//10k_1885_aa.cecc

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                       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, 1998

                                       OR

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

                               Commission File Number 1-13676


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

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

310 S. SCHUYLER AVENUE, KANKAKEE, ILLINOIS              60901
  (Address of principal executive offices)            (Zip Code)

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


           Securities Registered Pursuant to Section 12(b) of the Act:
                                                Name of Each Exchange
           Title of Each Class                  On Which Registered
Common Stock, Par Value $.01 Per Share        American Stock Exchange


           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]

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         As of March 1, 1999, the Registrant had issued and outstanding
1,357,508 shares of the Registrant's Common Stock. The aggregate market value of
the voting stock held by non-affiliates of the Registrant as of March 1, 1999,
was $27,364,215.*




                       DOCUMENTS INCORPORATED BY REFERENCE

         PARTS II and IV of Form 10-K--Portions of the 1998 Annual Report to
         Stockholders. PART III of Form 10-K--Portions of the Proxy Statement
         for the 1999 Annual Meeting of Stockholders.


































-----------------
*        Based on the last reported price ($23.00) of an actual transaction in
         the Registrant's Common Stock on March 1, 1999, 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.

                         1998 ANNUAL REPORT ON FORM 10-K

                                Table of Contents

                                                                     PAGE NUMBER

                                     PART I

Item     1.  Business........................................................ 4
Item     2.  Properties......................................................48
Item     3.  Legal Proceedings...............................................49
Item     4.  Submission of Matters to a Vote of Security Holders.............49

                                     PART II

Item     5.  Market for the Registrant's Common Stock and Related
                Security Holder Matters......................................49
Item     6.  Selected Financial Data.........................................49
Item     7.  Management's Discussion and Analysis of Financial
                Condition and Results of Operations..........................49
Item    7a.  Quantitative and Qualitative Disclosures About Market Risk......49
Item     8.  Financial Statements and Supplementary Data.....................50
Item     9.  Changes in and Disagreements With Accountants on
                Accounting and Financial Disclosure..........................50

                                    PART III

Item    10.  Directors and Executive Officers of the Registrant..............50
Item    11.  Executive Compensation..........................................50
Item    12.  Security Ownership of Certain Beneficial Owners and
                Management...................................................51
Item    13.  Certain Relationships and Related Transactions..................51
Item    14.  Exhibits, Financial Statement Schedules, and Reports on 8-K.....51

Form 10-K Signature Page.....................................................53



                                       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 Stock Market under the symbol "KNKB".

         The Bank is the Company's only financial institution subsidiary and was
initially chartered as an Illinois state savings and loan association in 1885.
The Bank converted to a federally chartered savings and loan association in 1937
and changed its name to Kankakee Federal Savings Bank in connection with its
conversion to stock form in 1992. All references to the Company include the Bank
and 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 fourteen branch offices located in the
communities of Ashkum, Bourbonnais, Bradley, Braidwood, Champaign, Coal City
(2), Diamond, Dwight, Herscher, Hoopeston, Manteno, Momence and Urbana,
Illinois. At December 31, 1998, the Company had consolidated assets of $411.8
million, deposits of $346.8 million and stockholders' equity of $39.7 million.


                                       4
<PAGE>


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

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

         In February 1998, the Bank received approval from the OTS to begin
offering trust services. While approval for full trust services was received,
the Bank has initially focused on personal trust services and limited employee
benefit plan services.

         The Company's revenues are derived from interest on loans,
mortgage-backed and related securities and investments, service charges and loan
origination fees, loan servicing fees and proceeds from the sale, through KFS,
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 and
borrowings.

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

MARKET AREA

         The Bank's main office is located at 310 S. Schuyler Avenue, Kankakee,
Illinois. The bank also has fourteen branch offices located in the communities
of Ashkum, Bourbonnais, Bradley, Braidwood, Champaign, Coal City (2), Diamond,
Dwight, Herscher, Hoopeston, Manteno, Momence and Urbana. The Company's market
areas include Kankakee, Champaign, Iroquois and Livingston Counties and portions
of Will, Grundy and Vermilion Counties, Illinois.



                                       5
<PAGE>


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

         Champaign/Urbana is located approximately 75 miles south of Kankakee.
It is the location of the original campus of the University of Illinois which
employs 17,000 people and has a student body of over 30,000. In addition, the
economy of the Champaign/Urbana market area includes several major medical
centers and agricultural and industrial businesses. Major employers in the
Champaign/Urbana area include Carle Clinic, Provena 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., Hoopeston Food's, Inc., Food Machinery Corp. (FMC), Hoopeston Community
Memorial Hospital and Schumachers.

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

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>
<CAPTION>

                                                                      DECEMBER 31,
                             -----------------------------------------------------------------------------------------------
                                    1998               1997                1996               1995               1994
                             -----------------  ------------------  -------------------  ----------------  -----------------
                              AMOUNT   PERCENT   AMOUNT   PERCENT    AMOUNT   PERCENT     AMOUNT  PERCENT   AMOUNT   PERCENT
                             --------  -------  --------  -------   --------  -------    -------  -------  --------  -------

REAL ESTATE LOANS                                               (DOLLARS IN THOUSANDS)
  <S>                        <C>       <C>     <C>        <C>      <C>         <C>      <C>        <C>     <C>        <C>   
  One-to-four family.........$159,956  59.23%  $157,764   58.22%   $149,544    54.74%   $147,007   54.28%  $136,735   61.13%
  Multi-family...............   5,556   2.06      7,480    2.76      14,172     5.19      14,475    5.35     14,551    6.51
  Commercial.................  21,291   7.88     20,881    7.71      28,721    10.51      28,273   10.44     25,300   11.31

  Construction or                                                    
    development..............  13,938   5.16      9,004    3.32       5,525     2.02       8,248    3.05     11,730    5.24
  Mortgage-backed
    securities and parti-
    cipation certificates....  18,746   6.94     28,503   10.52      34,713    12.71      36,481   13.47      6,357    2.84
                               ------   ----     ------   -----      ------    -----      ------   -----      -----    ----


    Total real estate loans
      and mortgage-backed
      securities............. 219,487  81.27    223,632   82.53     232,675    85.17     234,484   86.59    194,673   87.03
                              -------  -----    -------   -----     -------    -----     -------   -----    -------   -----
OTHER LOANS:
  Consumer Loans:
    Deposit account..........     827   0.31        820    0.30         588     0.21         745    0.27        504    0.23
    Student..................     231   0.09        825    0.30         918     0.34       1,151    0.43      1,733    0.77


</TABLE>

                                                 7

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<TABLE>
<CAPTION>

                                                                      DECEMBER 31,
                             ----------------------------------------------------------------------------------------------
                                   1998                1997               1996               1995               1994
                             ----------------   -----------------   -----------------   ----------------  -----------------
                             AMOUNT   PERCENT    AMOUNT   PERCENT   AMOUNT   PERCENT    AMOUNT  PERCENT   AMOUNT    PERCENT
                             ------   -------    ------   -------   ------   -------    ------  -------   ------    -------
    <S>                       <C>       <C>      <C>       <C>       <C>        <C>      <C>        <C>     <C>       <C> 
    Automobile..............   3,830    1.42      4,476    1.65       4,033     1.48      3,219     1.19    2,232     1.00
    Home equity.............  17,215    6.37     16,795    6.20      14,166     5.19     12,847     4.74    8,881     3.97
    Home improvement........       7    0.00         13    0.00          56     0.02        208     0.08      327     0.15
    Mobile home.............   2,826    1.05      3,293    1.22       3,161     1.16      3,122     1.15    3,207     1.43
    Credit cards............   1,376    0.51      1,534    0.57       1,705     0.62      1,870     0.69    1,804     0.81
    Personal................   6,900    2.55      7,407    2.73       5,942     2.17      3,919     1.45    2,246     1.00
                               -----    ----      -----    ----      ------     ----      -----     ----    -----     ----
      Total consumer loans..  33,212   12.30     35,163   12.97      30,569    11.19     27,081    10.00   20,934     9.36
Commercial business loans...  17,365    6.43     12,185    4.50       9,943     3.64      9,246     3.41    8,074     3.61
                              ------   -----     ------   -----      ------    -----     ------    -----    -----     ----
    Total other loans.......  50,577   18.73     47,348   17.47      40,512    14.83     36,327    13.41   29,008    12.97
                              ------   -----     ------   -----      ------    -----     ------    -----   ------    -----
Total loans and mortgage-
  backed securities
  receivable................ 270,064  100.00%   270,980  100.00%    273,187   100.00%   270,811   100.00%   223,681   100.00%
                             -------  -------   -------  --------    -------  -------   -------   -------   -------   -------
                                      -------            --------             -------             -------             -------
LESS:
  Loans in process..........   1,671              1,121               1,726                 957               1,705
  Deferred fees and
    discounts...............     129                176                 425                 517                 555
  Allowance for losses
    on loans................   2,375              2,130               2,360               2,388               2,151
                               -----              -----               -----               -----               -----
  Total loans and mortgage-
    backed securities
    receivable, net.........$265,889           $267,553            $268,676            $266,949            $200,341
                            --------           --------            --------            --------            --------
                            --------           --------            --------            --------            --------

</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>
<CAPTION>


                                                                            DECEMBER 31,
                                 -------------------------------------------------------------------------------------------------
                                        1998              1997                  1996                 1995                 1994
                                 ----------------    ---------------    -----------------     -----------------   ----------------
                                  AMOUNT  PERCENT    AMOUNT  PERCENT    AMOUNT    PERCENT     AMOUNT    PERCENT   AMOUNT   PERCENT
                                 -------  -------    ------  -------    -------   -------     ------    -------   ------   -------
                                                                        (DOLLARS IN THOUSANDS)
<S>                               <C>       <C>      <C>       <C>      <C>       <C>          <C>         <C>     <C>        <C>
FIXED-RATE LOANS AND
MORTGAGE-BACK SECURITIES
  Real estate:
    One-to-four family...........$75,352   27.90%   $56,908   21.00%   $50,758   18.58%       $51,620     19.06%  $55,299    24.72%
    Multi-family.................    390     0.14       ---      ---       ---      ---           ---        ---       37      0.02
    Commercial...................  2,076     0.77     1,392     0.51     3,520     1.29         6,128       2.26    2,984      1.33
    Construction or
      development................  2,708     1.00     1,711     0.63       690     0.25         1,583       0.58    8,844      3.96
  Mortgage-backed securities....   9,296     3.44    12,502     4.61    17,489     6.40        18,341       6.77    6,357      2.84
                                  ------     ----    ------     ----    ------     ----        ------       ----    -----      ----
  Total real estate loans and
      mortgage-backed
      securities ................ 89,822    33.25    72,513    26.75    72,457    26.52        77,672      28.67   73,521     32.87
Consumer......................... 19,087     7.07    19,918     7.35    17,065     6.25        14,876       5.49   12,789      5.72
Commercial business..............  8,020     2.97     3,005     1.11     2,867     1.05         2,665       0.98    2,359      1.05
                                   -----     ----     -----     ----     -----     ----         -----       ----    -----      ----
  Total fixed-rate loans and
      mortgage-backed securities.116,929    43.29    95,436    35.21    92,389    33.82        95,213      35.14   88,669     39.64
                                 -------    -----    ------    -----    ------    -----        ------      -----   ------     -----
ADJUSTABLE-RATE lOANS AND                                                                                                  
MORTGAGE-BACKED SECURITIES
  Real estate:
    One-to-four family........... 84,604    31.33   100,856    37.22    98,786    36.16        95,387      35.22   81,436     36.41

</TABLE>


                                        9

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<TABLE>
<CAPTION>


                                                                          DECEMBER 31,
                                 ------------------------------------------------------------------------------------------------
                                        1998              1997                1996                 1995             1994
                                 ----------------  ------------------   ----------------   ----------------   -------------------
                                  AMOUNT  PERCENT    AMOUNT  PERCENT    AMOUNT   PERCENT   AMOUNT   PERCENT   AMOUNT    PERCENT
                                 -------  -------  --------  --------   ------   -------   ------   -------   ------    ---------
<S>                              <C>      <C>      <C>      <C>       <C>      <C>        <C>      <C>       <C>       <C>    
    Multi-family................   5,166     1.92    7,480     2.76    14,172     5.19     14,475     5.35    14,514      6.49
    Commercial..................  19,215     7.11   19,489     7.19    25,201     9.22     22,145     8.18    22,316      9.97
    Construction or
      development...............  11,230     4.16    7,293     2.69     4,835     1.77      6,665     2.47     2,886      1.29
    Mortgage-backed securities..   9,450     3.50   16,001     5.91    17,224     6.31     18,140     6.70       ---       ---
                                  ------     ----   ------     ----    ------     ----     ------     ----    ------     -----
      Total real estate loans
        and mortgage-backed                                                                          
        securities.............. 129,665    48.02  151,119    55.77   160,218    58.65    156,812    57.92   121,152     54.16
Consumer........................  14,125     5.23   15,245     5.63    13,504     4.94     12,205     4.51     8,145      3.64
Commercial business ............   9,345     3.46    9,180     3.39     7,076     2.59      6,581     2.43     5,715      2.56
                                   -----     ----    -----     ----     -----     ----      -----     ----     -----      ----
    Total adjustable-rate loans
      and mortgage-backed
      securities................ 153,135    56.71  175,544    64.78   180,798    66.18    175,598    64.86   135,012     60.36
                                 -------    -----  -------    -----   -------    -----    -------    -----   -------     -----
  Total loans and mortgage-
    backed securities........... 270,064  100.00%  270,980  100.00%   273,187  100.00%    270,811  100.00%   223,681   100.00%
                                 -------  -------  -------  -------   -------  -------    -------  -------   -------
                                          -------           -------            -------             -------
Less:
  Loans in process..............   1,671           1,121                1,726               957              1,705
  Deferred fees and discounts...     129             176                  425               517                555
  Allowance for losses on loans.   2,375           2,130                2,360             2,388              2,251
                                   -----           -----                -----             -----              -----
    Total loans and mortgage-
      backed securities
      receivable, net...........$265,889        $267,553             $268,676          $266,949           $219,170
                                --------        --------             --------          --------           --------
                                --------        --------             --------          --------           --------
</TABLE>


                                       10

<PAGE>




         The following schedule illustrates the interest rate sensitivity of the
Company's loan and mortgage-backed securities portfolio at December 31, 1998.
Loans that have adjustable or renegotiable interest rates are shown as maturing
in the period during which the contract matures. The schedule does not reflect
the effects of possible prepayments or enforcement of due-on-sale clauses.



<TABLE>
<CAPTION>

                                          REAL ESTATE
                   -----------------------------------------------------------
                    ONE-TO-FOUR FAMILY AND                                            
                      MORTGAGE-BACKED       MULTI-FAMILY AND  CONSTRUCTION OR                       COMMERCIAL
                        SECURITIES            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,
1999(1)............  $1,143    8.08%    $4,481     8.44%   $12,159     8.38%   $4,930     11.26%  $9,710   8.76%  $32,423     8.93%
2000 and 2001......   2,914    8.55      2,564     7.90      1,054     9.24     6,834      9.34    3,666   8.89    17,032     8.89
2002 and 2003......   4,158    8.49      2,449     7.43         29     9.22    12,297      8.76    2,389   9.02    21,322     8.58
2004 and 2008......  22,313    7.29      3,873     8.88        265     8.35     7,448      9.11      589   8.45    34,488     7.89
2009 and 2023......  81,929    7.14     11,696     8.54        138     9.50     1,703     10.10    1,011   8.01    96,477     7.37
2024 and following.  66,245    7.22      1,784     8.80        293     6.50       ---       ---      ---    ---    68,322     7.25
                    -------           --------             -------            -------            -------          -------
  Total............$178,702            $26,847             $13,938            $33,212            $17,365         $270,064
                    -------           --------             -------            -------            -------          -------
                    -------           --------             -------            -------            -------          -------


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

</TABLE>



                                       11

<PAGE>



         As of December 31, 1998, the total amount of loans and mortgage-backed
securities due after December 31, 1999, which had predetermined interest rates
was $107.9 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 $129.8 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, 1998,
the Bank's regulatory loan-to-one borrower limit was $4.5 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, 1998, $160.0
million, or 59.2% 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 $49,200
and the largest outstanding residential loan had a book value of $582,000.
Substantially all of the residential loans originated by the Company are secured
by properties located in the Company's primary market areas.

         In order to reduce its exposure to changes in interest rates, the
Company originates Adjustable Rate Mortgages ("ARM"), subject to market
conditions and consumer preference. 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 its fixed-rate residential loans which have terms of 20 years or
less, and which meet periodically determined minimum interest rates.


                                       12

<PAGE>



         Most of 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 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 20 years, and those which have terms of 20 years or less at a
contractual interest rate of less than a periodically determined interest rate,
that it originates, the Company typically retains the servicing of loans that it
sells. Secondary mortgage market rates are reviewed in conjunction with other
market rates and economic forecasts on a regular basis to determine a rate below
which loans with terms of 20 years or less will be sold. All loans made on
applications taken after the rate is established which are below that rate are
sold. At December 31, 1998, the Company had $59.5 million of 15 year fixed-rate
residential loans and $15.8 million of 30 year fixed-rate residential loans in
its portfolio.

         The Company offers ARM loans at rates, terms and fees determined in
accordance with market and competitive factors. The Company's current
one-to-four family residential ARMs are fully amortizing loans with contractual
maturities of up to 30 years. The interest rates on the ARMs originated by the
Company are subject to adjustment at stated intervals based on a margin over a
specified index and are subject to annual as well as lifetime adjustment limits.
The Company's current ARMs do not permit negative amortization of principal and
carry no prepayment penalty. At December 31, 1998, the Company had $45.4
million, $5.8 million, and $33.4 million of one-year, three-year and five-year
ARMs, respectively.

         The Company's delinquency experience on its ARMs has generally been
similar to that on fixed-rate residential loans. Of the $1.1 million of
one-to-four family loans delinquent 60 days or more at December 31, 1998,
$792,000 (or 0.5% of one-to-four family loans) consisted of ARMs and $319,000
(or 0.2% of the Company's one-to-four family loans) represented fixed-rate
loans.

         The Company evaluates both the borrower's ability to make principal,
interest and escrow payments and the value of the property that will secure the
loan. The Company originates residential mortgage loans with loan-to-value
ratios generally up to 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.

         The Company, on occasion, originates loans in excess of $227,150 (the
FHLMC maximum during 1998). As of December 31, 1998, the Company had 43
residential mortgage loans having an aggregate balance of $12.7 million with
original balances in excess of $227,150 ("Jumbo Loans"). The Company's
historical delinquency experience on its Jumbo Loans has been excellent.


                                       13

<PAGE>



         The Company is an approved one-to-four family lender for both the
Federal Housing Administration ("FHA") and the Veterans' Administration ("VA").
The Company sells, with servicing released, all FHA and VA loans it originates
to other investors. During 1998, one such loan totaling $89,000 was 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, 1998, the Company had $26.8 million in multi-family and commercial
real estate loans, representing 9.9% of the Company's total loan and
mortgage-backed securities portfolio. Included in such loans were $1.9 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 other commercial buildings.

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

         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, 1998 and the amounts of such loans which were non-performing or "of
concern" at December 31, 1998. The amounts shown do not reflect allowances for
losses.

<TABLE>
<CAPTION>

                                                                     ORIGINAL       OUTSTANDING           AMOUNT
                                                     NUMBER            LOAN          PRINCIPAL         NON-PERFORMING
                                                    OF LOANS          AMOUNT          BALANCE          OR OF CONCERN
                                                    --------        ---------       -----------        --------------
                                                                            (DOLLARS IN THOUSANDS)
<S>                                                    <C>          <C>              <C>                   <C>   
Multi-family residential...................             19           $6,135           $5,556               $1,126
Nursing homes..............................              1              990                8                  ---
Churches...................................             12            3,438            2,600                  ---
Agricultural related.......................             11              498              401                  ---
Industrial and warehouse...................             42           18,233           11,398                  271
Retail.....................................             19            2,721            2,123                   49
Office.....................................              6            1,760              982                  ---
Other......................................             30            4,528            3,779                   69
                                                       ---         --------         --------             --------
         Total.............................            140          $38,303          $26,847               $1,515
                                                       ---         --------         --------             --------
                                                       ---         --------         --------             --------
</TABLE>



                                       14

<PAGE>



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

         PURCHASED LOAN PARTICIPATIONS. In order to supplement lending
activities during periods of low loan volume, the Company has from time to time
purchased participation interests in multi-family and commercial real estate
loans originated and serviced by other lenders. Prior to purchase, the Company
reviews each participation to ensure that the underlying loan complies with the
Company's lending policy as in effect at the time of purchase.

         The following table presents information regarding the Bank's
multi-family and commercial real estate loan participations at December 31,
1998. At December 31, 1998, the Bank had $673,000 of purchased loans and
participation interests in one-to-four family loans.

<TABLE>
<CAPTION>


                                                                                                                     AMOUNT
                                                                    ORIGINAL       OUTSTANDING       UNFUNDED         NON-
                                      MONTH OF     ORIGINAL LOAN  PARTICIPATION    BALANCE AT      COMMITMENT AT   PERFORMING
TYPE OF SECURITY/LOCATION           ORIGINATION       AMOUNT          AMOUNT      DEC. 31, 1998    DEC. 31, 1998  OR OF CONCERN
--------------------------------   --------------    --------     -------------   -------------    -------------  --------------
                                                             (DOLLARS IN THOUSANDS)
     <S>                             <C>              <C>             <C>            <C>             <C>               <C>
     APARTMENT BUILDINGS:
      Santa Ana, California          08/26/86         13,750             839             $753          ---                 ---
      Everett, Washington            09/12/86          5,500           1,375            1,126          ---               1,126
     NURSING HOME:                                                  
      Arlington Heights, Illinois    03/01/73          1,980             990                8          ---                 ---
                                                                                       ------        -----             -------
                                                                                       $1,887        $ ---              $1,126
                                                                                       ------        -----             -------
                                                                                       ------        -----             -------

</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, most of the loan participations currently on
the Company's books are 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 20% of total
assets. However, any amount exceeding 10% of total assets must represent small
business loans as defined by the OTS.

         In order to increase the proportion of interest rate sensitive and
relatively high yielding loans in its portfolio, and as a part of its effort to
provide more comprehensive financial services in the communities serviced by its
offices, the Company originates secured and unsecured commercial loans to local
businesses. Currently, the Company's commercial business lending activities
encompass loans with a broad variety of purposes including working capital,
accounts

                                       15

<PAGE>



receivable, inventory, equipment and agriculture. The Company does not have any
energy or foreign loans.

         At December 31, 1998, the Company had $17.4 million in commercial
business loans outstanding (representing 6.4% of the Company's total loan and
mortgage-backed securities portfolio) with additional commercial business loan
commitments totaling $12.1 million, most of which were undrawn lines of credit.
In addition, at December 31, 1998, the Company had fourteen letters of credit
outstanding, in an aggregate amount of $2.2 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, 1998, the Company had
sixteen commercial business loans with balances of $200,000 or more, in an
aggregate amount of $7.1 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, 1998.


<TABLE>
<CAPTION>

                                                                     TOTAL         OUTSTANDING           AMOUNT
                                                    NUMBER            LOAN          PRINCIPAL        NON-PERFORMING
                                                   OF LOANS        COMMITMENT        BALANCE         OR OF CONCERN
                                                   --------        ----------      -----------       --------------
                                                                        (DOLLARS IN THOUSANDS)
<S>                                                    <C>           <C>             <C>                  <C> 
SECURED LOANS:
  Accounts receivable......................              6              $373            $227               $24
  Inventory................................             19             2,469             844                67
  Equipment................................             86             8,665           4,397                36
  Other business assets....................             19             4,032           2,444               ---
  Stocks and bonds.........................             11               931             882               ---
  Heavy duty vehicles......................             64             2,885           1,837                31
  Other motor vehicles.....................             14             1,095             339                28
  Crops....................................              4             2,087             555               ---
  Life insurance...........................              1                25              20               ---
  Stand-by letters of credit...............              7             1,902             ---               ---
  Beneficial interest in real estate trust.             27             7,520           4,386                68
UNSECURED LOANS............................             66             2,034           1,434               ---
UNSECURED STAND-BY LETTERS OF CREDIT.......              7               310             ---               ---
                                                      ----          --------        --------            ------
  Total commercial business loans..........            331           $34,328         $17,365              $254
                                                      ----          --------        --------            ------
                                                      ----          --------        --------            ------
</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



                                       16

<PAGE>



asset/liability management tools. The Company currently originates substantially
all of its consumer loans in its market areas. At December 31, 1998, the
Company's consumer loans totaled $33.2 million or 12.3% 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 savings deposits, mobile home and automobile
loans. Although the Company primarily originates consumer loans secured by real
estate, deposits or other collateral, the Company also makes unsecured personal
loans. In addition, the Company offers unsecured consumer loans through its Visa
and MasterCard credit card programs.

         The Company offers mobile home loans in order to provide affordable
housing. All of the Company's mobile home loans have been originated with
fixed-rates of interest and are generally made in amounts of up to a maximum of
90% of the buyer's cost. As of December 31, 1998, mobile home loans totaled $2.8
million or approximately 1.1% 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,
1998, the Company held $231,000 of such loans, which represents 0.1% 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, 1998, $438,000, or
approximately 1.3% 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 areas, the Company expanded its construction
lending.

                                       17

<PAGE>



At December 31, 1998, the Company had $4.1 million of residential construction
loans and $269,000 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 one year and may provide for the payment of interest and loan
fees from loan proceeds. At December 31, 1998, the Bank had approximately $2.1
million in loans to builders of residences, and $1.0 million in loans on
commercial construction. In addition, on the same date, the Company had $6.4
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, 1998,
only four of the Company's construction loans had a principal balance in excess
of $500,000. The total principal balances of these loans was $7.5 million.

         The table below sets forth the number and amount of the Company's
construction loans at December 31, 1998, by type of security property.

<TABLE>
<CAPTION>



                                                                      TOTAL         OUTSTANDING         AMOUNT
                                                     NUMBER            LOAN          PRINCIPAL      NON-PERFORMING
                                                    OF LOANS        COMMITMENT        BALANCE       OR OF CONCERN
                                                    --------        ----------      -----------     --------------
                                                                     (DOLLARS IN THOUSANDS)

<S>                                                     <C>          <C>             <C>                <C>
One-to-four family residential.............             27            $4,187          $4,089            $   114
Land acquisition and development...........             34            14,646           8,256              2,069
Church.....................................              1                65              58                ---
Retail and Industrial......................              3             1,548           1,535                ---
                                                       ---           -------        --------             ------
         Total.............................             65           $20,446         $13,938             $2,183
                                                       ---           -------        --------             ------
                                                       ---           -------        --------             ------
</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.


                                       18

<PAGE>



         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. In addition, the Company sells a portion of its newly
originated conventional 15-year, fixed-rate residential mortgage loans and
conventional 20-year, fixed-rate residential mortgage loans which bear an
interest rate of less than a specified level, with servicing retained. The
specified rate level is reviewed on a monthly basis and changed based on market
conditions and interest rate forecasts. The Company's recent 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, 1998, excluding
mortgage-backed securities, approximately $2.6 million of the Company's loan
portfolio consisting of purchased loans and purchased participations was
serviced by others and the Company serviced $71.3 million of loans for others.
During the year ended December 31, 1998, the Company received fee income of
$149,000 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>
<CAPTION>


                                                                    YEAR ENDED DECEMBER 31,
                                                ----------------------------------------------------------------
                                                        1998                    1997                 1996
                                                ---------------------   --------------------   -----------------
                                                                     (DOLLARS IN THOUSANDS)
<S>                                                          <C>                     <C>                 <C>
ORIGINATIONS BY TYPE:
  Adjustable-Rate:
    Real estate - one-to-four family.........                $ 17,315                $20,180             $21,433
                - multi-family...............                      99                    ---                 ---
                - commercial.................                  17,434                  8,911               7,745
    Non-real estate - consumer...............                  12,930                 16,521              13,536
                        - commercial business                  12,531                  8,085               6,767
                                                             --------               --------            --------
          Total adjustable-rate..............                  60,309                 53,697              49,481
                                                             --------               --------            --------
  Fixed-Rate:
    Real estate - one-to-four family.........                  62,295                 20,354              13,728
                   - multi-family............                     ---                    ---                 ---
                   - commercial..............                   3,204                  3,757               1,829
    Non-real estate - consumer...............                   9,672                 13,470              14,525
                        - commercial business                   7,244                  2,870               2,336
                                                             --------               --------            --------
          Total fixed-rate...................                  82,415                 40,451              32,418
                                                              -------               --------            --------
          Total loans originated.............                 142,724                 94,148              81,899
                                                              -------               --------            --------

PURCHASES: 
  Real estate - one-to-four family...........                     ---                    ---                 ---
                - commercial.................                     ---                    260               1,120
  Non-real estate - consumer.................                     ---                    ---                 ---
                  - commercial business                           300                  1,920                 ---
  Loans acquired with CCNB...................                  17,958                    ---                 ---
                                                              -------            -----------         -----------
           Total loans.......................                  18,258                  2,180               1,120
  Mortgage-backed securities.................                   8,772                    ---              12,999
  Mortgage-backed securities                                             
                     acquired with CCNB......                     286                    ---                 ---
                                                            ---------            -----------         -----------
           Total purchased...................                  27,316                  2,180              14,119
                                                             --------               --------            --------

SALES AND REPAYMENTS:
Sales:
  Real estate - one-to-four family...........                  35,654                  6,565               4,834
              - commercial                                        191                    ---                 ---
  Non-real estate - consumer.................                   1,089                    493                 792
                  - commercial business                           ---                    ---                 ---
  Loans sold with branch                                          ---                    ---               3,845
                                                           ----------             ----------            --------
          Total loans........................                  36,934                  7,058               9,471
  Mortgage-backed securities.................                     ---                    ---               4,913
                                                           ----------             ----------            --------
          Total sales........................                  36,934                  7,058              14,384
  Principal repayments.......................                 133,538                 89,386              79,269
                                                              -------                -------             -------
          Total reductions...................                 170,472                 96,444              93,653
                                                              -------                -------             -------
  Increase (decrease) in other items, net....                   (484)                (2,091)                  11
                                                           ---------               --------            ---------
          Net increase (decrease) ...........                $  (916)               $(2,207)             $ 2,376
                                                           ---------               --------            ---------
                                                           ---------               --------            ---------



</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
15 days past due. Depending on the nature of the loan and the type of
collateral, if any, securing the loan, the Company may negotiate and accept a
modified payment program or take such other actions as the circumstances
warrant.

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



                                       21

<PAGE>



         The following table sets forth the Company's loan delinquencies by
type, by amount and by percentage of type at December 31, 1998.

<TABLE>
<CAPTION>


                                                    LOANS DELINQUENT FOR:
                              ---------------------------------------------------------------      TOTAL 60 DAYS OR MORE
                                 60-89 DAYS                        90 DAYS AND OVER                   DELINQUENT
                              -----------------               -------------------------------   -----------------------------
                                                   PERCENT                            PERCENT                         PERCENT
                                                   OF LOAN                            OF LOAN                         OF LOAN
                              NUMBER    AMOUNT     CATEGORY   NUMBER      AMOUNT      CATEGORY   NUMBER     AMOUNT    CATEGORY
                              -------   ------     --------   ------      ------      --------   ------     ------    --------
                                                        (DOLLARS IN THOUSANDS)
<S>                             <C>      <C>        <C>           <C>       <C>       <C>         <C>       <C>        <C> 
Real Estate:
  One-to-four family....        10       $505       0.32%          16       $606       0.38%        26      $1,111      0.70%
  Multi-family..........       ---        ---       - ---        ---         ---        ---         ---        ---       ---
  Commercial............         2         68       0.32           7         306       1.44          9         374      1.76
  Construction and
    development.........       ---        ---        ---         ---         ---        ---        ---         ---       ---

Consumer................        17        122       0.37          52         438       1.32         69         560      1.69

Commercial business.....       ---        ---        ---           4         131       0.75          4         131      0.75
                               ---     ------                    ---     -------                  -----    -------

       Total............        29     $  695       0.28          79      $1,481       0.59        108      $2,176      0.87
                               ---     ------                    ---     -------                  -----    -------
                               ---     ------                    ---     -------                  -----    -------

</TABLE>

         The following table sets forth the Company's loan delinquencies by
type, by amount and by percentage of type at December 31, 1997.

<TABLE>
<CAPTION>


                                                    LOANS DELINQUENT FOR:
                              ---------------------------------------------------------------      TOTAL 60 DAYS OR MORE
                                 60-89 DAYS                        90 DAYS AND OVER                   DELINQUENT
                              -----------------               -------------------------------   -----------------------------
                                                   PERCENT                            PERCENT                         PERCENT
                                                   OF LOAN                            OF LOAN                         OF LOAN
                              NUMBER    AMOUNT     CATEGORY   NUMBER      AMOUNT      CATEGORY   NUMBER     AMOUNT    CATEGORY
                              -------   ------     --------   ------      ------      --------   ------     ------    --------
                                                        (DOLLARS IN THOUSANDS)
<S>                             <C>      <C>       <C>           <C>        <C>       <C>          <C>       <C>       <C> 
Real Estate:
  One-to-four family....         3       $641       0.41%         13        $659       0.42%        16      $1,300     0.83%
  Multi-family..........       ---        ---        ---           1         556       7.43          1         556     7.43
  Commercial............         2        322       1.54           5         280       1.34          7         602     2.88
  Construction and
    development.........       ---        ---        ---           6         903      10.03          6         903    10.03

Consumer................        24        198       0.56          51         399       1.14         75         597     1.70

Commercial business.....         1        111       0.91           2          19       0.16          3         130     1.07
                               ---     ------                    ---       -----                 -----     -------

       Total............        30     $1,272       0.52          78      $2,816       1.16        108      $4,088     1.68
                               ---     ------                    ---       -----                 -----     -------
                               ---     ------                    ---       -----                 -----     -------


</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 losses on loans. If an asset or portion
thereof is classified as Loss, the institution must either establish specific
allowances for losses on loans in the amount of 100% of the portion of the asset
classified Loss, or charge off such amount. If an institution does not agree
with an examiner's classification of an asset, it may appeal this determination
to the Regional Director of the OTS. On the basis of management's review of its
assets, at December 31, 1998, on a net basis, the Company had classified $2.7
million of its assets as Special Mention, $4.1 million as Substandard and
$134,000 as Loss. No assets were classified as Doubtful at December 31, 1998.
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, 1998,
there were 56 loans with outstanding principal balances totaling $519,000 which
were 90 days or more past due and continuing to accrue interest.

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

                                       23

<PAGE>

<TABLE>
<CAPTION>



                                                                             DECEMBER 31,
                                                   -----------------------------------------------------------
                                                    1998         1997          1996         1995          1994
                                                   ------       ------        ------       ------        -----
                                                                      (DOLLARS IN THOUSANDS)
<S>                                                <C>          <C>           <C>          <C>           <C>  
Non-accruing loans:
  One-to-four family(1)...................          $606         $659          $524         $516          $485
  Multi-family............................           ---          ---           ---          ---           557
  Commercial..............................           265          207         1,396          111           111
  Construction and development............           ---          669           ---          ---           ---
  Consumer................................           ---          ---           ---          ---           ---
  Commercial business.....................            90          ---           ---          ---           ---
                                                  ------      -------       -------      -------       -------
     Total................................           962        1,535         1,920          627         1,153
                                                   -----        -----         -----        -----         -----

Accruing loans delinquent more than 90 days:
  One-to-four family(1)...................           ---          ---           ---          ---           ---
  Multi-family............................           ---          556           557          557           296
  Commercial..............................            41           73         1,005          ---           ---
  Construction and development............           ---          234           170          169           ---
  Consumer................................           438          399           177          108           133
  Commercial business.....................            40           19            45          ---           ---
                                                 -------      -------       -------     --------      --------
     Total................................           519        1,281         1,954          834           429
                                                  ------       ------        ------       ------        ------

Foreclosed assets:
  One-to-four family......................           387          ---            96           84            27
  Multi-family............................           ---          ---           ---          675           579
  Commercial..............................         1,489        1,317            69           69            73
  Construction and development............           ---          ---           ---          ---           ---
  Consumer................................           ---            3           ---          ---            16
                                                     ---          ---           ---          ---           ---
  Commercial business.....................           ---          ---           ---          ---           ---
                                                --------     --------       -------      -------     ---------
     Total foreclosed assets..............         1,876        1,320           193          828           695
                                                  ------       ------        ------       ------       -------

Troubled debt restructuring Real estate:
  One-to-four family......................           ---          209           ---          ---           ---
                                                 -------      -------       -------      -------       -------
     Total troubled debt restructuring....           ---          209           ---          ---           ---
                                                 -------      -------       -------      -------       -------

Total non-performing assets...............        $3,357       $4,345        $4,067       $2,289        $2,277
                                                 -------      -------       -------      -------       -------
                                                 -------      -------       -------      -------       -------
Total as a percentage of total
  assets..................................          0.82%        1.27%         1.16%        0.64%         0.75%
                                                 -------      -------       -------      -------       -------
                                                 -------      -------       -------      -------       -------
-------------------------
(1)  Includes loans held for sale.


         For the years ended December 31, 1998 and 1997, gross interest income
which would have been recorded had the non-accruing loans been current in
accordance with their original terms amounted to $44,493 and $33,215,
respectively. The amount that was included in interest income on such loans was
$28,524 and $48,240 for 1998 and 1997, respectively.

</TABLE>

                                       24

<PAGE>



         The Company's non-performing assets at December 31, 1998 included the
following: (i) an automobile dealership in Kankakee, Illinois; (ii) a
residential subdivision in Bourbonnais, Illinois; and (iii) a commercial retail
building in Champaign, Illinois.

                                       25

<PAGE>



         ANALYSIS OF ALLOWANCE FOR LOSSES ON LOANS. The following table sets
forth an analysis of the Company's allowance for losses on loans.

<TABLE>
<CAPTION>



                                                                            YEAR ENDED
                                                                            DECEMBER 31,
                                                    ------------------------------------------------------------
                                                     1998         1997          1996         1995          1994
                                                    ------       ------        ------       ------        ------
                                                                       (DOLLAR IN THOUSANDS)
<S>                                                 <C>          <C>           <C>          <C>           <C>   
Balance at beginning of period.                     $2,130       $2,360        $2,388       $2,251        $2,165

Charge-offs:

  One-to-four family........................            20          ---           ---          ---            31
  Multi-family..............................           ---          ---           ---          ---           108
  Commercial real estate....................           ---          ---           ---          ---            17
  Construction..............................           ---          160           ---          ---           ---
  Consumer..................................           160          136           125           59            74
  Commercial business.......................            44          ---             1          ---            15
                                                   -------      -------       -------      -------         -----
                                                       224          296           126           59           245
                                                    ------       ------        ------       ------         -----

Recoveries:
  One-to-four family........................           ---          ---           ---          ---           ---
  Multi-family..............................           ---          ---           ---          ---           ---
  Commercial real estate....................           ---          ---           ---          ---           ---
  Construction..............................           ---          ---           ---          ---           ---
  Consumer..................................            71           33            56           20            33
  Commercial business.......................           ---          ---           ---            3             2
                                                   -------      -------      --------      -------        ------
                                                        71           33            56           23            35
                                                    ------       ------       -------       ------         -----


Net charge-offs.............................         (153)        (263)          (70)         (36)         (210)
Additions charged to operations.............           ---           33            42          173           296
Additions through acquisitions..............           398          ---           ---          ---           ---
                                                  --------   ----------     ---------    ---------     ---------
Balance at end of period....................        $2,375       $2,130        $2,360       $2,388        $2,251
                                                  --------   ----------     ---------    ---------     ---------
                                                  --------   ----------     ---------    ---------     ---------

Ratio of net charge-offs during the
  period to average loans
  outstanding during the period.............          0.06%        0.11%         0.03%        0.02%         0.11%
                                                  --------   ----------     ---------    ---------     ---------
                                                  --------   ----------     ---------    ---------     ---------

Ratio of net charge-offs during the
  period to average non-
  performing assets.........................          3.97%        6.25%         2.20%        1.58%        11.51%
                                                  --------   ----------     ---------    ---------     ---------
                                                  --------   ----------     ---------    ---------     ---------

</TABLE>


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

                                       26

<PAGE>



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

<TABLE>
<CAPTION>

                                                             DECEMBER 31,
                   --------------------------------------------------------------------------------------------------------
                         1998               1997                1996                       1995                 1994
                   -----------------    -----------------  --------------------     -------------------     ---------------
                            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             CATEGORY          CATEGORY               CATEGORY              CATEGORY
                            TO TOTAL             TO TOTAL          TO TOTAL               TO TOTAL              TO TOTAL
                   AMOUNT   LOANS        AMOUNT  LOANS     AMOUNT  LOANS        AMOUNT    LOANS        AMOUNT   LOANS
                   ------   -----------  ------  -----     ------  -----------  ------    -----------  ------   -----------
                                                            (DOLLARS IN THOUSANDS)
<S>                <C>      <C>        <C>       <C>       <C>         <C>       <C>      <C>         <C>          <C>    
One-to-four
  family..........  $ 415     63.65%    $ 521      65.06%   $ 408        62.71%   $ 403     62.74%      $506         62.92%
Multi-family......     83      2.21       172       3.09      451         5.94      437      6.18        460          6.70
Commercial real
  estate..........    469      8.47       444       8.61      496        12.04      561     12.07        470         14.34
Construction or
  development.....    301      5.55       150       3.71      294         2.32      272      3.52        424          2.70
Consumer..........    208     13.21       215      14.50      185        12.82      170     11.56        150          9.63
Commercial
  business........    556      6.91       352       5.03      276         4.17      259      3.95        241          3.71

Unallocated.......    343       ---       276        ---      250          ---      286       ---        ---           ---
                   ------  --------   -------   --------   ------    ---------  -------  --------    -------     ---------
     Total........ $2,375    100.00%   $2,130     100.00%  $2,360       100.00%  $2,388    100.00%    $2,251        100.00%
                   ------  --------   -------   --------   ------    ---------  -------  --------    -------     ---------
                   ------  --------   -------   --------   ------    ---------  -------  --------    -------     ---------


</TABLE>



                                       27

<PAGE>



INVESTMENT ACTIVITIES

     The Company has traditionally invested in U.S. Government securities and
agency obligations of both long and short terms to supplement its lending
activities. During recent years, the Company has refocused its investment
activities on short and medium term securities, although the Company has
retained a number of longer term securities in its portfolio which are held for
investment. In addition, from time to time, the 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, 1998, 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, 1998, the Bank's liquidity ratio (liquid assets as
a percentage of net withdrawable savings and current borrowings) was 27.3% as
compared to the OTS requirement of 4%. The Company believes its liquidity
position is such that it will have no difficulty in meeting any additional
requirements for cash availability which could result from the Year 2000 issue.



                                       28

<PAGE>



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

<TABLE>
<CAPTION>

                                                                                  DECEMBER 31,
                                                      -------------------------------------------------------------------------
                                                             1998                    1997                     1996
                                                      ---------------------  ---------------------     ------------------------
                                                       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......................     $21,690       27.60%     $7,587       19.33%      $ 9,628        17.87%
   Federal agency obligations......................      53,865       68.54      28,876       73.56        41,386        76.82
   Municipal bonds.................................         342        0.44          70        0.18            72         0.13
   Non-marketable equity securities................         501        0.64         501        1.28           501         0.93
   Mutual fund shares..............................         388        0.49         360        0.92           331         0.62
                                                       --------    --------   ---------    --------     ---------     --------
         Subtotal..................................      76,786       97.71      37,394       95.27        51,918        96.37
FHLB Stock.........................................       1,801        2.29       1,856        4.73         1,956         3.63
                                                       --------     -------    --------     -------      --------     --------
         Total investment securities and FHLB                                           
            stock..................................     $78,587      100.00%    $39,250      100.00%      $53,874       100.00%
                                                       --------     -------    --------     -------      --------     --------
                                                       --------     -------    --------     -------      --------     --------

Average remaining life or term to repricing of
   investment securities excluding FHLB stock
   and non-marketable securities...................   43 months               52 months                 64 months

Other Interest-Earning Assets:
   Federal funds sold..............................     $18,525       58.10%     $8,575       38.91%      $ 7,985        55.59%
   Money market funds..............................      13,311       41.74       5,067       22.99         4,883        33.99
   FHLB overnight investments......................         ---         ---       6,793       30.83         1,446        10.07
   Certificates of deposit.........................          50        0.16       1,602        7.27            50         0.35
                                                        -------    --------   ---------   ---------    ----------     --------
      Total........................................     $31,886      100.00%    $22,037      100.00%      $14,364       100.00%
                                                        -------    --------   ---------   ---------    ----------     --------
                                                        -------    --------   ---------   ---------    ----------     --------


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

</TABLE>



                                       29

<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, 1998, are indicated in the
following table.


<TABLE>
<CAPTION>

                                                              AT DECEMBER 31, 1998
                               -------------------------------------------------------------------------------
                               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......                   $12,081        $ 9,609       $   ---        $   ---           $21,690
Federal agency
 obligations.....                     2,960         39,907         9,003          1,995            53,865
Mutual fund
 shares......                           388            ---           ---            ---               388
                                  ---------    -----------     ---------      ---------         ---------
Total ......                        $15,429        $49,516        $9,003         $1,995           $75,943
                                  ---------    -----------     ---------      ---------         ---------
                                  ---------    -----------     ---------      ---------         ---------
Weighted average
 yield..........                       5.54%          5.89%         6.35%          7.00%             5.91%
                                  ---------    -----------     ---------      ---------         ---------
                                  ---------    -----------     ---------      ---------         ---------


SECURITIES
HELD-TO-MATURITY:                                                                              
Municipal Bonds                     $    31        $    56       $   177         $   78           $   342
                                  ---------    -----------     ---------      ---------         ---------
                                  ---------    -----------     ---------      ---------         ---------
Weighted average                                                                         
 yield...........                      5.77%          5.49%         4.65%          6.25%             5.25%
                                  ---------    -----------     ---------      ---------         ---------
                                  ---------    -----------     ---------      ---------         ---------

</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 deposit with varying maturities and
individual retirement accounts. Deposit account terms vary, according to the
minimum balance required, the time period the funds must remain on deposit and

                                       30

<PAGE>



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

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


<TABLE>
<CAPTION>

                                                                        YEAR ENDED DECEMBER 31,
                                                --------------------------------------------------------------------
                                                    1998                          1997                       1996
                                                -----------                    ---------                    --------
                                                                         (DOLLARS IN THOUSANDS)
<S>                                               <C>                           <C>                         <C>     
Opening balance.................                  $280,022                      $277,348                    $286,080
Deposits........................                   872,751                       533,933                     562,775
Withdrawals.....................                   869,404                       541,843                     573,994
Purchased deposits..............                    51,688                           ---                         ---
Sold deposits. . . . . . . .                           ---                           ---                     (8,608)
Increase (decrease)                                                                          
  before  interest
  credited......................                    55,035                       (7,910)                    (19,827)
Interest credited...............                    11,746                        10,584                      11,095
                                                ----------                    ----------                   ---------

Ending balance..................                  $346,803                      $280,022                    $277,348
                                                ----------                    ----------                   ---------
                                                ----------                    ----------                   ---------

Net increase (decrease).........                  $ 66,781                      $  2,674                   $ (8,732)
                                                ----------                    ----------                   ---------
                                                ----------                    ----------                   ---------

Percent increase
(decrease)......................                     23.85%                         0.96%                     (3.05)%
                                                ----------                    ----------                   ---------
                                                ----------                    ----------                   ---------


</TABLE>

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

                                       31

<PAGE>


<TABLE>
<CAPTION>



                                                                  DECEMBER 31,
                                    ---------------------------------------------------------------------------------
                                           1998                          1997                         1996
                                    -------------------           -------------------        ------------------------
                                               PERCENT                       PERCENT                      PERCENT
                                                 OF                            OF                           OF
                                     AMOUNT     TOTAL             AMOUNT      TOTAL           AMOUNT       TOTAL
                                    -------    -------            ------      ------          ------      ---------
                                                                (DOLLARS IN THOUSANDS)
<S>                                 <C>          <C>             <C>           <C>           <C>            <C>    
TRANSACTION AND
SAVINGS DEPOSITS(1):

Commercial Demand
  0% .....................          $15,327        4.42%          $9,720         3.47%        $7,644          2.76%
Savings Accounts
  2.39%...................           60,583       17.47           50,727        18.12         51,966         18.74
NOW Accounts
  2.73%...................           46,553       13.42           32,759        11.70         34,756         12.53

Money Market
Accounts
  2.96%...................           13,655        3.94            6,699         2.39          6,612          2.38
                                   --------     -------        ---------      -------      ---------       ---------

Total Non-Certificates....          136,118       39.25           99,905        35.68        100,978         36.41
                                   --------      ------         --------       ------       --------       --------

CERTIFICATES:

 0.00 - 3.99%.............              ---         ---              ---          ---              3          0.00
 4.00 - 4.99%.............           29,665        8.55            2,561         0.91          6,560          2.37
 5.00 - 5.49%.............           36,662       10.57           41,636        14.87         65,714         23.69
 5.50 - 5.99%  . . . . .            114,663       33.06          103,602        37.00         64,930         23.41
 6.00 - 7.99%.............           29,390        8.48           32,025        11.44         38,666         13.94
 8.00 - over..............               23        0.01               97         0.03            273          0.10
                                -----------     -------      -----------      -------    -----------      --------

Total Certificates........          210,403       60.67          179,921        64.25        176,146         63.51
                                   --------      ------         --------       ------      ---------      --------
Accrued Interest..........              282        0.08              196         0.07            224          0.08
                                 ----------     -------       ----------      -------    -----------      --------

Total Deposits............         $346,803      100.00%        $280,022       100.00%      $277,348        100.00%
                                 ----------     -------       ----------      -------    -----------      --------
                                 ----------     -------       ----------      -------    -----------      --------

-----------------
(1) Rates on transaction and savings deposits are those in effect on December
    31, 1998.

</TABLE>


                                       32

<PAGE>



         The following table shows rate and maturity information for the
Company's certificates of deposit as of December 31, 1998.

<TABLE>
<CAPTION>


                           0.00-       5.00-       5.50-       6.00-                                                PERCENT
                           4.99%       5.49%       5.99%       7.99%       8% AND OVER            TOTAL             OF TOTAL
                           -----       ------      ------      ------      -----------            ------            --------
                                                 (DOLLARS IN THOUSANDS)
<S>                       <C>         <C>        <C>         <C>              <C>            <C>                 <C>    
CERTIFICATE ACCOUNTS
MATURING IN QUARTER
ENDING:

March 31, 1999............ $3,646     $11,768     $32,281     $1,220          $17             $48,932              23.26%
June 30, 1999............. 11,814       1,881      21,892      2,721          ---              38,308              18.21
September 30, 1999........  1,223       2,694      20,243      6,545          ---              30,705              14.59
December 31, 1999......... 11,004       6,752      12,916      2,128          ---              32,800              15.59
March 31, 2000............    946       3,224      10,780      3,684          ---              18,634               8.86
June 30, 2000.............    777       5,192       3,942      3,181          ---              13,092               6.22
September 30, 2000........    ---         235       2,213      1,216          ---               3,664               1.74
December 31, 2000.........    206       3,914       1,030      3,302          ---               8,452               4.02
March 31, 2001............    ---          77       2,887      1,221            6               4,191               1.99
June 30, 2001.............    ---         222       1,132         24          ---               1,378               0.65
September 30, 2001........    ---         ---       1,347        383          ---               1,730               0.82
December 31, 2001.........     49         485         371      1,309          ---               2,214               1.05
Thereafter................    ---         218       3,629      2,456          ---               6,303               3.00
                          -------  ----------  ----------  ---------     --------          ----------        -----------

   Total..................$29,665     $36,662    $114,663    $29,390          $23            $210,403             100.00%
                          -------  ----------  ----------  ---------     --------          ----------        -----------
                          -------  ----------  ----------  ---------     --------          ----------        -----------

   Percent of total.......  14.10%      17.42%      54.50%     13.97%        0.01%
                          -------  ----------  ----------  ---------     --------
                          -------  ----------  ----------  ---------     --------

</TABLE>





                                       33

<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, 1998.

<TABLE>
<CAPTION>


                                                                 MATURITY
                                             -------------------------------------------------
                                                            OVER         OVER
                                             3 MONTHS      3 TO 6       6 TO 12        OVER
                                             OR LESS       MONTHS       MONTHS       12 MONTHS        TOTAL
                                             --------      -------      -------      ---------        ------
                                                               (DOLLARS IN THOUSANDS)

<S>                                         <C>         <C>           <C>           <C>           <C>     
Certificates of deposit less
than $100,000 (1)..........................$42,726     $33,253       $55,755       $52,649       $184,383
Certificates of deposit of                                                    
 $100,000 or more (1).......................  4,928       1,779         5,047         4,697         16,451

Public funds (2)............................  1,278       3,276         2,703         2,312          9,569
                                            -------     --------      -------       --------       --------
Total certificates of
 deposit....................................$48,932     $38,308       $63,505       $59,658       $210,403
                                            -------     --------      -------       --------       --------
                                            -------     --------      -------       --------       --------

</TABLE>

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


         BORROWINGS. The Company utilizes borrowings primarily for two purposes.
The first is to purchase mortgage-backed securities in order to generate
additional net interest income and as a method of increasing the leverage on its
capital. The second is as part of the management of short term cash
requirements. The decision to borrow money to purchase mortgage-backed
securities is based on several factors, including the current asset/liability
mix, the regulatory capital position of the Bank and the adequacy of available
interest rate spreads available in such transactions, subject to the limits on
such transactions established by the Board of Directors. Borrowings for such
purposes are derived from securities sold under agreements to repurchase and
advances from the FHLB of Chicago. Borrowings related to short term cash
management are in the form of advances from the FHLB of Chicago. As a member of
the FHLB of Chicago, the Company is authorized to apply for advances from the
FHLB of Chicago. Each FHLB of Chicago credit program has its own interest rate,
which may be fixed or variable, and range of maturities. The FHLB of Chicago may
prescribe the acceptable uses for these advances, as well as limitations on the
size of the advances and repayment provisions. At December 31, 1998, borrowed
money totaled $22.9 million, all of which was in advances from the FHLB of
Chicago. Interest expense on borrowed money totaled $1.3 million during 1998 and
$1.5 million during 1997.


                                       34

<PAGE>



SERVICE CORPORATION

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

         KFS 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, 1998, the Company's equity
investment in KFS was approximately $1.1 million. During 1998, KFS recorded net
consolidated income of $156,000. During 1998 and 1997, gross revenues related to
securities and annuities brokerage, appraisal activities and insurance agency
activities totaled approximately $202,000, $235,000 and $62,000, and $173,000,
$215,000 and $82,000, respectively.

COMPETITION

         The Company faces competition both in originating loans and in
attracting deposits. Competition in originating loans comes primarily from other
savings institutions, commercial banks, credit unions and mortgage bankers who
also make loans secured by real estate located in the Company's primary market
areas. The Company competes for loans principally on the basis 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, Coal
City, Hoopeston and Champaign/Urbana market areas to be 15.6%, 48.4%, 17.6% and
less than 1.0%, 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.

                                       35

<PAGE>



EMPLOYEES

         As of December 31, 1998, the Company had 146 full-time employees and 23
part-time employees. The Company places a high priority on staff development
which involves extensive training, including customer service and sales
training. New employees are selected on the basis of both technical skills and
customer service capabilities. None of the Company's employees are represented
by any collective bargaining group. The Company offers a variety of employee
benefits and management considers its relations with its employees to be
excellent.


                           SUPERVISION AND REGULATION

GENERAL

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

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


                                       36

<PAGE>



RECENT REGULATORY DEVELOPMENTS

         PENDING LEGISLATION. Legislation has been introduced in the Congress
that would allow bank holding companies to engage in a wider range of nonbanking
activities, including greater authority to engage in securities and insurance
activities. The expanded powers generally would be available to a bank holding
company only if the bank holding company and its bank subsidiaries remain
well-capitalized and well-managed. Unlike prior financial modernization bills
considered by the Congress, the pending legislation does not include provisions
eliminating the federal savings association charter and requiring all federal
savings associations to convert to banks. The pending legislation does, however,
restrict the types of non-banking activities that may be conducted by any
company which becomes a unitary savings and loan holding company (I.E., a
savings and loan holding company that controls only one savings association
subsidiary) after October 7, 1998. Under current law, unitary savings and loan
holding companies are generally not subject to restrictions on the types of
non-banking activities in which they may engage. At this time, the Company is
unable to predict whether the proposed legislation will be enacted and,
therefore, is unable to predict the impact such legislation may have on the
Company and the Bank.

THE COMPANY

         GENERAL. The Company, as the sole shareholder of the Bank, is a savings
and loan holding company. As a savings and loan holding company, the Company is
registered with, and is subject to regulation by, the OTS under the Home Owners'
Loan Act, as amended (the "HOLA"). Under the HOLA, the Company is subject to
periodic examination by the OTS. The Company is also required to file with the
OTS periodic reports of the Company's operations and such additional information
regarding the Company and its subsidiaries as the OTS may require.

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

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

                                       37

<PAGE>



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 types
of 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 (SEE "--The Bank--
Qualified Thrift Lender Test"). 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. The restrictions the OTS may impose include
limitations on (i) the payment of dividends by the savings association to the
holding company, (ii) transactions between the savings association and its
affiliates and (iii) any activities of the savings association that might create
a serious risk that liabilities of the holding company and its affiliates may be
imposed on the savings association.

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

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

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


                                       38

<PAGE>



THE BANK

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

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

         During the year ended December 31, 1998, SAIF assessments ranged from
0% of deposits to 0.27% of deposits. For the semi-annual assessment period
beginning January 1, 1999, SAIF assessment rates will continue to range from 0%
of deposits to 0.27% of deposits.

         The FDIC may terminate the deposit insurance of any insured depository
institution if the FDIC determines, after a hearing, that the institution (i)
has engaged or is engaging in unsafe or unsound practices, (ii) is in an unsafe
or unsound condition to continue operations or (iii) has violated any applicable
law, regulation, order, or any condition imposed in writing by, or written
agreement with, the FDIC. The FDIC may also suspend deposit insurance
temporarily during the hearing process for a permanent termination of insurance
if the institution has no tangible capital. Management of the 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 Financing Corporation ("FICO"). FICO was
created in 1987 to finance the recapitalization of the Federal Savings and Loan
Insurance Corporation, the SAIF's predecessor insurance fund. As a result of
federal legislation enacted in 1996, beginning as of January 1, 1997, both SAIF
members and members of the FDIC's Bank Insurance Fund ("BIF") became subject to
assessments to cover the interest payments on outstanding FICO obligations.
These FICO assessments are 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. Between January 1, 2000 and the final maturity of the outstanding
FICO

                                       39

<PAGE>



obligations in 2019, BIF members and SAIF members will share the cost of the
interest on the FICO bonds on a PRO RATA basis. During the year ended December
31, 1998, the FICO assessment rate for SAIF members ranged between approximately
0.061% of deposits and approximately 0.063% of deposits, while the FICO
assessment rate for BIF members ranged between approximately 0.012% of deposits
and approximately 0.013% of deposits. During the year ended December 31, 1998,
the Bank paid FICO assessments totaling $168,000.

         SUPERVISORY ASSESSMENTS. All Federal savings associations are required
to pay supervisory assessments to the OTS to fund the operations of the OTS. The
amount of the assessment is calculated using a formula which takes into account
the institution's size, its supervisory condition (as determined by the
composite rating assigned to the institution as a result of its most recent OTS
examination) and the complexity of its operations. During the year ended
December 31, 1998, the Bank paid supervisory assessments to the OTS totaling
$90,000.

         CAPITAL REQUIREMENTS. Pursuant to the HOLA and OTS regulations, savings
associations, such as the Bank, are subject to the following minimum capital
requirements: a core capital requirement, consisting of a minimum ratio of core
capital to total assets of 3%; 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. Core capital consists primarily of permanent stockholders' equity less
(i) intangible assets other than certain supervisory goodwill, certain mortgage
servicing rights and certain purchased credit card relationships and (ii)
investments in subsidiaries engaged in activities not permitted for national
banks. Tangible capital is substantially the same as core capital except that
all intangible assets other than certain mortgage servicing rights must be
deducted. Total capital consists primarily of core capital plus certain debt and
equity instruments that do not qualify as core capital and a portion of the
Bank's allowances for loan and leases losses.

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

         During the year ended December 31, 1998, the Bank was not required by
the OTS to increase its capital to an amount in excess of the minimum regulatory
requirement. As of December 31, 1998, the Bank exceeded its minimum regulatory
capital requirements with a core capital ratio of 6.95%, a tangible capital
ratio of 6.95% and a risk-based capital ratio of 13.62%.

         The OTS has proposed to amend its regulations to establish a minimum
core capital requirement of 3% of total assets for any savings association
assigned a composite rating of 1 as of the association's most recent OTS
examination, with a minimum core capital requirement of

                                       40

<PAGE>



4% of total assets for all other savings associations. It is not anticipated
that the adoption of this proposal would affect the Bank's ability to comply
with the OTS capital requirements.

         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," in each case as defined by regulation. Depending upon the
capital category to which an institution is assigned, the regulators' corrective
powers include: requiring the institution to submit a capital restoration plan;
limiting the institution's asset growth and restricting its activities;
requiring the institution to issue additional capital stock (including
additional voting stock) or to be acquired; restricting transactions between the
institution and its 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. As of December 31, 1998, the Bank was "well-capitalized," as
defined by OTS regulations.

         DIVIDENDS. OTS regulations impose limitations upon all capital
distributions by savings associations, including cash dividends. Under the OTS
rule that is presently in effect, an institution that exceeds all applicable
capital requirements both before and after the proposed capital distribution (a
"Tier 1 Institution") may, after prior notice to, but without the approval of,
the OTS, make capital distributions during a calendar year in an aggregate
amount 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 amounts of its capital in excess of its 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 OTS approval. As of December 31, 1998, the Bank was a Tier 1
Institution.

         The OTS has amended its regulations governing capital distributions
(including cash dividends) by savings associations. The amended rule, which
takes effect April 1, 1999, will require prior OTS approval for any capital
distribution by a savings association that is not eligible for expedited
processing under the OTS's application processing regulations. In order to
qualify for expedited processing, a savings association must: (i) have a
composite examination rating of 1 or 2; (ii) have a Community Reinvestment Act
rating of satisfactory or better; (iii) have a compliance rating of 1 or 2; (iv)
meet all applicable regulatory capital requirements; and (v) not have been
notified by the OTS that it is a problem association or an association in
troubled condition. Savings associations that qualify for expedited processing
will be required to obtain OTS approval prior to making a capital distribution
only if: (a) the amount of the proposed capital distribution, when aggregated
with all other capital distributions during the same calendar year, will exceed
an amount equal to the association's year-to-date net income plus its retained
net income for the preceding two years; (b) after giving effect to the
distribution, the association will

                                       41

<PAGE>



not be at least "adequately capitalized" (as defined by OTS regulation); or (c)
the distribution would violate a prohibition contained in an applicable statute,
regulation or agreement with the OTS or the FDIC or violate a condition imposed
in connection with an OTS-approved application or notice. The amended regulation
will continue to require that the OTS be given prior notice of certain types of
capital distributions, including any capital distribution by a savings
association that, like the Bank, is a subsidiary of a savings and loan holding
company, or by a savings association that, after giving effect to the
distribution, would not be "well-capitalized" (as defined by OTS regulation).

         The payment of dividends by any financial institution or its holding
company is affected by the requirement to maintain adequate capital pursuant to
applicable capital adequacy guidelines and regulations, and a financial
institution generally is prohibited from paying any dividends if, following
payment thereof, the institution would be undercapitalized. As described above,
the Bank exceeded its minimum capital requirements under applicable guidelines
as of December 31, 1998. 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, 1998, approximately $5.9 million was available to be paid as
dividends to the Company by the Bank. Notwithstanding the availability of funds
for dividends, however, the OTS may prohibit the payment of any dividends by the
Bank if the OTS determines such payment would constitute an unsafe or unsound
practice.

         INSIDER TRANSACTIONS. The Bank is subject to certain restrictions
imposed by federal law on extensions of credit to the Company 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,
federal law and regulations may affect the terms upon which any person becoming
a director or officer of the Company or one of its subsidiaries or a principal
stockholder of the Company may obtain credit from banks with which the Bank
maintains a correspondent relationship.

         SAFETY AND SOUNDNESS STANDARDS. The federal banking agencies have
adopted guidelines which establish operational and managerial standards to
promote the safety and soundness of federally insured depository institutions.
The guidelines set forth standards for internal controls, information systems,
internal audit systems, loan documentation, credit underwriting, interest rate
exposure, asset growth, compensation, fees and benefits, asset quality and
earnings. In addition, in October 1998, the federal banking regulators issued
safety and soundness standards for achieving Year 2000 compliance, including
standards for developing and managing Year 2000 project plans, testing
remediation efforts and planning for contingencies.


                                       42

<PAGE>



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

         BRANCHING AUTHORITY. Federally chartered savings associations which
qualify as "domestic building and loan associations," as defined in the Internal
Revenue Code, or meet the qualified thrift lender test (SEE "-The Bank --
Qualified Thrift Lender Test") have the authority, subject to receipt of OTS
approval, to establish or acquire branch offices anywhere in the United States.
If a federal savings association fails to qualify as a "domestic building and
loan association," as defined in the Internal Revenue Code, and fails to meet
the qualified thrift lender test the association may branch only to the extent
permitted for national banks located in the savings association's home state. As
of December 31, 1998, the Bank qualified as a "domestic building and loan
association," as defined in the Internal Revenue Code and met the qualified
thrift lender test.

         QUALIFIED THRIFT LENDER TEST. The HOLA requires every savings
association to satisfy a "qualified thrift lender" ("QTL") test. Under the HOLA,
a savings association will be deemed to meet the QTL test if it either (i)
maintains at least 65% of its "portfolio assets" in "qualified thrift
investments" on a monthly basis in nine out of every 12 months or (ii) qualifies
as a "domestic building and loan association," as defined in the Internal
Revenue Code. For purposes of the QTL test, "qualified thrift investments"
consist of mortgage loans, mortgage-backed securities, education loans, small
business loans, credit card loans and certain other housing and consumer-related
loans and investments. "Portfolio assets" consist of a savings association's
total assets less goodwill and other intangible assets, the association's
business properties and a limited amount of the liquid assets maintained by the
association pursuant to the liquidity requirements of the HOLA and OTS
regulations (SEE "--The Bank--Liquidity Requirements"). A savings association
that fails to meet the QTL test must either convert to a bank charter or operate
under certain restrictions on its operations and activities. Additionally,
within one year following the loss of QTL status, the holding company for the
savings association will be required to register as, and will be deemed to be, a
bank holding company. A savings association that fails the QTL test may
requalify as a QTL but it may do so only once. As of December 31, 1998, the Bank
satisfied the QTL test, with a ratio of qualified thrift investments to
portfolio assets of 78.0%,

                                       43

<PAGE>



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 quarter, 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 4% of either (i) its liquidity base (I.E., its net withdrawable
accounts plus borrowings repayable in 12 months or less) as of the end of the
preceding calendar quarter or (ii) the average daily balance of its liquidity
base during the preceding calendar quarter. This liquidity requirement may be
changed from time to time by the OTS to an amount within a range of 4% to 10% of
the liquidity base, depending upon economic conditions and the deposit flows of
savings associations. The OTS may also require a savings association to maintain
a higher level of liquidity than the minimum 4% requirement if the OTS deems
necessary to ensure the safe and sound operation of the association. Penalties
may be imposed for failure to meet liquidity ratio requirements. At December 31,
1998, the Bank was in compliance with OTS liquidity requirements, with a
liquidity ratio of 27.3%.

         FEDERAL RESERVE SYSTEM. Federal Reserve regulations, as presently in
effect, require depository institutions to maintain non-interest earning
reserves against their transaction accounts (primarily NOW and regular checking
accounts), as follows: for transaction accounts aggregating $46.5 million or
less, the reserve requirement is 3% of total transaction accounts; and for
transaction accounts aggregating in excess of $46.5 million, the reserve
requirement is $1.395 million plus 10% of the aggregate amount of total
transaction accounts in excess of $46.5 million. The first $4.9 million of
otherwise reservable balances are exempted from the reserve requirements. These
reserve requirements are subject to annual adjustment by the Federal Reserve.
The Bank is in compliance with the foregoing requirements. The balances used to
meet the reserve requirements imposed by the Federal Reserve 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.

         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

                                       44

<PAGE>



savings associations 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 ($108,000) has been recaptured into taxable income during 1996,
1997 and 1998. 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 losses on loans that have been deducted in excess
of amounts that have been charged against income on the financial statements. No
provision for federal income tax has been made against this amount. If, in the
future, the Bank ceases to qualify as a "bank" for federal income tax purposes
or if these retained earnings are liquidated, federal income taxes may be
imposed at the then-applicable rates. If federal income taxes had been provided,
the deferred liability would have been approximately $3,059,000.

         In addition to the regular income tax, corporations, including savings
associations such as the Bank, generally are subject to a minimum tax. An
alternative minimum tax is imposed at a minimum tax rate of 20% on alternative
minimum taxable income, which is the sum of a corporation's regular taxable
income (with certain adjustments) and tax preference items, less any available
exemption. The alternative minimum tax imposed to the extent it exceed 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 years ended December 31, 1996, 1997 and 1998, 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.


                                       45

<PAGE>



                        EXECUTIVE OFFICERS OF THE COMPANY

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

         Ronald J. Walters, age 49, 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 Chief Financial Officer, was named Treasurer in 1985, and
promoted to Senior Vice President in 1996. Mr. Walters is a certified public
accountant.

         David B. Cox, age 60, 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 62, 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.

         Keith M. Roseland, age 49, is a Senior Vice President and Regional
Branch Manager of the Bank, a position he was appointed to in 1998. Mr. Roseland
is responsible for the operation of the Coal City, Diamond and Braidwood,
Illinois branches of the Bank. He had previously served as President, since
1986, of CCNB, which was acquired by the Bank in January, 1998.
Mr. Roseland had been with CCNB since 1967.

         Lois Swartz, age 56, 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 and the Company's
Training Department. She joined the Bank in 1960.


                                       46

<PAGE>



         Monte S. Crowl, age 34, 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 60, 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.

         Carol Hoekstra, age 43, 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 mortgage and consumer lending operations. 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.

         Robert E. Edwards, age 45, is a Vice President and Senior Trust Officer
of the Bank, a position he was appointed to in 1998. Mr. Edwards is responsible
for the operations of the Bank's newly established trust department. He has in
excess of fifteen years experience in similar positions with financial
institutions in the Pontiac, Dixon and Kankakee, Illinois areas. Mr. Edwards is
an attorney.

         Terry L. Ralston, age 49, was elected a Vice President of the Bank in
1998. He is also the Data Processing Manager of the Bank, a position he has held
since joining the Bank in February, 1996. He is responsible for the day-to-day
operation of the Bank's data processing. He has over twenty-five years of
experience in similar positions with financial institutions in northern Illinois
and southern Wisconsin.

                                       47

<PAGE>



ITEM 2.  PROPERTIES
OFFICES
         The following table sets forth information concerning the main office
and each branch office of the Bank at December 31, 1998. At December 31, 1998,
the Company's premises had an aggregate net book value of approximately $5.8
million.

<TABLE>
<CAPTION>

                                      YEAR                OWNED                 LEASE                 NET
           LOCATION                OPENED (1)           OR LEASED          EXPIRATION DATE         BOOK VALUE
           --------                ------               ---------          ---------------         ----------
                                                                                                 (IN THOUSANDS)
<S>                                   <C>                 <C>           <C>                           <C>
MAIN OFFICE
-----------
310 S. Schuyler Avenue                1958                Owned                  N/A                    $861
Kankakee, Illinois

FULL SERVICE BRANCHES
---------------------
Main Street and U.S. 45               1977                Owned                  N/A                      27
Ashkum, Illinois
680 S. Main Street                    1974                Owned                  N/A                     280
Bourbonnais, Illinois
990 N. Kinzie Avenue                  1998               Leased         October 22, 2013 (2)             --- (4)
Bradley, Illinois
180 N. Front Street                   1998               Leased           July 24, 2000 (3)              ---
Braidwood, Illinois
1001 S. Neil Street                   1992                Owned                  N/A                     806
Champaign, Illinois
100 S. Broadway                       1998               Leased           July 24, 2000 (3)              198
Coal City, Illinois
660 S. Broadway                       1998                Owned                  N/A                     820
Coal City, Illinois
1275 E. Division Street               1998                Owned                  N/A                     385
Diamond, Illinois
302 W. Mazon Avenue                   1987                Owned                  N/A                     419
Dwight, Illinois
654 N. Park Road                      1998                Owned                  N/A                     634
Herscher, Illinois
323 E. Main Street                    1994                Owned                  N/A                     176
Hoopeston, Illinois
310 Section Line Road                 1975                Owned                  N/A                     231
Manteno, Illinois
200 W. Washington Street              1995                Owned                  N/A                     165
Momence, Illinois
1708 S. Philo Road                    1998                Owned                  N/A                     756
Urbana, Illinois                                                                                          
                                                                                                      $5,758
                                                                                                      ------
                                                                                                      ------

</TABLE>
----------------
(1) Year opened refers to the year in which the current facility opened or
    was acquired.
(2) The Bank has an option to cancel this lease at the end of the fifth and
    tenth year by providing notice consistent with the terms of the lease.
(3) The Bank has an option to renew this lease for three consecutive five
    year terms.
(4) The office opened on November 2, 1998. However, all related bills had not
    been submitted for payment by December 31, 1998, and costs had not been
    transferred to the appropriate fixed assets accounts.


                                       48

<PAGE>




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

         The Company maintains depositor and borrower customer files on an
in-house system. The net book value of the data processing and computer
equipment utilized by the Company at December 31, 1998 was $197,000.

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,
1998.

                                     PART II

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

         Page 55 of the 1998 Annual Report to Stockholders is herein
incorporated by reference.

ITEM 6.  SELECTED FINANCIAL DATA

         Pages 7 and 8 of the 1998 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 27 of the 1998 Annual Report to Stockholders are herein
incorporated by reference.

ITEM 7a.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         Pages 9 through 27 of the 1998 Annual Report to Stockholders are herein
incorporated by reference.


                                       49

<PAGE>



ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

         Pages 29 through 53 of the 1998 Annual Report to Stockholders are
herein incorporated by reference.

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

         None

                                    PART III

ITEM 10.  DIRECTORS AND OFFICERS OF THE REGISTRANT

         Information concerning directors of the Company is incorporated herein
by reference from the Company's definitive Proxy Statement for the Annual
Meeting of Stockholders to be held in 1999 (the "1999 Proxy Statement"), a copy
of which was filed on March 12, 1999.

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 1998, 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, 1998 through December 31, 1998.

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 1999 Proxy Statement entitled "Executive Compensation." The report of
the Company's Compensation Committee is not incorporated into this Form 10-K.

                                       50

<PAGE>



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 1999 Proxy Statement entitled
"Voting Securities and Principal Holder Thereof."

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 1999 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 1998 Annual
Report to Stockholders is incorporated by reference in this Annual Report on
Form 10-K as Exhibit 13.

<TABLE>
<CAPTION>

                                                                                                    PAGES IN
                                   ANNUAL REPORT SECTION                                          ANNUAL REPORT
                                   ---------------------                                          -------------
<S>                                                                                                    <C>
Selected Financial Data....................................................................            7-8
Management's Discussion and Analysis of
  Financial Condition and Results of Operations............................................            9-27
Report of Independent Auditors.............................................................            29
Consolidated Statements of Financial Condition.............................................            30-31
Consolidated Statements of Income..........................................................            32
Consolidated Statements of Stockholders' Equity............................................            33
Consolidated Statements of Cash Flows......................................................            34-35
Notes to Consolidated Financial Statements.................................................            36-53
Quarterly Financial Information ...........................................................            53

</TABLE>


         With the exception of those sections specifically incorporated by
reference, the Registrant's 1998 Annual Report to Stockholders is not deemed
filed as part of this Annual Report on Form 10-K.

         (a)(2) FINANCIAL STATEMENT SCHEDULES:

                                       51

<PAGE>



         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.

         (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 Plan               (1)                             N/A

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

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

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

13              1998 Annual Report to Stockholders             N/A
22              Subsidiaries of Registrant                     N/A
23              Consent of Independent Auditor                 N/A
27              Financial Data Schedule                        N/A
99.1            1999 Proxy Statement                           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.

      (b)  REPORTS ON FORM 8-K:

         No reports on Form 8-K have been filed during the three-month period
         ended December 31, 1998.

                                       52

<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 18, 1999       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    3-18-99      Chief Executive Officer and Chairman
 ----------------------    -------
  James G. Schneider       Date         of the Board (Principal Executive and
                                        Operating Officer)

 /S/ RONALD J. WALTERS     3-18-99      Vice President and Treasurer (Principal
 ----------------------    -------
  Ronald J. Walters        Date         Financial and Accounting Officer)

 /S/ WILLIAM CHEFFER       3-18-99      Director
 ----------------------    -------
  William Cheffer          Date

 /S/ CHARLES C. HUBER      3-18-99      Director
 ----------------------    -------
  Charles C. Huber         Date

 /S/ WESLEY E. WALKER      3-18-99      Director
 ----------------------    -------
  Wesley E. Walker         Date

 /S/ LARRY D. HUFFMAN      3-18-99      Director
 ----------------------    -------
  Larry D. Huffman         Date

 /S/ THOMAS M. SCHNEIDER   3-18-99      Director
 ----------------------    -------
  Thomas M. Schneider      Date

 /S/ MICHAEL A. STANFA     3-18-99      Director
 ----------------------    -------
  Michael A. Stanfa        Date

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

                                       53

<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   1998 Annual Report to Stockholders                       N/A
22   Subsidiaries of Registrant                               N/A
23   Consent of Independent Auditor                           N/A
27   Financial Data Schedule                                  N/A
99.1    1999 Proxy Statement                                  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.


                                       54