SECURITIES AND EXCHANGE COMMISSION
                             Washington, D. C. 20549
                                   ----------

                                    FORM 10-Q

          (Mark One)

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

                For the quarterly period ended September 30, 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 0-28696

                           Home Bancorp of Elgin, Inc.
             (Exact name of registrant as specified in its charter)

          Delaware                                 36-4090333
(State or other jurisdiction of                 (I.R.S. Employer
 incorporation or organization)                Identification  No.)

                  16 North Spring Street, Elgin, Illinois 60120
                    (Address of principal executive offices)
                                   (Zip Code)

                                 (847) 742-3800
               (Registrant's telephone number including area code)

                                       N/A
                      ------------------------------------
              (Former name, former address and former fiscal year,
                          if changed from last Report)

     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
filing requirements for the past 90 days. Yes X   No    .
                                             ---    ---

     Indicate the number of shares  outstanding of each of the issuer's  classes
of common stock as of the latest practicable date.

                                               Outstanding at
                        Class                  October 31, 1998
                        -----                  ----------------

                    Common Stock,
                    par value $.01                 6,638,799




<PAGE>



                                                  TABLE OF CONTENTS

                                           PART I -- FINANCIAL INFORMATION
                                           -------------------------------


<TABLE>
<CAPTION>
<S>                                                                                                             <C>
Item 1.   Financial Statements of Home Bancorp of Elgin, Inc.

          Consolidated Balance Sheets (Unaudited) -- September 30, 1998
          and December 31, 1997 ................................................................................. 1

          Consolidated Statements of Earnings (Unaudited) -- Three and nine months ended
          September 30, 1998 and 1997 ........................................................................... 2

          Consolidated Statements of Cash Flows (Unaudited) -- Three and nine months ended
          September 30, 1998 and 1997 ........................................................................... 3

          Notes to Unaudited Consolidated Financial Statements .................................................. 4

Item 2.   Management's Discussion and Analysis of Financial Condition and
          Results of Operations ................................................................................. 5

Item 3.   Quantitative and Qualitative Disclosures About Market Risk............................................ 17


                                            PART II -- OTHER INFORMATION
                                            ----------------------------

Item 1.   Legal Proceedings .................................................................................... 19

Item 2.   Changes in Securities and Use of Proceeds ............................................................ 19

Item 3.   Defaults upon Senior Securities ...................................................................... 19

Item 4.   Submission of Matters to a Vote of Security Holders .................................................. 19

Item 5.   Other Information .................................................................................... 19

Item 6.   Exhibits and Reports on Form 8-K ..................................................................... 19

Signatures...................................................................................................... 20
</TABLE>


                                                        - i -


<PAGE>



Part I - FINANCIAL INFORMATION
         ---------------------

ITEM 1. FINANCIAL STATEMENTS

HOME BANCORP OF ELGIN, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
          (Unaudited)

<TABLE>
<CAPTION>
                                                                                                    September 30,       December 31,
                                                                                                        1998                1997
                                                                                                     ---------            ---------
                                                                                                         (In thousands, except
                                                                                                             share amounts)
<S>                                                                                                  <C>                  <C>      
ASSETS
 Cash and due from banks .................................................................           $   6,193            $   6,852
 Interest-earning deposits ...............................................................              28,898               34,708
 Loans receivable, net ...................................................................             338,026              298,661
 Government National Mortgage Association
   mortgage-backed securities held to maturity ...........................................                  63                   92
 Accrued interest receivable .............................................................               1,619                1,437
 Real estate owned and in judgment, at lower of cost or fair value .......................                 342                  286
 Federal Home Loan Bank of Chicago stock, at cost ........................................               2,954                2,606
 Office properties and equipment, net ....................................................               6,768                7,113
 Prepaid expenses and other assets .......................................................               1,242                  840
                                                                                                     ---------            ---------
   Total assets ..........................................................................           $ 386,105            $ 352,595
                                                                                                     =========            =========

LIABILITIES AND STOCKHOLDERS' EQUITY
 Savings deposits ........................................................................           $ 264,096            $ 248,218
 Borrowed funds ..........................................................................              25,000                5,000
 Advance payments by borrowers for taxes and insurance ...................................               1,464                2,285
 Accrued interest payable and other liabilities ..........................................               2,235                1,877
                                                                                                     ---------            ---------
   Total liabilities .....................................................................             292,795              257,380
                                                                                                     ---------            ---------

Stockholders' Equity:
 Preferred stock, $.01 par value, 3,000,000 shares
   authorized; none outstanding ..........................................................                  --                   --
 Common stock, $.01 par value; 12,000,000 shares
   authorized, 7,009,250 shares issued ...................................................                  70                   70
 Additional paid-in capital ..............................................................              68,731               68,324
 Retained earnings, substantially restricted .............................................              38,017               38,095
 Treasury stock, at cost (350,451 and 153,451 shares at September
   30, 1998 and December 31, 1997, respectively) .........................................              (5,549)              (2,470)
 Common stock acquired by Recognition and Retention Plan .................................              (3,224)              (3,898)
 Common stock acquired by Employee Stock Ownership Plan ..................................              (4,735)              (4,906)
                                                                                                     ---------            ---------
   Total stockholders' equity ............................................................              93,310               95,215
                                                                                                     ---------            ---------
 Total liabilities and stockholders' equity ..............................................           $ 386,105            $ 352,595
                                                                                                     =========            =========
</TABLE>

See accompanying notes to unaudited consolidated financial statements.


                                      - 1 -

<PAGE>



HOME BANCORP OF ELGIN, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF EARNINGS
             (Unaudited)

<TABLE>
<CAPTION>
                                                                                  For the Three                  For the Nine
                                                                                  Months Ended                   Months Ended
                                                                                  September 30,                  September 30,
                                                                                  -------------                  -------------
                                                                              1998            1997            1998            1997
                                                                             -------         -------         -------         -------
                                                                                             (In thousands, except
                                                                                               per share amounts)
<S>                                                                          <C>             <C>             <C>             <C>    
INTEREST INCOME
 Loans secured by real estate ......................................         $ 6,153         $ 5,545         $17,869         $15,928
 Other loans .......................................................              15              14              44              44
 Mortgage-backed securities held to maturity .......................               1               2               4               7
 Investment securities held to maturity ............................              --             454              --           1,643
 Interest-earning deposits .........................................             435             267           1,620           1,013
 Federal Home Loan Bank of Chicago stock ...........................              49              44             139             133
                                                                             -------         -------         -------         -------
    Total interest income ..........................................           6,653           6,326          19,676          18,768
INTEREST EXPENSE
 Savings deposits ..................................................           2,893           2,613           8,499           7,789
 Borrowed funds ....................................................             123             117             139             122
                                                                             -------         -------         -------         -------
    Total interest expense .........................................           3,016           2,730           8,638           7,911
                                                                             -------         -------         -------         -------
 Net interest income before provision for loan
losses .............................................................           3,637           3,596          11,038          10,857
 Provision for loan losses .........................................              30              30              90              90
                                                                             -------         -------         -------         -------
 Net interest income after provision for loan losses ...............           3,607           3,566          10,948          10,767
                                                                             -------         -------         -------         -------
NON-INTEREST INCOME
 Service fee income ................................................             319             256             804             751
 Gain on sale of real estate owned .................................               1              --              14              34
 Other income ......................................................               7               6              22             200
                                                                             -------         -------         -------         -------
    Total non-interest income ......................................             327             262             840             985
NON-INTEREST EXPENSE
 Compensation and benefits .........................................           1,449           1,468           4,518           4,057
 Occupancy expense .................................................             395             401           1,193           1,202
 Federal deposit insurance premiums ................................              63              61             182             156
 Advertising and promotion .........................................              92             107             314             315
 Automated teller machines .........................................             111             107             317             311
 Professional services .............................................              31             134             339             349
 Data processing ...................................................             238             225             698             685
 Other .............................................................             303             308           1,012           1,033
                                                                             -------         -------         -------         -------
    Total non-interest expense .....................................           2,682           2,811           8,573           8,108
                                                                             -------         -------         -------         -------
 Income before income tax expense ..................................           1,252           1,017           3,215           3,644
 Income tax expense ................................................             486             394           1,247           1,414
                                                                             -------         -------         -------         -------
    Net income .....................................................         $   766         $   623         $ 1,968         $ 2,230
                                                                             =======         =======         =======         =======

Earnings per share:
 Basic .............................................................         $  0.12         $  0.10         $  0.31         $  0.35
                                                                             =======         =======         =======         =======
 Diluted ...........................................................         $  0.12         $  0.10         $  0.31         $  0.35
                                                                             =======         =======         =======         =======
</TABLE>


See accompanying notes to unaudited consolidated financial statements.


                                      - 2 -

<PAGE>



HOME BANCORP OF ELGIN, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
 (Unaudited)

<TABLE>
<CAPTION>
                                                                              For the Three Months Ended  For the Nine Months Ended
                                                                                      September 30,             September 30,
                                                                              --------------------------  -------------------------
                                                                                    1998        1997           1998        1997
                                                                                  --------    --------       --------    --------
                                                                                                  (In thousands)
<S>                                                                               <C>         <C>            <C>         <C>     
Cash flows from operating activities:                                                                      
 Net income ....................................................................  $    766    $    623       $  1,968    $  2,230
 Adjustments to reconcile net income to net                                                                
  cash provided by operating activities:                                                                   
 Depreciation and amortization .................................................       152         153            455         472  
 Provision for loan losses .....................................................        30          30             90          90
 Accretion of discounts, net ...................................................        --        (113)            --        (589)
 Market adjustment for committed ESOP shares ...................................        61         110            407         261
 Cost of ESOP shares released ..................................................        --          --            171          --
 Cost of RRP ...................................................................       225         225            675         375
 Increase (decrease) in deferred loan fees .....................................         5         (66)           141        (184)
 Gain on sale of real estate owned .............................................        (1)         --            (14)        (34)
 Real estate owned expense .....................................................        (6)         --              2          --
 Decrease (increase) in accrued interest receivable ............................       (65)        258           (182)        190
 Increase in prepaid expenses and other assets, net ............................      (398)         (6)          (402)       (156)
 Increase (decrease) in accrued interest payable and other liabilities, net ....       258          (9)           356        (377)
                                                                                  --------    --------       --------    --------
                                                                                                           
    Net cash provided by operating activities ..................................     1,028       1,205          3,668       2,278
                                                                                  --------    --------       --------    --------
                                                                                                           
Cash flows from investing activities:                                                                      
 Net increase in loans receivable ..............................................   (18,242)    (11,188)       (39,702)    (29,689)
 Repayment of mortgage-backed securities held to maturity ......................        10          14             29          42
 Maturities of investment securities held to maturity ..........................        --      34,000             --      54,374
 Purchase of office properties and equipment ...................................        (9)        (11)          (110)       (120)
 Proceeds from the sale of REO .................................................        --          --             62         359
 Redemption (purchase) of stock in the Federal Home Loan Bank of Chicago .......        --          --           (348)         72
                                                                                  --------    --------       --------    --------
                                                                                                           
    Net cash provided by (used in) investing activities ........................   (18,241)     22,815        (40,069)     25,038
                                                                                  --------    --------       --------    --------
                                                                                                           
Cash flows from financing activities:                                                                      
 Net increase (decrease) in savings deposits ...................................    (3,196)     (4,069)        15,878      (6,778)
 Increase (decrease) in Federal Home Loan Bank of Chicago advances .............    25,000      (5,000)        20,000          --
 Net decrease in advance payments by borrowers for taxes and insurance .........      (913)     (1,252)          (821)     (1,174)
 Purchase of RRP stock .........................................................        --          --             --      (4,498)
 Purchase of Treasury stock ....................................................    (3,079)         --         (3,079)     (2,470)
 Dividends paid on common stock ................................................      (675)       (686)        (2,046)     (1,387)
                                                                                  --------    --------       --------    --------
 Net cash provided by (used in) financing activities ...........................    17,137     (11,007)        29,932     (16,307)
                                                                                  --------    --------       --------    --------
 Increase (decrease) in cash and cash equivalents ..............................       (77)     13,013         (6,470)     11,009
 Cash and cash equivalents at beginning of period ..............................    35,168      25,999         41,561      28,003
                                                                                  --------    --------       --------    --------
 Cash and cash equivalents at end of period ....................................  $ 35,091    $ 39,012       $ 35,091    $ 39,012
                                                                                  ========    ========       ========    ========
                                                                                                        
 Supplemental  disclosure of cash flow information:
  Cash paid during the period for:
        Interest ...............................................................  $  2,999    $  2,669       $  8,630    $  7,848
        Income taxes ...........................................................       570         406          1,604         902
</TABLE>


See accompanying notes to unaudited consolidated financial statements.


                                      - 3 -

<PAGE>



HOME BANCORP OF ELGIN, INC. AND SUBSIDIARY

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(1) Basis of Presentation

     The consolidated financial statements included herein have been prepared by
the Company without audit. In the opinion of management,  the quarterly and nine
month  unaudited  consolidated  financial  statements  include all  adjustments,
consisting of normal recurring  accruals,  necessary for a fair  presentation of
the  financial  position  and  results  of  operations  at and for  the  periods
presented.  Certain  information and footnote  disclosures  normally included in
accordance with generally accepted accounting  principles have been condensed or
omitted  pursuant to the rules and  regulations  of the  Securities and Exchange
Commission.  The Company  believes that the disclosures are adequate to make the
information  presented  not  misleading,  however,  the  results for the periods
presented  are not  necessarily  indicative  of results to be  expected  for the
entire year.

(2) Earnings Per Share

     Earnings  per share of common  stock  for the three and nine  months  ended
September 30, 1998 have been calculated according to the guidelines of Statement
of Financial  Accounting  Standards No. 128,  "Earnings Per Share" ("SFAS 128").
Earnings per share for the three and nine months ended  September  30, 1997 have
been  restated to comply with the  provisions  of SFAS 128. ESOP shares are only
considered  outstanding  for  earnings  per  share  calculations  when  they are
released or committed to be released.

<TABLE>
<CAPTION>

                                                                              For the Three                   For the Nine
                                                                              Months Ended                    Months Ended
                                                                              September 30,                   September 30,
                                                                       ---------------------------       ---------------------------
                                                                          1998             1997             1998             1997
                                                                       ----------       ----------       ----------       ----------
<S>                                                                    <C>              <C>              <C>              <C>       
Basic:

Net Income .....................................................       $  766,293       $  622,703       $1,967,794       $2,230,274

  Weighted average common shares outstanding ...................        6,260,514        6,309,078        6,340,506        6,402,947
                                                                       ----------       ----------       ----------       ----------


  Basic earnings per share .....................................       $     0.12       $     0.10       $     0.31       $     0.35
                                                                       ==========       ==========       ==========       ==========
  Diluted:
  Net income ...................................................       $  766,293       $  622,703       $1,967,794       $2,230,274
  Weighted average common shares outstanding ...................        6,260,514        6,309,078        6,340,506        6,402,947
  Effect of dilutive stock options outstanding .................               --          122,613           69,111           54,555
                                                                       ----------       ----------       ----------       ----------
  Diluted weighted average common shares
    outstanding ................................................       $6,260,514       $6,431,691       $6,409,617       $6,457,502
                                                                       ----------       ----------       ----------       ----------
  Diluted earnings per share ...................................       $     0.12       $     0.10       $     0.31       $     0.35
                                                                       ==========       ==========       ==========       ==========
</TABLE>

(3) Definitive Merger Agreement

     The Company executed a Definitive Merger Agreement on June 2, 1998 to merge
with State  Financial  Services  Corporation  ("State"),  a bank holding company
headquartered in Hales Corners,  Wisconsin.  The organization resulting from the
merger will retain the name of State Financial Services Corporation.  The merger
is  expected to be  accounted  for as a pooling of  interests  and is subject to
several  contingencies,  including SEC registration,  regulatory  approval,  and
shareholder  approval  from  both  the  Company  and  State  shareholders.  Both
Companies held a special meeting of their  respective  shareholders on Thursday,
November  5, 1998 to vote on  the  merger.  The  shareholders  of both Companies
approved  the  merger  agreement.  State  reported  assets of $417.4  million at
September 30, 1998.  The Company and State have also entered into a Stock Option
Agreement  whereby,  subject to certain  conditions,  the Company would grant to
State an option to acquire up to 19.9% of the Company's  outstanding shares. The
merger is expected to close in the fourth quarter of 1998.

(4) Commitments and Contingencies

     At September 30, 1998, the Company had outstanding commitments to originate
mortgage  loans of  $16.1  million,  of  which  $15.7  million  were  fixed-rate
commitments.


                                      - 4 -

<PAGE>



ITEM 2. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

GENERAL

     On September 26, 1996, Home Federal  Savings and Loan  Association of Elgin
("Home  Federal" or the  "Association")  completed its conversion from mutual to
stock form and became a wholly-owned  subsidiary of Home Bancorp of Elgin,  Inc.
("Home  Bancorp" or the  "Company").  On such date,  the Company sold  7,009,250
shares of its common stock,  par value $.01 per share,  to the public,  at a per
share price of $10.00.  The conversion and offering  raised $62.4 million in net
proceeds.

     Home  Bancorp's  sole  business  activity  consists of the ownership of the
Association.  The Company also invests in short-term investment grade marketable
securities and other liquid  investments.  The Association's  principal business
consists of attracting  deposits from the public and investing  those  deposits,
along  with funds  generated  from  operations,  primarily  in loans  secured by
mortgages  on one- to  four-family  residences.  The  Association's  results  of
operations  are  dependent  primarily  on  net  interest  income,  which  is the
difference  between the interest income earned on its  interest-earning  assets,
such as  loans,  interest-earning  deposits  and  securities,  and the  interest
expense  on its  interest-bearing  liabilities,  such as  savings  deposits  and
borrowed  funds.  The  Association  also generates  non-interest  income such as
service  charges  and  other  fees.  The  Association's   non-interest  expenses
primarily  consist of employee  compensation and benefits,  occupancy  expenses,
federal  deposit  insurance  premiums,  data processing fees and other operating
expenses.  The  Association's  results  of  operations  are  also  significantly
affected by general economic and competitive conditions (particularly changes in
market interest rates), government policies and actions of regulatory agencies.


                                      - 5 -

<PAGE>



     The selected financial ratios and other data of the Company set forth below
is derived in part from, and should be read in  conjunction  with, the Unaudited
Consolidated  Financial  Statements of the Company and Notes  thereto  presented
elsewhere in this report.

<TABLE>
<CAPTION>
                                                                      At or For the                           At or For the
                                                                    Three Months Ended                     Nine Months Ended
                                                                       September 30,                          September 30,
                                                                ----------------------------          ----------------------------
                                                                   1998              1997                1998               1997
                                                                ---------          ---------          ---------          ---------
                                                                                  (Dollars in thousands, except
                                                                                  shares and per share amounts)
                                                                                           (Unaudited)
<S>                                                                  <C>                <C>                <C>                <C>  
SELECTED FINANCIAL RATIOS(1):
 PERFORMANCE RATIOS:
 Return on average assets ..............................             0.81%              0.70%              0.71%              0.84%
 Return on average equity ..............................             3.27               2.65               2.76               3.05
 Average interest rate spread(2) .......................             2.78               3.01               2.98               3.05
 Net interest margin(3) ................................             3.97               4.19               4.12               4.23
 Average interest-earning assets to average
  interest-bearing liabilities .........................           136.11             137.14             135.42             138.35
 Non-interest expense to average assets ................             2.83               3.17               3.08               3.04
CAPITAL RATIOS(1):
 Average equity to average assets ......................            24.73              26.50              25.55              27.45
 Consolidated equity to total assets at end of .........            
  period ...............................................            24.17              27.56              24.17              27.56
 Tangible capital(4) ...................................            19.43              21.10              19.43              21.10
 Core capital(4) .......................................            19.43              21.10              19.43              21.10
 Total risk-based capital(4) ...........................            32.50              38.39              32.50              38.39
ASSET QUALITY RATIOS AND OTHER DATA(1):
 Total non-performing loans(5) .........................      $       597        $       940        $       597        $       940
 Real estate owned, net ................................              342                264                342                264
 Non-performing loans to total loans(6) ................             0.18%              0.32%              0.18%              0.32%
 Non-performing assets to total assets .................             0.24               0.35               0.24               0.35
 Allowance for loan losses to:
  Non-performing loans .................................           192.85             110.16             192.85             110.16
  Total loans(6) .......................................             0.34               0.35               0.34               0.35
 Number of shares outstanding ..........................        6,658,799          6,855,799          6,658,799          6,855,799
 Book value per share ..................................      $     14.01        $     13.77        $     14.01        $     13.77
</TABLE>

---------------------------
(1)  With the exception of end-of-period ratios, all ratios are based on average
     monthly  balances  during the indicated  periods and are  annualized  where
     appropriate.  Capital  Ratios and Asset  Quality  Ratios And Other Data are
     end-of-period ratios and data.
(2)  The average  interest rate spread  represents  the  difference  between the
     weighted-average yield on interest-earning  assets and the weighted-average
     cost of interest-bearing liabilities.
(3)  The net interest  margin  represents net interest income as a percentage of
     average interest-earning assets.
(4)  These  regulatory  capital  ratios are for Home  Federal  Savings  and Loan
     Association of Elgin only.
(5)  Non-performing loans consist of non-accrual loans; the Company did not have
     any loans that were 90 days or more past due and still  accruing  at any of
     the dates referred to in the table above.
(6)  Total loans  represents  gross loans less  deferred  loan fees and loans in
     process.


                                      - 6 -

<PAGE>



ANALYSIS OF NET INTEREST INCOME

     Net  interest   income   represents  the   difference   between  income  on
interest-earning  assets  and  expense  on  interest-bearing   liabilities.  Net
interest income depends upon the relative amounts of interest-earning assets and
interest-bearing liabilities and the interest rates earned or paid on them.

     The  following  table  sets  forth  certain  information  relating  to  the
Company's statements of financial condition and the statements of operations for
the three and nine months ended  September  30, 1998 and 1997,  and reflects the
average  yield  on  assets  and  average  cost of  liabilities  for the  periods
indicated.  Such yields and costs are  derived by dividing  income or expense by
the  average  balance of assets or  liabilities,  respectively,  for the periods
shown.  Average balances are derived from average monthly  balances.  The yields
and costs include fees which are considered adjustments to yields.


                                      - 7 -

<PAGE>



<TABLE>
<CAPTION>
                                                                        For the Three Months Ended September 30,
                                                                        ----------------------------------------
                                                                     1998                                      1997
                                                       ----------------------------------     -----------------------------------
                                                                                   Average                                Average
                                                       Average                      Yield/    Average                      Yield/
                                                       Balance        Interest       Cost     Balance       Interest        Cost
                                                       -------        --------       ----     -------       --------        ----
                                                                                  (Dollars in thousands)
<S>              <C>                                   <C>              <C>          <C>      <C>              <C>          <C>  
ASSETS:
Interest-earning assets:
Real estate loans(1) .............................     $330,094         $6,153       7.46%    $287,378         $5,545       7.72%
Other loans ......................................          653             15       9.19          599             14       9.35
Mortgage-backed securities .......................           66              1       6.06          103              2       7.77
Investment securities ............................           --             --         --       32,258            454       5.63
Interest-earning deposits ........................       32,567            435       5.34       20,416            267       5.23
FHLB of Chicago stock ............................        2,954             49       6.64        2,606             44       6.75
                                                       --------       --------       ----    ---------       --------       ----
                                                                                                                                  
   Total interest-earning assets .................      366,334          6,653       7.26%     343,360          6,326       7.37%
                                                       --------       --------       ----    ---------       --------       ----
                                                                                                                                  
 Allowance for loan losses .......................       (1,141)                                (1,025)
 Non-interest earning assets .....................       14,259                                 12,581
                                                       --------                              ---------
       Total asset ...............................     $379,452                               $354,916
                                                       ========                              =========
                                                                                                                                  
LIABILITIES AND EQUITY:
Interest-bearing liabilities:
   NOW/Super NOW accounts ........................     $ 42,415       $    229       2.16%    $ 41,759       $    222       2.13%
   Money market accounts .........................       16,456            130       3.16       16,243            132       3.25
   Passbook accounts .............................       60,143            466       3.10       61,134            476       3.11
   Certificates of deposit .......................      141,872          2,068       5.83      123,349          1,783       5.78
   Borrowed funds ................................        8,261            123       5.96        7,880            117       5.94
                                                       --------       --------       ----    ---------       --------       ----
                                                                                                                                  
     Total interest-bearing liabilities ..........      269,147          3,016       4.48%     250,365          2,730       4.36%
                                                       --------       --------       ----    ---------       --------       ----
                                                                                                                                  
 Non-interest bearing NOW accounts ...............        6,829                                  5,693
 Other non-interest-bearing liabilities ..........        9,632                                  4,792
                                                       --------                              ---------
                                                                                                                                  
       Total liabilities .........................      285,608                                260,850
                                                       --------                              ---------
                                                                                                                                  
   Stockholders' equity ..........................       93,844                                 94,066                            
                                                      ---------                              ---------
                                                                                                                                  
       Total liabilities and stockholders' equity.    $ 379,452                              $ 354,916
                                                      =========                              =========
                                                                                                                                  
 Net interest income..............................                     $ 3,637                             $   3,596
                                                                        =======                            ==========
 Interest rate spread(2)..........................                                   2.78%                                  3.01%
                                                                                     ====                                   ====
 Net interest margin(3)...........................                                   3.97%                                  4.19%
                                                                                     ====                                   ====
                                                                                                                                  
 Ratio of interest-earning assets to                                                                                             
   interest-bearing liabilities...................                      136.11%                               137.14%      
                                                                        ======                                ======
</TABLE>


---------------------------
(1)  In  computing  the average  balance of loans,  non-accrual  loans have been
     included.
(2)  Interest rate spread  represents the  difference  between the average yield
     earned on interest-earning  assets and the average cost of interest-bearing
     liabilities.
(3)  Net  interest  margin  represents  net interest  income as a percentage  of
     average interest-earning assets.


                                      - 8 -

<PAGE>




<TABLE>
<CAPTION>
                                                                         For the Nine Months Ended September 30,                    
                                                ------------------------------------------------------------------------------------
                                                                1998                                           1997                 
                                                ----------------------------------------    ----------------------------------------
                                                                                 Average                                     Average
                                                Average                          Yield/     Average                           Yield/
                                                Balance        Interest           Cost      Balance        Interest            Cost
                                                -------        --------           ----      -------        --------            ----
                                                                                 (Dollars in thousands)
<S>              <C>                           <C>             <C>                <C>       <C>             <C>                <C>  
ASSETS:
Interest-earning assets:
Real estate loans(1) ......................    $314,168        $ 17,869           7.58%     $274,121        $ 15,928           7.75%
                                                                                                                                    
Other loans ...............................         644              44           9.11           634              44           9.25
Mortgage-backed securities ................          75               4           7.11           120               7           7.78
Investment securities .....................          --              --             --        38,905           1,643           5.63
Interest-earning deposits .................      39,277           1,620           5.50        25,921           1,013           5.21
FHLB of Chicago stock .....................       2,838             139           6.53         2,630             133           6.74
                                               --------        --------           ----      --------        --------           ---- 
                                                                                                                                    
    Total interest-earning assets..........     357,002          19,676           7.35%      342,331          18,768           7.31%
                                               --------        --------           ----      --------        --------           ---- 
                                                                                                                                    
Allowance for loan losses..................      (1,112)                                        (995)                               
Non-interest earning assets................      15,798                                       14,372                                
                                               --------                                     --------                                
    Total assets...........................    $371,688                                     $355,708                                
                                               ========                                     ========                                
                                                                                                                                    
LIABILITIES AND EQUITY:                                                                                                             
Interest-bearing liabilities:                                                                                                       
    NOW/Super NOW accounts.................    $ 43,031           $ 683           2.12%      $42,118            $674           2.13%
    Money market accounts..................      15,987             386           3.22        16,512             394           3.18
    Passbook accounts......................      60,237           1,388           3.07        62,400           1,439           3.07
    Certificates of deposit................     141,223           6,042           5.70       123,653           5,282           5.70
    Borrowed funds.........................       3,150             139           5.88         2,755             122           5.90
                                               --------        --------           ----      --------        --------           ---- 
                                                                                                                                    
    Total interest-bearing liabilities.....     263,628           8,638           4.37%      247,438           7,911           4.26%
                                               --------        --------           ----      --------        --------           ---- 
                                                                                                                                    
Non-interest bearing NOW accounts..........       6,654                                        5,698                                
Other non-interest-bearing liabilities.....       6,454                                        4,923                                
                                               --------                                     --------                                
                                                                                                                                    
Total liabilities..........................     276,736                                      258,059                                
                                               --------                                     --------                                
                                                                                                                                    
Stockholders' equity.......................      94,952                                       97,649                                
                                               --------                                     --------                                
                                                                                                                                    
Total liabilities and stockholders' equity.    $371,688                                     $355,708                                
                                               ========                                     ========                                
                                                                                                                                    
Net interest income........................                   $  11,038                                     $ 10,857                
                                                              =========                                     ========                
Interest rate spread(2)....................                                       2.98%                                        3.05%
                                                                                  ====                                         ====
Net interest margin(3).....................                                       4.12%                                        4.23%
                                                                                  ====                                         ====
                                                                                                                                    
Ratio of interest-earning assets to                                                                    
    interest-bearing liabilities...........                      135.42%                                      138.35%              
                                                                 ======                                       ======
</TABLE>                                                         

---------------------------
(1)  In  computing  the average  balance of loans,  non-accrual  loans have been
     included.
(2)  Interest rate spread  represents the  difference  between the average yield
     earned on interest-earning  assets and the average cost of interest-bearing
     liabilities.
(3)  Net  interest  margin  represents  net interest  income as a percentage  of
     average interest-earning assets.


                                      - 9 -

<PAGE>



COMPARISON OF FINANCIAL CONDITION AT SEPTEMBER 30, 1998 AND DECEMBER 31, 1997

     TOTAL  ASSETS.  Total assets  increased  $33.5  million or 9.5% from $352.6
million at December  31,  1997 to $386.1  million at  September  30,  1998.  The
increase in total  assets was  primarily  due to funds  received  from the $15.9
million  increase in savings deposits and the $20.0 million increase in borrowed
funds,  which  were  used  to  fund  a  net  increase  in  loans  receivable  of
$39,365,000.

     CASH AND DUE FROM BANK. Cash and due from banks decreased  $659,000 or 9.6%
from $6.9 million at December  31, 1997 to $6.2  million at September  30, 1998.
This  decrease was  primarily  due to the use of funds for the increase in loans
receivable.

     INTEREST-EARNING DEPOSITS. Interest-earning deposits decreased $5.8 million
or 16.7% from $34.7  million at December 31, 1997 to $28.9  million at September
30, 1998.  This  decrease was  primarily due to use of funds for the increase in
loans receivable and the purchase of treasury stock.

     LOANS  RECEIVABLE.  Loans  receivable  increased  $39,365,000 or 13.2% from
$298,661,000  at December 31, 1997 to  $338,026,000  at September 30, 1998. This
increase was  primarily  due to the strength of the local economy and the impact
of the lower interest rate environment.

     SAVINGS  DEPOSITS.  Savings  deposits  increased $15.9 million or 6.4% from
$248.2  million at December 31, 1997 to $264.1  million at  September  30, 1998.
This  increase was  primarily  due to the offering of a special rate  short-term
certificate of deposit. The proceeds were used primarily to fund the increase in
loans receivable.

     BORROWED  FUNDS.  Borrowed funds,  represented by FHLB advances,  increased
$20.0  million  from $5.0  million  at  December  31,  1997 to $25.0  million at
September  30,  1998.  The  proceeds  were  used to fund the  increase  in loans
receivable.

     STOCKHOLDERS'  EQUITY.  Stockholders' equity decreased $1.9 million or 2.0%
from $95.2  million at December 31, 1997 to $93.3 million at September 30, 1998.
Additional  paid-in  capital  increased  $407,000  or 0.6% from  $68,324,000  at
December 31, 1997 to $68,731,000 at September 30, 1998,  primarily due to market
value adjustments on Employee Stock Ownership Plan (the "ESOP") shares released.
Common stock acquired by the  Recognition  and Retention Plan ("RRP")  decreased
$674,000  or 17.3%  from  $3,898,000  at  December  31,  1997 to  $3,224,000  at
September 30, 1998 due to RRP amortization expense. Common stock acquired by the
ESOP  decreased  $171,000 or 3.5% from $4.9 million at December 31, 1997 to $4.7
million at September 30, 1998 due to the release of stock to plan  participants.
Retained  earnings  decreased $78,000 or 0.2% from $38.1 million at December 31,
1997 to $38.0 million at September 30, 1998. This decrease was due to $2,046,000
in dividends paid on common stock,  which was offset by $1,968,000 in net income
for the nine months ended  September 30, 1998.  Treasury  stock  increased  $3.1
million or 124.7%  from $2.5  million at December  31,  1997 to $5.5  million at
September 30, 1998. This increase was due to the purchase of stock at an average
price of $15.63  per share  under the  Company's  stock  repurchase  program.  

COMPARISON  OF OPERATING  RESULTS FOR THE THREE MONTHS ENDED  SEPTEMBER 30, 1998
AND 1997

     GENERAL.  Net income  increased  $143,000  or 23.0% from  $623,000 or $0.10
diluted  earnings  per share for the three months  ended  September  30, 1997 to
$766,000  or $0.12  diluted  earnings  per  share  for the  three  months  ended
September 30, 1998.  The increase was primarily due to an increase of $41,000 in
net interest  income,  a $65,000  increase in noninterest  income and a $129,000
decrease in noninterest  expense,  which was partially  offset by an increase of
$92,000 in income tax expense.

     INTEREST INCOME. Interest income increased $327,000 or 5.2% from $6,326,000
for the three months ended September 30, 1997 to $6,653,000 for the three months
ended  September 30, 1998. This increase was primarily due to an increase in the
average  balance  of  interest-earning   assets  of  $22,974,000  or  6.7%  from
$343,360,000  for the three months ended September 30, 1997 to $366,334,000  for
the three  months ended  September  30, 1998,  which was  partially  offset by a
decrease in the average yield on interest-earning assets of 11 basis points from
7.37% for the  three  months  ended  September  30,  1997 to 7.26% for the three
months  ended  September  30,  1998.  The  decrease  in  the  average  yield  on
interest-earning  assets was  primarily due to the decrease in the average yield
on real estate  loans of 26 basis  points from 7.72% for the three  months ended
September 30, 1997 to 7.46% for the three months ended September 30, 1998.


                                     - 10 -

<PAGE>

     INTEREST  EXPENSE.  Interest  expense  increased  $286,000  or  10.5%  from
$2,730,000  for the three months ended  September 30, 1997 to $3,016,000 for the
three months ended  September 30, 1998.  This increase was primarily due to a 12
basis point increase in the cost of average  interest-bearing  liabilities  from
4.36% for the  three  months  ended  September  30,  1997 to 4.48% for the three
months  ended  September  30,  1998 and a  $18,782,000  or 7.5%  increase in the
average balance of interest-bearing  liabilities from $250,365,000 for the three
months  ended  September  30, 1997 to  $269,147,000  for the three  months ended
September  30,  1998.  The 12  basis  point  increase  in the  cost  of  average
interest-bearing liabilities was primarily due to higher costing certificates of
deposit. The increase in the average balance of interest-bearing liabilities was
primarily  due  to the  Association's  offering  of a  special  rate  short-term
certificate of deposit.

     NET INTEREST INCOME BEFORE  PROVISION FOR LOAN LOSSES.  Net interest income
before provision for loan losses  increased  $41,000 or 1.1% from $3,596,000 for
the three months ended  September  30, 1997 to  $3,637,000  for the three months
ended  September 30, 1998.  This increase was primarily due to a $22,974,000  or
6.7%  increase  in  the  average   balance  of   interest-earning   assets  from
$343,360,000  for the three months ended September 30, 1997 to $366,334,000  for
the three  months ended  September  30, 1998,  which was  partially  offset by a
decrease of 11 basis points in the average yield from 7.37% for the three months
ended September 30, 1997 to 7.26% for the three months ended September 30, 1998.
That  increase was  partially  offset by a  $18,782,000  or 7.5% increase in the
average balance of interest-bearing  liabilities from $250,365,000 for the three
months  ended  September  30, 1997 to  $269,147,000  for the three  months ended
September  30, 1998 and a 12 basis point  increase in the average  cost of funds
from 4.36% for the three months ended  September 30, 1997 to 4.48% for the three
months ended September 30, 1998.

     PROVISION  FOR LOAN LOSSES.  The  provision for loan losses was $30,000 for
each period. Management determined that keeping the provision for loan losses at
the  same  level  was  appropriate  in  light  of  its  current  review  of  the
Association's  loan  portfolio,  asset quality,  delinquent  and  non-performing
loans,  the  historically low loan loss experience and the national and regional
economies. Non-performing loans were $596,683 and $939,501 at September 30, 1998
and 1997,  respectively.  Loan  chargeoffs  were $510 for the three months ended
September 30, 1998 and there were no loan  chargeoffs for the three months ended
September 30, 1997. The ratio of the allowance for loan losses to non-performing
loans was 192.85% and 110.16% at September 30, 1998 and 1997, respectively,  and
the ratio of the allowance for loan losses to total loans was 0.34% and 0.35% at
such respective dates. Management believes that the allowance for loan losses is
reasonable  and  adequate  to cover any known  losses and any losses  reasonably
expected in the existing loan portfolio.  While management estimates loan losses
using  the  best  available  information,  such  as  independent  appraisals  on
collateral,  no assurance  can be given that future  additions to the  allowance
will not be  necessary  based on  changes in  economic  and real  estate  market
conditions,   further  information   obtained  regarding  known  problem  loans,
identification of additional  problem loans,  regulatory  examinations and other
factors, both within and outside of management's control.

     NONINTEREST  INCOME.  Noninterest  income  increased  $65,000 or 24.8% from
$262,000 for the three months ended September 30, 1997 to $327,000 for the three
months ended  September  30, 1998.  This increase was primarily due to a $63,000
increase in service fee income as a result of changes in service charges and the
institution of an ATM surcharge.

     NONINTEREST  EXPENSE.  Noninterest  expense decreased $129,000 or 4.6% from
$2.8 million for the three months ended  September  30, 1997 to $2.7 million for
the three months ended  September 30, 1998. This decrease was primarily due to a
decrease in compensation and benefits expense, advertising and promotion expense
and  professional  services expense which was partially offset by an increase in
data processing expense.  Compensation and benefits expense decreased $19,000 or
1.3% from $1,468,000 for the three months ended September 30, 1997 to $1,449,000
for the three months ended  September 30, 1998.  This decrease was primarily due
to a decrease in ESOP expense due to a smaller market value  adjustment  because
of the decrease in the Company's  average stock price for the three months ended
September  30, 1998,  as compared to the three months ended  September 30, 1997.
Advertising and promotion  expense  decreased $15,000 or 14.0% from $107,000 for
the three months ended  September 30, 1997 to $92,000 for the three months ended
September  30,  1998.  Professional  services  decreased  $103,000 or 76.9% from
$134,000 for the three months ended  September 30, 1997 to $31,000 for the three
months ended  September  30, 1998.  This  decrease  was  primarily  due to using
professional  services for a special meeting of  stockholders  and evaluation of
strategic business options during the three months ended September 30, 1997.


                                     - 11 -

<PAGE>



Although the Company has incurred costs of a similar  nature in preparation  for
its special  stockholder's  meeting on  November  5, 1998,  such costs are being
deferred as merger related expenses.

     INCOME TAX  EXPENSE.  Income tax  expense  increased  $92,000 or 23.3% from
$394,000 for the three months ended September 30, 1997 to $486,000 for the three
months ended  September 30, 1998. This increase was primarily due to an increase
in  taxable  income.  The  effective  tax rate was 38.7% and 38.8% for the three
months ended September 30, 1997 and 1998, respectively.

COMPARISON OF OPERATING RESULTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND
1997

     GENERAL.  Net income  decreased  $262,000 or 11.7% from $2,230,000 or $0.35
diluted  earnings  per share for the nine  months  ended  September  30, 1997 to
$1,968,000  or $0.31  diluted  earnings  per  share  for the nine  months  ended
September  30, 1998.  The $262,000  decrease was  primarily due to a decrease of
$145,000 in noninterest  income and a $465,000 increase in noninterest  expense.
These were offset, in part, by a $181,000 increase in net interest income before
provision for loan losses and a $167,000 decrease in income tax expense.

     INTEREST  INCOME.  Interest  income  increased  $908,000 or 4.8% from $18.8
million for the nine months ended  September  30, 1997 to $19.7  million for the
nine months ended  September  30, 1998.  This  increase was  primarily due to an
increase in the average yield on interest-earning  assets of 4 basis points from
7.31% for the nine months ended  September 30, 1997 to 7.35% for the nine months
ended   September   30,  1998  and  an  increase  in  the  average   balance  of
interest-earning  assets of $14.7  million or 4.3% from  $342.3  million for the
nine months ended September 30, 1997 to $357.0 million for the nine months ended
September  30, 1998.  The increase in the average  yield was  primarily due to a
change in the  composition of  interest-earning  assets.  The average balance of
real estate loans  increased  $40.0 million,  which is a higher  yielding asset,
while  investment  securities  and  interest-earning  deposits  decreased  $25.5
million,  which are lower yielding  assets.  The increase in the average balance
was  primarily  due to  receipt of the  proceeds  from the  increase  in savings
deposits.

     INTEREST  EXPENSE.   Interest  expense  increased  $727,000  or  9.2%  from
$7,911,000  for the nine months ended  September 30, 1997 to $8,638,000  for the
nine months ended  September 30, 1998.  This increase was primarily due to an 11
basis point increase in the cost of average  interest-bearing  liabilities  from
4.26% for the nine months ended  September 30, 1997 to 4.37% for the nine months
ended  September  30, 1998 and a $16.2  million or 6.5%  increase in the average
balance of interest-bearing  liabilities from $247.4 million for the nine months
ended  September 30, 1997 to $263.6 million for the nine months ended  September
30, 1998.  The 11 basis point  increase in the cost of average  interest-bearing
liabilities  was primarily due to the $17.6 million  increase in higher  costing
certificates of deposit. The increase in the average balance of interest-bearing
liabilities  was primarily due to the  Association's  offering of a special rate
short-term certificate of deposit.

     NET INTEREST INCOME BEFORE  PROVISION FOR LOAN LOSSES.  Net interest income
before provision for loan losses increased $181,000 or 1.7% from $10,857,000 for
the nine months  ended  September  30, 1997 to  $11,038,000  for the nine months
ended  September 30, 1998. This increase was primarily due to a $14.7 million or
4.3%  increase in the  average  balance of  interest-earning  assets from $342.3
million for the nine months ended  September 30, 1997 to $357.0  million for the
nine months  ended  September  30, 1998 and an increase of 4 basis points in the
average  yield from 7.31% for the nine months ended  September 30, 1997 to 7.35%
for the nine months ended  September 30, 1998.  These  increases  were partially
offset  by  a  $16.2  million  or  6.5%  increase  in  the  average  balance  of
interest-bearing  liabilities  from $247.4  million  for the nine  months  ended
September  30, 1997 to $263.6  million for the nine months ended  September  30,
1998, and an 11 basis point increase in the average cost of funds from 4.26% for
the nine months  ended  September  30,  1997 to 4.37% for the nine months  ended
September 30, 1998.

     PROVISION  FOR LOAN LOSSES.  The  provision for loan losses was $90,000 for
each period. Management determined that keeping the provision for loan losses at
the  same  level  was  appropriate  in  light  of  its  current  review  of  the
Association's  loan  portfolio,  asset quality,  delinquent  and  non-performing
loans,  the  historically low loan loss experience and the national and regional
economies. Non-performing loans were $596,683 and $939,501 at September 30, 1998
and 1997, respectively. Loan chargeoffs were $3,325 and $435 for the nine months
ended September 30, 1998 and 1997, respectively.  The ratio of the allowance for
loan losses to  non-performing  loans was 192.85% and 110.16% at  September  30,
1998 and 1997, respectively, and the ratio of the


                                     - 12 -

<PAGE>



allowance for loan losses to total loans was 0.34% and 0.35% at such  respective
dates.  Management believes that the allowance for loan losses is reasonable and
adequate  to cover any known  losses and any losses  reasonably  expected in the
existing loan portfolio.  While management  estimates loan losses using the best
available  information,   such  as  independent  appraisals  on  collateral,  no
assurance  can be given  that  future  additions  to the  allowance  will not be
necessary  based on changes  in  economic  and real  estate  market  conditions,
further  information  obtained regarding known problem loans,  identification of
additional problem loans, regulatory examinations and other factors, both within
and outside of management's control.

     NONINTEREST  INCOME.  Noninterest  income decreased  $145,000 or 14.7% from
$985,000 for the nine months ended  September  30, 1997 to $840,000 for the nine
months ended September 30, 1998. This decrease was primarily due to the $178,000
or 89.0%  decrease in other  income  from  $200,000  for the nine  months  ended
September 30, 1997 to $22,000 for the nine months ended September 30, 1998. This
decrease was due to the receipt of $182,000 in excess funds from the liquidation
of the  Association's  pension plan in 1997 in connection with the Association's
conversion to stock form in September 1996, a non-recurring item. There was also
a decrease of $20,000 in gain on real estate owned.  These decreases were offset
by a $53,000 or 7.1%  increase in service fee income from  $751,000 for the nine
months ended  September 30, 1997 to $804,000 for the nine months ended September
30, 1998.  This increase was primarily due to changes in service charges and the
institution of an ATM surcharge.

     NONINTEREST  EXPENSE.  Noninterest  expense increased $465,000 or 5.7% from
$8.1  million for the nine months ended  September  30, 1997 to $8.6 million for
the nine months ended  September  30, 1998.  This  increase was primarily due to
increases in compensation and benefits and federal deposit  insurance  premiums,
which were  partially  offset by a decrease in other expense.  Compensation  and
benefits expense increased $461,000 or 11.4% from $4,057,000 for the nine months
ended  September 30, 1997 to $4,518,000 for the nine months ended  September 30,
1998.  The increase was primarily  related to additional RRP expense of $300,000
recorded as the RRP was in existence for the entire nine months ended  September
30, 1998;  the RRP was not in  existence  in the first four months of 1997.  The
increase  was also due to an  additional  $135,000  of ESOP  expense  due to the
market value adjustment for shares released through the ESOP trustee's repayment
of principal on the ESOP loan from plan earnings; there was no such repayment in
the nine months ended September 30, 1997.

     INCOME TAX  EXPENSE.  Income tax expense  decreased  $167,000 or 11.8% from
$1,414,000  for the nine months ended  September 30, 1997 to $1,247,000  for the
nine months ended September 30, 1998. This decrease was primarily due to a lower
level of taxable  income.  The  effective tax rate was 38.8% for the nine months
ended September 30, 1997 and 1998.

LIQUIDITY AND CAPITAL RESOURCES

     The Company's primary sources of funds are savings deposits,  principal and
interest  payments on loans and securities and, to a limited extent,  borrowings
from the FHLB of Chicago.  While maturities and scheduled  amortization of loans
and  securities  provide an  indication  of the timing of the  receipt of funds,
changes  in  interest  rates,   economic  conditions  and  competition  strongly
influence  mortgage  prepayment  rates and savings  deposit flows,  reducing the
predictability of the timing of sources of funds.

     The  Association is required to maintain an average daily balance of liquid
assets  as a  percentage  of net  withdrawable  savings  deposit  accounts  plus
short-term  borrowings,  as defined by the  regulations  of the OTS. The minimum
required  liquidity  ratio  is  currently  4.0%.  At  September  30,  1998,  the
Association's  liquidity ratio was 6.72%. The levels of the Association's liquid
assets are  dependent on the  Association's  operating,  financing and investing
activities  during any given period.  Management  believes it will have adequate
resources  to fund  all  commitments  on a  short-term  and  long-term  basis in
accordance with its business strategy.


                                     - 13 -

<PAGE>



     The primary  investing  activities  of the Company are the  origination  of
mortgage and other loans and, to a much more limited extent,  the purchase of U.
S.  Government or U. S.  Government  agency  securities.  See the  "Consolidated
Statements of Cash Flows" in the  unaudited  consolidated  financial  statements
included in this Form


                                      -14-
<PAGE>


10-Q for the sources and uses of cash flows for operating activities,  investing
activities  and financing  activities for the three and nine month periods ended
September 30, 1998 and 1997.

     The Company has other sources of liquidity if a need for  additional  funds
arises,  including the ability to obtain FHLB of Chicago advances of up to $59.0
million based on the Association's  current investment in FHLB of Chicago stock.
There were $25 million in advances outstanding at September 30, 1998.

     At September 30, 1998, the  Association had  outstanding  loan  origination
commitments  of $16.1  million,  undisbursed  loans in process of  $884,000  and
unused lines of consumer credit of $252,000. The Association anticipates that it
will have sufficient  funds available to meet its current  origination and other
lending commitments.  Certificates of deposit scheduled to mature in one year or
less from September 30, 1998 totaled $86.9 million. Based upon the Association's
most  recent  experience  and  pricing  strategy,  management  believes  that  a
significant portion of such deposits will remain with the Association.

     At  September  30, 1998,  the  Association  exceeded all of its  regulatory
capital  requirements with a tangible capital level of $71.9 million,  or 19.43%
of total adjusted  assets,  which is above the required level of $5.5 million or
1.5%; core capital of $71.9 million,  or 19.43% of total adjusted assets,  which
is above the  required  level of $11.1  million  or 3.0%;  and total  risk-based
capital of $73.0 million, or 32.50% of risk-weighted  assets, which is above the
required level of $18.0 million, or 8.0%.

     At September 30, 1998, the total  stockholders'  equity of Home Bancorp was
$93.3 million, and the ratio of stockholders' equity to total assets was 24.17%.

THE YEAR 2000 PROBLEM

     The "Year 2000  Problem"  centers on the  inability of computer  systems to
recognize  the Year 2000.  Many  existing  computer  programs  and systems  were
originally  programmed  with six digit  dates that  provided  only two digits to
identify the calendar year in the date field,  without  considering the upcoming
change  in the  century.  With the  impending  millennium,  these  programs  and
computers will  recognize "00" as the year 1900 rather than the year 2000.  Like
most  financial  service  providers,  the  Company  and the  Association  may be
significantly  affected by the Year 2000  Problem due to the nature of financial
information.  Furthermore,  if computer  systems are not  adequately  changed to
identify  the  Year  2000,  many  computer  applications  could  fail or  create
erroneous results.

     In order to  address  the Year 2000  issue and to  minimize  its  potential
adverse  impact,  management  has begun a process to identify areas that will be
affected by the Year 2000 Problem, assess its potential impact on the operations
of the  Association,  monitor the  progress of third party  software  vendors in
addressing  the  matter,  test  changes  provided  by these  vendors and develop
contingency   plans  for  any  critical   systems   that  are  not   effectively
reprogrammed.  To  accomplish  this,  the Company has  incorporated  the Federal
Financial Institutions Examination Council ("FFIEC") recommended five management
phases.

     Awareness  Phase - The inability of most computer  programs to  distinguish
the year  1900  from the year  2000  poses  substantial  risks to all  financial
institutions.  The majority of computer operating systems and programs currently
in use have  six-digit  date fields  (MMDDYY),  which  represent,  for  example,
December 31, 1999, by 123199.  And the six-digit field, with only two digits for
the year, is the basis for all  date-related  calculations  within most computer
systems today, particularly mainframes.

     The fundamental  problem posed for these systems by the arrival of the Year
2000 is that such systems have no way of expressing a date past  year-end  1999:
010100 will be interpreted by these systems as January 1, 1900.

         Assessment  Phase - The Company will assess the size and  complexity of
the problem and detail the  magnitude  of the effort  necessary  to address Year
2000  issues.  This  phase  will  identify  all  hardware,  software,  networks,
automated teller machines,  other various processing platforms, and customer and
vendor


                                      -15-
<PAGE>


interdependencies  affected by the Year 2000 date change. The assessment will go
beyond information systems and include  environmental systems that are dependent
on  embedded  microchips,  such  as the  security  and  telephone  systems.  The
assessment phase will incorporate the following course of action:

     o    Develop a  complete  inventory  of all  vendor-supplied  hardware  and
          software.  Identify  interdependencies  with other  vendor-supplied or
          proprietary hardware and software.

     o    Contact the vendors to request specific information on their plans for
          Year 2000 compliance.

     o    Rank the products to identify which are the most critical or sensitive
          to the on-going operation of the Company.

     o    Identify  non-compliant  products,  the  date  that the  products  are
          scheduled to be compliant,  and finding replacement  products based on
          the responses the Company may receive from its vendors.

     o    Install  and  thoroughly  test  products  vendors  have  certified  as
          compliant to make sure that all interfaces with the Company's hardware
          and  software  work and that the  software  operates  as stated by its
          vendors.

     o    Develop contingency plans for any problems encountered,  and develop a
          strategy for unanticipated problems that occur at the last minute.

     The Company  will also  evaluate  the Year 2000  effect on other  strategic
business  initiatives.  This assessment will consider the potential  effect that
mergers and acquisitions,  major system development,  corporate  alliances,  and
system  interdependencies  will have on existing  systems and/or  potential Year
2000 issues that may arise from acquired systems.

     The Company's  assessment  will identify  resource  needs,  establish  time
frames  and  sequencing  of  Year  2000  efforts.  Resource  needs  may  include
contractors,  vendor support,  budget allocations,  and hardware capacity.  This
phase will include the reporting,  monitoring and  notification  to software and
hardware  vendors.  Finally,  contingency  plans  will  be  developed  to  cover
unforeseen  obstacles  during the renovation  and validation  phases and include
plans to deal with  lesser  priority  systems  that would be fixed  later in the
renovation phase.

     Renovation  Phase - This phase  includes  code  enhancements,  hardware and
software upgrades, system replacement, vendor certification and other associated
changes.  Work will be  prioritized  based on  information  gathered  during the
assessment phase. In that the Company relies on outside servicers or third-party
hardware and software providers, it will have ongoing discussions and monitoring
of their progress.

     Validation  Phase - Testing is a  multifaceted  process that is critical to
the Year 2000 project and inherent in each phase of the project management plan.
This  process  includes  the  testing of  incremental  changes to  hardware  and
software  components.  In addition to testing upgraded  components,  connections
with other  systems  must be  verified,  and all  changes  should be accepted by
internal and external  users.  The Company will assure the  effective and timely
completion of all hardware and software  testing prior to final  implementation.
As with the renovation  phase,  the Company will have ongoing  discussions  with
outside servicers or third-party  hardware and software providers on the success
of their validation efforts.

     Implementation  Phase  - In  this  phase,  the  Company's  systems  will be
certified  as Year 2000  compliant  by the  Company's  vendors.  For any  system
failing  certification,  the effect will be  assessed  clearly and its Year 2000
contingency   plans   will  be   implemented.   Any   potentially   noncompliant
mission-critical  system  will be  brought  to the  attention  of the  Company's
compliance  committee for  immediate  resolution.  In addition,  this phase will
ensure  that any new  system or  subsequent  changes  to  verified  systems  are
compliant with Year 2000 requirements.


                                  -16-
<PAGE>

     The  Company  has  completed  the  awareness  and  assessment   phases  and
anticipates  completion of the  renovation  phase in the fourth quarter of 1998.
Because  the  Company   outsources  its  data  processing  and  item  processing
operations,  a  significant  component  of the Year  2000 plan is  working  with
external  vendors to test and certify their systems as Year 2000 compliant.  The
Company's  external  vendors  have  surveyed  their  programs to  inventory  the
necessary changes and have begun correcting the applicable computer programs and
replacing equipment so that the Company's  information systems will be Year 2000
compliant  prior to December  31, 1998.  The Company  will begin the  validation
phase in November  1998 by testing its hardware  and  software  with its primary
provider Fiserv,  Inc. Final testing and completion of the implementation  phase
is  expected to be  completed  by June 30,  1999.  At that time,  the  Company's
systems will be certified by vendors as Year 2000 compliant.

     The  Company is  preparing  a written  Year 2000  contingency  plan,  which
addresses  operational and specific event issues.  In November 1998, the Company
will test its service bureau's core applications and peripheral systems for Year
2000 compliance.  Additionally,  the service bureau is replicating the Company's
applications,  systems and files at their other regional offices that will allow
access  by the  Company's  platform  software  via  dial  backup  modems.  These
additional sites will be available for processing data should there be a failure
at the  Company's  normal  location.  This will form the basis of the  Company's
application processing contingency plan.

     In addition,  monitoring  and managing the Year 2000 project will result in
additional  direct and indirect  costs to the Company and the  Association.  The
Company currently estimates that the aggregate direct and indirect costs will be
approximately $250,000 and does not believe that such costs will have a material
effect  on its  results  of  operations.  Both  direct  and  indirect  costs  of
addressing  the Year 2000 Problem  will be charged to earnings as incurred.  The
Company has realized $56,000 of these costs to date.

     The  costs  of the  project  and the  date on which  the  Company  plans to
complete the Year 2000  modifications  are based on management's best estimates,
which were derived utilizing numerous assumptions of future events including the
continued availability of certain resources,  third party modification plans and
other factors.  However,  there can be no guarantee that these estimates will be
achieved,  and actual  results  could differ  materially  from those  plans.  In
addition, there can be no guarantee that the systems of other companies on which
the  Company's  systems  rely will be  timely  converted,  or that a failure  to
convert  by another  company,  or a  conversion  that is  incompatible  with the
Company's systems, would not have a material adverse effect on the Company.

IMPACT OF NEW ACCOUNTING STANDARDS

     In June 1997,  the  Financial  Accounting  Standards  Board  (FASB)  issued
Statement of Financial Accounting  Standards (SFAS) No. 131,  "Disclosures about
Segment  of  an  Enterprise  and  Related  Information"  (Statement  131)  which
establishes  standards  for the way public  business  enterprises  are to report
information about operating segments in annual financial statements and requires
those  enterprises to report selected  information  about operating  segments in
interim financial reports issued to shareholders. Statement 131 is effective for
financial  periods beginning after December 15, 1997 and is not expected to have
a material impact on the Company.

     In February  1998,  the FASB issued  SFAS No. 132,  "Employers'  Disclosure
about  Pensions and Other  Postretirement  Benefits"  (Statement  No. 132) which
amends the disclosure  requirements of Statements No. 87, "Employers' Accounting
for Pensions" (Statement No. 87), No. 88, "Employers' Accounting for Settlements
and Curtailments of Defined Benefit Pension Plans and for Termination  Benefits"
(Statement No. 88), and No. 106, "Employers' Accounting  Postretirement Benefits
Other Than Pensions" (Statement No. 106).


     This Statement  standardizes the disclosure  requirements of Statements No.
87 and No. 106 to the extent  practicable  and recommends a parallel  format for
presenting  information  about  pensions  and  other  postretirement   benefits.
Statement  No.  132 only  addresses  disclosure  and does not  change any of the
measurement of recognition

                                      -17-
<PAGE>

provisions  provided for in Statements No. 87, No. 88, or No. 106. Statement 132
is  effective  for fiscal  years  beginning  after  December 15, 1997 and is not
expected to have a material impact on the Company.

     In June 1998,  the FASB issued  Statement 133,  "Accounting  for Derivative
Instruments and Hedging  Activities".  Statement 133 standardizes the accounting
for derivative instruments, including certain derivative instruments imbedded in
other  contracts.  Under  the  standard,  entities  are  required  to carry  all
derivative instruments in the statement of financial position at fair value. The
accounting for the changes in fair value of a derivative  instrument  depends on
whether it has been  designated and qualifies as part of a hedging  relationship
and,  if so, on the  reason for  holding  it. The gain or loss due to changes in
fair value is  recognized  in earnings or as other  comprehensive  income in the
statement  of  shareholders'  equity,  depending on the type of  instrument  and
whether or not it is considered a hedge.  Statement No. 133 is effective for all
fiscal  quarters of all fiscal years  beginning after June 15, 1999. The Company
has not yet  determined  the impact  this new  statement  may have on its future
financial condition or its results of operations.

     In  October  1998,   the  FASB  issued  SFAS  No.  134,   "Accounting   for
Mortgage-Backed  Securities  Retained after the Securitization of Mortgage Loans
Held for Sale by a Mortgage Banking  Enterprise,  an amendment of FASB Statement
No. 65" (Statement 134).  Statement No. 134 amends Statement No. 65, "Accounting
for Certain  Mortgage Banking  Activities" to conform the subsequent  accounting
for securities retained after the securitization of mortgage loans by a mortgage
banking enterprise with the subsequent  accounting for securities retained after
the securitization of other types of assets by a nonmortgage banking enterprise.
Statement No. 134 is effective for the first quarter  beginning  after  December
15, 1998 and is not expected to have a material impact on the Company.

OTHER

     The  Office of  Thrift  Supervision  ("OTS")  approved  a Stock  Repurchase
Program  ("Repurchase  Program"),  that was adopted by the Board of Directors of
the  Company.  The Stock  Repurchase  Program was  intended to replace the Stock
Repurchase  Program  which was  originally  announced on May 1, 1997 and was not
completed in its entirety prior to expiration. The Repurchase Program authorizes
the  Company  to  repurchase  up to  342,789  shares,  or five  percent,  of its
6,855,799  outstanding  common shares.  The Repurchase  Program is authorized to
continue for a period up to twelve months.  The Company has repurchased  197,000
shares at a cost of $3.1 million or $15.63 per share under the program.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

     The OTS  requires  all  regulated  thrift  institutions  to  calculate  the
estimated  change in the  institution's  net portfolio  value  ("NPV")  assuming
instantaneous,  parallel  shifts in the Treasury yield curve of 100 to 400 basis
points  either up or down in 100 basis point  increments.  The NPV is defined as
the present value of expected  cash flows from existing  assets less the present
value of expected cash flows from existing liabilities plus the present value of
net expected cash inflows from existing off-balance sheet contracts.

     The OTS  provides  all  institutions  that  file a  schedule  entitled  the
Consolidated  Maturity/Rate schedule ("CMR") as a part of their quarterly Thrift
Financial  Report  with an  interest  rate  sensitivity  report of NPV.  The OTS
simulation  model  uses a  discounted  cash flow  analysis  and an  option-based
pricing  approach to measuring  the interest  rate  sensitivity  of NPV. The OTS
model  estimates  the  economic  value of each  type of  asset,  liability,  and
off-balance  sheet contract  under the assumption  that the Treasury yield curve
shifts  instantaneously  and parallel up and down 100 to 400 basis points in 100
basis point increments.  The OTS allows thrifts with under $500 million in total
assets to use the results of the OTS' interest rate sensitivity  model, which is
based on information provided by the institution, to estimate the sensitivity of
NPV.  Since  the  Association  had less  than $500  million  in total  assets at
September 30, 1998,  the results  discussed in this section were provided by the
OTS analysis.


                                     - 18 -

<PAGE>



     The OTS model  utilizes an  option-based  pricing  approach to estimate the
sensitivity of mortgage  loans.  The most  significant  embedded option in these
types of assets is the prepayment  option of the  borrowers.  The OTS model uses
various price indications and prepayment  assumptions to estimate sensitivity of
mortgage loans.

     In the OTS model,  the value of deposit  accounts  appears on the asset and
liability side of the NPV analysis.  In estimating the value of  certificates of
deposit (the "CD")  account,  the liability  portion of the CD is represented by
the implied  value when  comparing the  difference  between the CD face rate and
available  wholesale  CD rates.  On the asset side of the NPV  calculation,  the
value of the "customer  relationship"  due to the rollover of retail CD deposits
represents an intangible asset in the NPV calculation.

     Other deposit accounts such as transaction  accounts,  money market deposit
accounts,  passbook accounts, and noninterest bearing accounts also are included
on the asset and liability  side of the NPV  calculation  in the OTS model.  The
accounts are valued at 100% of the respective  account balances on the liability
side.  On  the  assets  side  of  the  analysis,  the  value  of  the  "customer
relationship" of the various types of deposit accounts is reflected as a deposit
intangible.

     The NPV  sensitivity  of borrowed funds is estimated by the OTS model based
on a  discounted  cash flow  approach.  The cash flows are assumed to consist of
monthly interest payments with principal paid at maturity.

     The OTS model is based only on the Association's  balance sheet. The assets
and liabilities at the Parent Company level are short-term in nature,  primarily
cash and equivalents, and were not considered in the analysis because they would
not have a material  effect on the analysis of NPV  sensitivity.  The  following
table  sets  forth the  Association's  interest  rate  sensitivity  of NPV as of
September 30, 1998.

<TABLE>
<CAPTION>
                       *** INTEREST RATE SENSITIVITY OF NET PORTFOLIO VALUE (NPV) ***
                               NET PORTFOLIO  VALUE                             NPV AS % OF PV OF ASSETS
   CHANGE IN RATES         $ AMOUNT           $ CHANGE           % CHANGE         NPV RATIO     CHANGE   
   ---------------         --------           --------           --------         ---------     ------   
<S>      <C>                <C>                 <C>                  <C>            <C>          <C>   
        +400 bp             47,609             -34,281              -42%            13.92%      -754 bp
        +300 bp             56,989             -24,902              -30%            16.16%      -530 bp
        +200 bp             66,521             -15,370              -19%            18.30%      -316 bp
        +100 bp             75,281              -6,509               -8%            20.15%      -131 bp
           0 bp             81,891                                                  21.45%             
        -100 bp             84,581               2,690                3%            21.90%       +45 bp
        -200 bp             86,710               4,820                6%            22.21%       +76 bp
        -300 bp             90,058               8,168               10%            22.75%      +130 bp
        -400 bp             93,553              11,662               14%            23.31%      +185 bp
</TABLE>



                                     - 19 -

<PAGE>



Part II -- OTHER INFORMATION
           -----------------

Item 1. Legal Proceedings

        None.

Item 2. Changes in Securities and Use of Proceeds

        None.

Item 3. Defaults upon Senior Securities

        None.

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

        None.

Item 5. Other Information

     On November 5, 1998, the Company held a Special  Meeting of Stockholders at
which the  stockholders  voted on the Agreement and Plan of Merger,  dated as of
June 1, 1998,  between  the  Company and State  Financial  Services  Corporation
("Merger Agreement"),  which provides, among other things, for the merger of the
Company with and into State Financial.  The Company's  stockholders approved the
merger agreement with the following vote:

                                 Votes
                                 -----
        For                      4,008,357
        Against                  491,212
        Abstained                42,409
        Broker Non-Votes         59,557

     The  Merger  Agreement  was  also  approved  by the  shareholders  of State
Financial  Services  Corporation at a Special  Meeting of  Shareholders  held on
November 5, 1998 in Franklin, Wisconsin.

Item 6. Exhibits and Reports on Form 8-K

     (a)  Exhibit 27 -- Financial Data Schedule*

     (b)  Reports on Form 8-K



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

        *Submitted only with filing in electronic format.


                                     - 20 -

<PAGE>



                                   SIGNATURES

     Pursuant to the  requirements  of the Securities  Exchange Act of 1934, the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.




                                        Home Bancorp of Elgin, Inc.      
                                        -----------------------------------
                                        (Registrant)



                             By:        /s/Lyle N. Dolan                   
                                        -----------------------------------
                                        Lyle N. Dolan
                                        Executive Vice President and Chief
                                        Financial and Accounting Officer

November 12, 1998


                                     - 21 -