing by, or written 
agreement with, the FDIC.


                                      39
<PAGE>

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 Company 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 FICO, the entity created to finance the 
recapitalization of the FSLIC, the SAIF's predecessor insurance fund.  
Pursuant to federal legislation enacted September 30, 1996, commencing 
January 1, 1997, both SAIF members and BIF members will be subject to 
assessments to cover the interest payment on outstanding FICO obligations.  
Such FICO assessments will be in addition to amounts assessed by the FDIC for 
deposit insurance.  Until January 1, 2000, the FICO assessments made against 
BIF members may not exceed 20% of the amount of the FICO assessments made 
against SAIF members.  It is estimated that SAIF members will pay FICO 
assessments equal to 0.064% of deposits while BIF members will pay FICO 
assessments equal to 0.013% of deposits.  Between January 1, 2000 and the 
maturity of the outstanding FICO obligations in 2019, BIF members and SAIF 
members will share the cost of the interest on the FICO bonds on a PRO RATA 
basis.  It is estimated that FICO assessments during this period will be less 
than 0.025% of deposits.

     OTS ASSESSMENTS.  Federal savings associations are required to pay 
supervisory fees to the OTS to fund the operations of the OTS.  The amount of 
such supervisory fees is based upon each institution's total assets, 
including consolidated subsidiaries, as reported to the OTS.  During the year 
ended December 31, 1996 the Bank paid supervisory fees to the OTS totaling 
$85,000.

     CAPITAL REQUIREMENTS.  The OTS has established the following minimum 
capital standards for savings associations, such as the Bank:  a core capital 
requirement, consisting of a minimum ratio of core capital to total assets of 
3%; 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%, at least one-half of which must consist of core capital.  For purposes 
of these capital standards, core capital consists primarily of permanent 
stockholders' equity less intangible assets other than certain supervisory 
goodwill, certain mortgage servicing rights and certain purchased credit card 
relationships and less 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; and total capital means 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 lease 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 interest rate risk or the risks posed by 
concentrations of credit or nontraditional activities.


                                      40
<PAGE>


     During the year ended December 31, 1996, the Bank was not required by 
the OTS to increase its capital to an amount in excess of the minimum 
regulatory requirements.  As of December 31, 1996 the Bank exceeded its 
minimum regulatory capital requirements with a core capital ratio of 8.41%, a 
tangible capital ratio of 8.41% and a risk-based capital ratio of 14.53%.

     Federal law 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 "well capitalized," "adequately capitalized," 
"undercapitalized," "significantly undercapitalized" or "critically 
undercapitalized." Depending upon the capital category to which an 
institution is assigned, the regulators' corrective powers include:  
requiring the submission of a capital restoration plan; placing limits on 
asset growth and restrictions on activities; requiring the institution to 
issue additional capital stock (including additional voting stock) or to be 
acquired; restricting transactions with affiliates; restricting the interest 
rate the institution may pay on deposits; ordering a new election of 
directors of the institution; requiring that senior executive officers or 
directors be dismissed; prohibiting the institution from accepting deposits 
from correspondent banks; requiring the institution to divest certain 
subsidiaries; prohibiting the payment of principal or interest on 
subordinated debt; and ultimately, appointing a receiver for the institution.

     DIVIDENDS.  OTS regulations impose limitations upon all capital 
distributions by savings associations, including cash dividends.  The rule 
establishes three tiers of institutions.  An institution that exceeds all 
fully phased-in capital requirements before and after the proposed capital 
distribution  (a "Tier 1 Institution") could, after prior notice to, but 
without the approval of, the OTS, make capital distributions during a 
calendar year of up to the higher of (i) 100% of its net income to date 
during the calendar year plus the amount that would reduce by one-half its 
"surplus capital ratio" (I.E., the excess capital over its fully phased-in 
capital requirements) at the beginning of the calendar year, or (ii) 75% of 
its net income over the most recent preceding four quarter period.  Any 
additional capital distributions would require prior regulatory approval. As 
of December 31, 1996, the Bank was a Tier 1 Institution.

     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, 1996.  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, 1996, approximately $8.2 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 if the OTS determines such payment 
would constitute an unsafe or unsound practice.


                                    41
<PAGE>

     INSIDER TRANSACTIONS.  The Bank is subject to certain restrictions 
imposed by the Federal Reserve Act on extensions of credit to the Company and 
its subsidiaries, on investments in the stock or other securities of the 
Company and its subsidiaries and the acceptance of the stock or other 
securities of the Company or its subsidiaries 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 and its subsidiaries, to principal stockholders of 
the Company, and to "related interests" of such directors, officers and 
principal stockholders.  In addition, such legislation 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 OTS has adopted guidelines which 
establish operational and managerial standards to promote the safety and 
soundness of savings associations.  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 
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 OTS may require the institution to submit a plan 
for achieving and maintaining compliance.  The preamble to the guidelines 
states that the OTS expects to require a compliance plan from an institution 
whose failure to meet one or more of the guidelines is of such severity that 
it could threaten the safety and soundness of the institution.  Failure to 
submit an acceptable plan, or failure to comply with a plan that has been 
accepted by the OTS, would constitute grounds for further enforcement action.

     BRANCHING AUTHORITY.  Federally chartered savings associations which 
qualify as "domestic building and loan associations," as defined in the 
Internal Revenue Code, or meet the QTL test (SEE "-The Bank -- Qualified 
Thrift Lender Test") have the authority, subject to receipt of OTS approval, 
to establish branch offices anywhere in the United States, either DE NOVO or 
through acquisitions of all or part of another financial institution.  If a 
federal savings association fails to qualify as a "domestic building and loan 
association," as defined in the Internal Revenue Code, or fails to meet the 
QTL test the association generally may establish a branch in a state other 
than the state of its home office only to the extent authorized by the law of 
the state in which the branch is to be located.  As of December 31, 1996, the 
Bank qualified as a "domestic building and loan association," as defined in 
the Internal Revenue Code and met the QTL test.

     QUALIFIED THRIFT LENDER TEST. Under the QTL test in effect prior to 
September 30, 1996, the Bank generally was required to invest at least 65% of 
its portfolio assets in "qualified thrift investments," as measured on a 
monthly average basis in nine out of every 12 months.  Qualified thrift 
investments for purposes of the QTL test consist principally of residential 
mortgage loans, mortgage-backed securities and other housing and 
consumer-related investments.  The term "portfolio assets" is statutorily 
defined to mean a savings association's total assets less goodwill and other 
intangible assets, the association's business property and a limited amount 
of its liquid assets.  Under amendments to the HOLA enacted September 30, 
1996, the Bank will be deemed to satisfy the QTL test if it either holds 
qualified thrift investments equaling 65% or more of its portfolio assets or 


                                       42
<PAGE>

qualifies as a domestic building and loan association under the Internal 
Revenue Code.  The new legislation also expanded somewhat the definition of 
qualified thrift investments.  SEE "--Recent Regulatory Developments."  As of 
December 31, 1996, the Bank satisfied with the QTL test, with a ratio of 
qualified thrift investments to portfolio  assets of 80.0% and qualified as a 
"domestic building and loan association," as defined in the Internal Revenue 
Code.

     LIQUIDITY REQUIREMENTS.  OTS regulations currently require each savings 
association to maintain, for each calendar month, an average daily balance of 
liquid assets (including cash, certain time deposits, bankers' acceptances, 
and specified United States Government, state or federal agency obligations) 
equal to at least 5% of the average daily balance of its net withdrawable 
accounts plus short-term borrowings (I.E., those repayable in 12 months or 
less) during the preceding calendar month.  This liquidity requirement may be 
changed from time to time by the OTS to an amount within a range of 4% to 10% 
of such accounts and borrowings, depending upon economic conditions and the 
deposit flows of savings associations.  OTS regulations also require each 
savings association to maintain, for each calendar month, an average daily 
balance of short-term liquid assets (generally liquid assets having 
maturities of 12 months or less) equal to at least 1% of the average daily 
balance of its net withdrawable accounts plus short-term borrowings during 
the preceding calendar month.  Penalties may be imposed for failure to meet 
liquidity ratio requirements.  At December 31, 1996, the Bank was in 
compliance with OTS liquidity requirements, with an overall liquidity ratio 
of 14.8% and a short-term liquidity ratio of 4.7%.

     FEDERAL RESERVE SYSTEM.  FRB 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 $49.3 million or 
less, the reserve requirement is 3% of total transaction accounts; and for 
transaction accounts aggregating in excess of $49.3 million, the reserve 
requirement is $1.479 million plus 10% of the aggregate amount of total 
transaction accounts in excess of $49.3 million.  The first $4.4 million of 
otherwise reservable balances are exempted from the reserve requirements.  
These reserve requirements are subject to annual adjustment by the FRB.  The 
Bank is in compliance with the foregoing requirements.  The balances used to 
meet the reserve requirements imposed by the FRB may be used to satisfy 
liquidity requirements imposed by the OTS.

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.


                                      43
<PAGE>

     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 thrifts prior to 1996.  The Bank is now 
required to compute reserves on all loans under the experience method.  The 
new law freezes the reserves for bad debts that existed at end of the last 
tax year beginning before January 1, 1988 and requires the Bank to recapture 
into taxable income over a six year period the "applicable excess reserve."  
For the Bank, the applicable excess reserve is approximately $648,000 which 
represents 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. One-sixth of the applicable excess reserve of $108,000 has 
been recaptured into 1996 taxable income.  Deferred taxes have previously 
been established on the applicable excess reserve.

     Retained income of the Bank includes approximately $8,998,000 that 
represents tax provisions for loan losses 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 the corporation's regular income tax and net operating 
losses can offset no more than 90% of alternative minimum taxable income.  
For taxable years beginning after 1986 and before 1996, corporations, 
including savings associations such as the Bank, are also subject to an 
environmental tax equal to 0.12% of the excess of alternative minimum taxable 
income for the taxable year (determined without regard to net operating 
losses and the deduction for the environmental tax) over $2 million.  During 
the year ended December 31, 1996, 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.





                                           44
<PAGE>
                                      

                   EXECUTIVE OFFICERS OF THE COMPANY

     The following information as to the business experience during the past 
five years is supplied with respect to executive officers of the Company and 
the Bank who do not serve on the Company's Board of Directors.  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 47, 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 and data processing activities.  Mr. Walters joined the 
Bank in 1984 as Controller and was promoted to his present position in 1985. 
Mr. Walters is a certified public accountant.

     David B. Cox, age 58, was elected President of the Bank in 1993, and a 
Director of the Bank in 1995.  Prior to his election as President, Mr. Cox 
had served as Vice President of Operations for the Bank since 1985.  Mr. Cox 
is responsible for overseeing the day-to-day operation of the Bank.  Mr. Cox 
joined the Bank in 1956 and has held a variety of positions including 
Assistant Vice President, Branch Manager and Assistant Secretary.  Mr. Cox 
has served as Vice President of the Company since 1992.

     Gerald C. Chantome, age 60, is a Senior Vice President and Chief Lending 
Officer of the Bank, a position he was appointed to in 1995.  Previously he 
was Vice President of Commercial and Consumer Lending for the Bank, a 
position he held since 1988.  Mr. Chantome is responsible for oversight of 
the Bank's lending departments.  Prior to joining the Bank, from 1981 to 
1988, Mr. Chantome served as Senior Vice President and director of City 
National Bank and Keystone Bancshares located in Kankakee, Illinois.  Mr. 
Chantome was an employee and officer of City National since 1954.

     Lois Swartz, age 54, has been Vice President of Human Resources of the 
Bank since January 1993.  She is responsible for administering the Human 
Resources Department and the Company's employee benefit plans.  She joined 
the Bank in 1960.

     Monte S. Crowl, age 32, 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.

     Lois Jean Phelps, age 58, was elected Vice President of Operations in 
1994.  She is responsible for the day-to-day operations of the Bank.  Ms. 
Phelps has served the Bank in various capacities in Ashkum and Kankakee 
including head teller, branch manager and assistant secretary since 1977.  
She was named operations manager in 1993.

                                      45 
<PAGE>

     Carol Hoekstra, age 41, was elected a Vice President of the Bank in 
1995.  She is also an Assistant Secretary of the Company, a position she has 
held since 1992.  Previously, she was an Assistant Vice President of the Bank 
since 1991.  She is responsible for overseeing the day-to-day administration 
of the Bank's consumer lending operation and has recently been given 
additional responsibilities in lending.  Ms. 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.

ITEM 2.  PROPERTIES

OFFICES

     The following table sets forth information concerning the main office 
and each branch office of the Bank at December 31, 1996. At December 31, 
1996, the Company's premises had an aggregate net book value of approximately 
$2.7 million.

                                                      Lease       
                               Year       Owned     Expiration      Net     
Location                     Opened(1)  or Leased      Date      Book Value 
--------                     ---------  ---------   ----------   ---------- 
                                                               (In thousands)
MAIN OFFICE
310 S. Schuyler Avenue
Kankakee, Illinois             1958       Owned         N/A          $552 

FULL SERVICE BRANCHES
Main Street and U.S. 45
Ashkum, Illinois               1977       Owned         N/A            13 

680 S. Main Street
Bourbonnais, Illinois          1974       Owned         N/A           315 

1001 S. Neil Street
Champaign, Illinois            1992       Owned         N/A           698 

302 W. Mazon Avenue
Dwight, Illinois               1987       Owned         N/A           451 

161 S. Main Street
Herscher, Illinois             1987       Owned         N/A            36 

323 E. Main Street
Hoopeston, Illinois            1994       Owned         N/A           182 

310 Section Line Road
Manteno, Illinois              1975       Owned         N/A           279 

200 W. Washington Street
Momence, Illinois              1995       Owned         N/A           168 
                                                                   ------ 
                                                                   $2,694 
                                                                   ------ 
                                                                   ------ 

(1)  Year opened refers to the year in which the current facility opened.

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

                                      46 
<PAGE>


     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, 1996 was $325,000.

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, 
1996.

                                    PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

     Page 49 of the 1996 Annual Report to Stockholders is herein incorporated 
by reference.

ITEM 6.  SELECTED FINANCIAL DATA

     Pages 7 and 8 of the 1996 Annual Report to Stockholders is herein 
incorporated by reference.

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND 
         RESULTS OF OPERATION

     Pages 9 through 23 of the 1996 Annual Report to Stockholders are herein 
incorporated by reference.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     Pages 24 through 49 of the 1996 Annual Report to Stockholders are herein 
incorporated by reference.

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND 
         FINANCIAL DISCLOSURE

     The Company hereby incorporates by reference the information called for 
by Item 9 of this Form 10-K from the Form 8-K dated October 20, 1994 filed by 
the Company with the SEC in connection with the dismissal of Ernst & Young 
LLP as the Company's independent auditors and the engagement of McGladrey & 
Pullen, LLP as the Company's independent auditors for the fiscal year ending 
December 31, 1995 (Exhibit 99.2 to this Form 10-K).                           

                                      47 
<PAGE>

                                  PART III

ITEM 10.  DIRECTORS AND OFFICERS OF THE REGISTRANT

     Information concerning directors of the Company is incorporated herein 
by reference from the Company's definitive Proxy Statement for the Annual 
Meeting of Stockholders to be held in 1997 (the "1997 Proxy Statement"), a 
copy of which was filed on March 14, 1997.

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 herein 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 
1996, 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 the period commencing January 1, 1996 through December 
31, 1996.

ITEM 11.  EXECUTIVE COMPENSATION

     Information concerning executive compensation called for by Item 11 of 
this Form 10-K is incorporated herein by reference from the section in the 
Company's 1997 Proxy Statement entitled "Executive Compensation."  The report 
of the Company's Compensation Committee is 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 herein 
by reference from the section in the Company's 1997 Proxy Statement entitled 
"Voting Securities and Principal Holder Thereof."

                                      48 
<PAGE>

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 herein by reference 
from the section in the Company's 1997 Proxy Statement entitled "Certain 
Relationships and Related Transactions."

                                   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 1996 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...............       9-23 
Report of Independent Auditors................................         24 
Consolidated Statements of Financial Condition................      25-26 
Consolidated Statements of Operations.........................         27 
Consolidated Statements of Changes in Stockholders' Equity....         28 
Consolidated Statements of Cash Flows.........................      29-30 
Notes to Consolidated Financial Statements....................      31-47 
Quarterly Financial Information...............................         47 


     With the exception of those sections specifically incorporated by 
reference, the Registrant's 1996 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.

                                      49 

<PAGE>

    (a)(3) EXHIBITS:
 
<TABLE>
<CAPTION>

  Regulation                                                   Reference to Prior                 Sequential Page Number Where
 S-K Exhibit                                                    Filing or Exhibit               Attached Exhibits Are Located in
    Number                      Document                     Number Attached Hereto                        Form 10-K
 -----------      ----------------------------------------   ----------------------             --------------------------------
<S>              <C>                                        <C>                                <C>
      3           Articles of Incorporation                            (1)                                    N/A

      3           Bylaws                                               (1)                                    N/A

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

      10          Executive Compensation Plans and
                  Arrangements

                  a.     Stock Option Plan                             (2)                                    N/A

                  b.     Management Recognition Plan                   (2)                                    N/A
                         and Trusts

                  c.     Employee Stock Ownership                      (1)                                    N/A
                         Plan
                                                                       (1)                                    N/A
                  d.     Money Purchase Pension Plan
                                                                       (1)                                    N/A
                  e.     401(k) Plan

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

      13          Incorporated portions of
                  1996 Annual Report to Stockholders                   N/A                                     53

      22          Subsidiaries of Registrant                           N/A                                     94

     23.1         Consent of Independent Auditor                       N/A                                     95

     23.2         Consent of Independent Auditor                       N/A                                     96

      27          Financial Data Schedule                              N/A                                     97

     99.1         1997 Proxy Statement                                 N/A                                    102

     99.2         Form 8-K dated October 20, 1994                      (4)                                    N/A


</TABLE>

--------------
 
(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 March 31, 1995, 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.


      (b)  REPORTS ON FORM 8-K:

    No reports on Form 8-K have been filed during the three-month period ended
    December 31, 1996.


                                          50


<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 21, 1997                  By:   /s/ James G. Schneider
      --------------                        -----------------------------------
                                               James G. Schneider
                                               Chief Executive Officer and
                                               Chairman of the Board

    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/ James G. Schneider      3-21-97   Chief Executive Officer and
-------------------------    --------  Chairman of the Board (Principal
  James G. Schneider          Date     Executive and Operating Officer)

 /s/ Ronald J. Walters       3-21-97   Vice President and Treasurer (Principal
-------------------------    --------  Financial and Accounting Officer)
  Ronald J. Walters          Date

 /s/ William Cheffer         3-21-97   Director
-------------------------    --------
  William Cheffer            Date

 /s/ Charles C. Huber        3-21-97   Director
-------------------------    --------
  Charles C. Huber           Date

 /s/ Wesley E. Walker        3-21-97   Director
-------------------------    --------
  Wesley E. Walker           Date

 /s/ Larry D. Huffman        3-21-97   Director
-------------------------    --------
  Larry D. Huffman           Date

 /s/ Thomas M. Schneider     3-21-97   Director
-------------------------    --------
  Thomas M. Schneider        Date

 /s/ Michael A. Stanfa       3-21-97   Director
-------------------------    --------
  Michael A. Stanfa               Date

    The foregoing constitute all of the Board of Directors of the Company.


                                          51


<PAGE>

                                  INDEX TO EXHIBITS
 
<TABLE>
<CAPTION>


  Regulation                                                   Reference to Prior                Sequential Page Number Where
 S-K Exhibit                                                    Filing or Exhibit              Attached Exhibits Are Located in
    Number                     Document                      Number Attached Hereto                        Form 10-K
 -----------     ----------------------------------------   ----------------------             --------------------------------
<S>             <C>                                         <C>                               <C>
      3          Articles of Incorporation                              (1)                                    N/A

      3          Bylaws                                                 (1)                                    N/A

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

      10         Executive Compensation Plans and
                 Arrangements

                 a.      Stock Option Plan                              (2)                                    N/A

                 b.      Management Recognition Plan                    (2)                                    N/A
                         and Trusts

                 c.      Employee Stock Ownership Plan                  (1)                                    N/A

                 d.      Money Purchase Pension Plan                    (1)                                    N/A

                 e.      401(k) Plan                                    (1)                                    N/A

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


      13         Incorporated portions of
                 1996 Annual Report to Stockholders                     N/A                                    53

      22         Subsidiaries of Registrant                             N/A                                    94

     23.1        Consent of Independent Auditor                         N/A                                    95

     23.2        Consent of Independent Auditor                         N/A                                    96

     27          Financial Data Schedule                                N/A                                    97

     99.1        1997 Proxy Statement                                   N/A                                    102

     99.2        Form 8-K dated October 20, 1994                        (4)                                    N/A

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

</TABLE>
 
(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 March 31, 1995, 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.


                                          52