-----------------------------------------------------------------------
                           1997 ANNUAL REPORT
-----------------------------------------------------------------------

LOGO:
NORTH BANCSHARES, INC.
<PAGE>


TABLE OF CONTENTS



CHAIRMAN'S MESSAGE....................................  1
SELECTED CONSOLIDATED FINANCIAL INFORMATION...........  2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
  CONDITION AND RESULTS OF OPERATIONS.................  4
INDEPENDENT AUDITORS' REPORT.......................... 17
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION........ 18
CONSOLIDATED STATEMENTS OF OPERATIONS................. 20
CONSOLIDATED STATEMENTS OF CHANGES IN
  STOCKHOLDERS' EQUITY................................ 21
CONSOLIDATED STATEMENTS OF CASH FLOWS................. 22
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS............ 24
STOCKHOLDER AND CORPORATE INFORMATION................. 46


<PAGE>


LOGO:
NORTH BANCSHARES, INC.

100 West North Avenue at Clark, Chicago, Illinois 60610-1399, (312) 664-4320


                                                                 March 17, 1998

To Our Shareholders:

         We are pleased to present the 1997 Annual Report of North Bancshares,
Inc. The information in this Annual Report is designed to provide a detailed
financial review of 1997 and our outlook for the future. We continue to make
progress in reaching our goals that are detailed in the report and we remain
committed to improving shareholder value by positioning the Company for future
earnings growth. A detailed summary of the targets and goals are outlined in the
"Management's Discussion and Analysis" section of the report.

         On December 29, 1997, the Company's stock was split three-for-two. The
Board decided a stock split was in the best interests of the shareholders after
reviewing the increase in the price of the stock during 1997 and new Nasdaq
listing requirements. This split provided enough public float to allow the
Company to continue trading on the Nasdaq National Market system and has
provided more liquidity and value to our shareholders.

         On January 22nd of this year we announced a $.10 per share quarterly
dividend which amounted to a 25% increase in the regular quarterly dividend paid
during 1997. We have recently completed our ninth stock repurchase program and
begun the tenth. We opened for business six days a week at our Chicago office in
July 1997 and we expanded the hours of operation at our branch in Wilmette. We
introduced a home equity line of credit account during 1997, and installed a new
ATM at the Gold Coast Multi-Plex on North Clark street. Our "Easy Retrieve"
telephone banking system is now answering approximately 1,500 calls per month
and we are looking into expanding the service to include a bill payment service.

         The market has continued to react positively to these events, resulting
in a compounded annual rate of return to shareholders, from the date of the
conversion to December 31, 1997, of approximately 28%. We will continue to focus
on all the elements of our strategic plan in order to continue to improve the
value of the franchise


                                   Sincerely,

                                   /s/ Mary Ann Hass
                                   Mary Ann Hass
                                   Chairman of the Board


<PAGE>


Set forth below is selected financial data of the Company. This financial data
is derived in part from, and should be read in conjunction with, the
Consolidated Financial Statements and the Notes thereto of the Company.
<TABLE>

                   SELECTED CONSOLIDATED FINANCIAL INFORMATION
<CAPTION>
                                                                                     DECEMBER 31,
                                                  -------------------------------------------------------------------------------
                                                              1993            1994           1995             1996          1997
                                                  -------------------------------------------------------------------------------
                                                                                   (IN THOUSANDS)
=================================================================================================================================


SELECTED FINANCIAL CONDITION DATA:


<S>                                                       <C>             <C>            <C>              <C>           <C>
Total assets                                              $102,189        $106,959       $111,668         $117,473      $123,078
Loans receivable, net                                       29,712          45,288         56,161           73,378        79,031
Mortgage backed securities held                             21,379          17,015          9,419            7,465         5,841
to maturity
Mortgage backed securities                                     ---             ---          6,927              ---           ---
available for sale
Investment securities held to                                2,999           3,493            498              ---           ---
maturity
Investment securities available                             15,802          24,695         27,882           24,426        23,250
for sale
Investment in mutual funds                                  10,602           7,796            ---              ---           ---
Deposit accounts                                            74,708          70,178         75,169           73,611        75,041
Borrowed funds                                                 ---          12,976         11,750           24,100        29,100
Stockholders' equity                                        22,889          21,602         21,028           17,823        16,448



<CAPTION>
                                                                             YEAR ENDED DECEMBER 31,
                                                 -------------------------------------------------------------------------------
SELECTED OPERATING DATA:                                      1993            1994           1995             1996          1997
                                                 -------------------------------------------------------------------------------

<S>                                                         <C>             <C>            <C>              <C>           <C>
Total interest income                                       $6,446          $6,310         $7,525           $8,468        $8,751
Total interest expense                                       3,160           2,880          4,144            4,640         4,973
                                                 -------------------------------------------------------------------------------
Net interest income before
  provision for loan losses                                  3,286           3,430          3,381            3,828         3,778
Provision for loan losses                                       72              54             40                8           ---
                                                 -------------------------------------------------------------------------------
Net interest income after
provision                                                    3,214           3,376          3,341            3,820         3,778
  for loan losses
                                                 -------------------------------------------------------------------------------
Non-interest income (loss):
  Fees & service charges                                       127             105            120              190           211
  Gain on sale of investment
    securities and mutual funds,                               ---             216            245               88            60
net
  Decline in value of mutual                                   ---            (612)           ---              ---           ---
funds
  Other non-interest income                                    118              41             19               23            20
                                                 -------------------------------------------------------------------------------
Total non-interest income (loss)                               245            (250)           384              301           291
Non-interest expense                                         2,312           2,728          2,776            3,464         3,070
                                                 -------------------------------------------------------------------------------
Income before taxes and
cumulative effect of                                         1,147             398            949              657           999
  change in accounting principle
Income tax expense                                             429             353            253              165           363
                                                 -------------------------------------------------------------------------------
Income before cumulative effect
  of change in accounting                                      718              45            696              492           636
principle
Cumulative effect of change in
  accounting for income taxes                                   96             ---            ---              ---           ---
                                                 -------------------------------------------------------------------------------
NET INCOME                                                    $622             $45           $696             $492          $636
                                                 ===============================================================================
</TABLE>


                                        2


<PAGE>
<TABLE>
<CAPTION>
                                                                          YEAR ENDED DECEMBER 31,

                                                 --------------------------------------------------------------------------
                                                       1993             1994           1995            1996         1997
                                                 --------------------------------------------------------------------------

<S>                                               <C>                 <C>            <C>             <C>           <C>
SELECTED FINANCIAL RATIOS AND OTHER DATA:
PERFORMANCE RATIOS:
 Return on assets (ratio of net
income to                                              0.69%            0.04%         0.64%            0.42%        0.53%
  average total assets)
 Interest rate spread
information:
   Average during year                                 3.17             2.67          2.15             2.53         2.41
   End of year                                         2.33             2.23          2.24             2.57         2.51
 Net interest margin                                   3.72             3.54          3.19             3.36         3.19
 Ratio of operating expenses to
average                                                2.56             2.75          2.57             2.98         2.54
   total assets
 Ratio of average
interest-earning assets to                           115.31           129.40        126.61           120.61       118.65
   average interest-bearing
liabilities


ASSET QUALITY RATIOS:
  Non-performing assets to total
assets at end of period                                0.04             0.03          0.02           N/A(1)       N/A(1)
  Allowance for loan losses to
non-performing loans                                 271.79           500.00        833.33           N/A(1)       N/A(1)
  Allowance for loan losses to
loans                                                  0.36             0.35          0.36             0.28         0.26
   receivable

CAPITAL RATIOS:
  Stockholders' equity to total                       22.40            20.20         18.83            15.17        13.36
assets
  Average stockholders' equity                        11.86            22.52         19.71            16.32        14.03
to average assets
  Return on stockholders' equity
(ratio of net                                          5.81              .20          3.27             2.59         3.75
   income to average equity)

NUMBER OF FULL SERVICE OFFICES                         2                2             2                2            2


(1) Not applicable because the Company had no non-performing assets as of
    December 31, 1996 and December 31, 1997.
</TABLE>

                                        3


<PAGE>


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

GENERAL

         North Bancshares, Inc. (the "Company") was organized on September 23,
1993 under Delaware law as the holding company for North Federal Savings Bank
(the "Bank"). In connection with the Bank's conversion from a federally
chartered mutual savings bank to a stock savings bank, the Bank issued all of
its common stock to the Company for approximately 50% of the net proceeds of the
conversion. The Company sold 1,388,625 shares of common stock at $10.00 on
December 21, 1993, thereby completing the conversion. On December 29, 1997, the
Company split the stock three-for-two. At December 31, 1997, there were
1,429,812 outstanding shares of common stock. The Company's common stock trades
on The Nasdaq Stock Market under the symbol: "NBSI."

         The primary business of the Company is that of an independent
community-oriented financial institution offering a variety of financial
services to meet the needs of the communities it serves. The Company attracts
deposits from the general public, borrows funds, or enters into reverse
repurchase agreements and uses such funds to originate or acquire one- to
four-family residential mortgages, or loans secured by small to mid-size
apartment buildings or mixed use properties. To a lesser extent, the Company
purchases participating interests in multi-family apartment building loans,
originates consumer loans in its primary market area and has established a
commercial line of credit with a manufactured housing developer. The Company
also invests in federal agency mortgage-backed securities, U. S. Government and
agency securities, investment grade securities, common stock of other financial
institutions and money market accounts.

         The Company's consolidated results of operations are primarily
dependent on net interest income, which is the difference between the interest
earned on interest-earning assets and the interest paid on deposits and
borrowings and, to a lesser degree on non-interest income and non-interest
expense. The Company's operating expenses consist principally of employee
compensation, occupancy expenses, federal insurance premiums and other general
and administrative expenses. The Company'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 authorities.


FORWARD-LOOKING STATEMENTS

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

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

                                        4

<PAGE>

MANAGEMENT STRATEGY

         The Company's three year financial goals are to: (1) achieve a 7.5% to
10% return on equity (ROE) by the end of fiscal year 2000; (2) achieve a .85% to
1.00% return on assets (ROA) by the end of fiscal year 2000; (3) increase
interest-earning assets by approximately 5% to 7% per year; (4) maintain the
Company's record of high asset quality; (5) improve the loan to assets ratio to
between 70% to 75%, of which 10% to 15% would be consumer, multi-family and
commercial loans; (6) increase non-interest income by approximately 10% to 15%
annually; (7) develop new residential and commercial loan broker relationships;
(8) develop relationships with other financial institutions for the purchase of
loans within the Bank's market area; (9) conduct leveraged transactions using
Federal Home Loan Bank ("FHLB") advances or other borrowings at a minimum spread
of 1%; (10) review quarterly the payment of a regular dividend; (11) continue to
evaluate stock repurchase programs in light of current book value and the effect
on earnings per share; and (12) keep operating expenses under control.

         During 1997: (1) return on equity increased from 2.59% to 3.75%; (2)
return on assets increased from .42% to .53%; (3) interest-earning assets
increased by approximately 5.0% from $114.5 million to $120.2 million; (4) there
were no loans delinquent 60 days or more at December 31, 1997; (5) the loan to
assets ratio increased from 62.5% to 64.2%, with multi-family, consumer and
commercial loans increasing from 8.3% to 9.5% of the total portfolio; (6)
non-interest income , without the effect of securities gains, increased by 8.5%
from $213,000 to $231,000; (7) mortgage loan broker relationships are being
maintained with five companies although no new loan broker relationships were
established during 1997; (8) relationships with three local financial
institutions are being maintained for the purpose of purchasing whole loans or
participations within the community; (9) $8.3 million in leveraged securities
transactions were conducted during 1997 at an average spread of 1.80%; (10) the
quarterly dividend for 1997 was increased from $.06 per share in 1996 to $.08
per share for 1997; (11) two stock repurchase programs were initiated and one
was completed during 1997; and (12) operating expenses decreased by 11.4% from
$3.5 million for 1996 to $3.1 million for 1997, primarily due to the absence of
the SAIF special assessment.

          Also during 1997, $158,000 in additional ESOP expense was recorded as
a result of an increase in the market price of the Company's stock that was
allocated under the Employer Stock Ownership Plan. This non-tax deductible
expense was added back to additional paid in capital and therefore stockholders'
equity was unaffected by the transaction.

          In order to achieve these goals the Bank: (1) will expand consumer
lending to include manufactured housing loans and a broader based marketing of
home equity loans, accompanied by appropriate reserves for loan losses; (2) will
continue to develop new niche market loan products for conforming and
non-conforming mortgage loans on both owner-occupied and non-owner occupied
properties; (3) will continue to develop and introduce new products and services
such as "Free Checking", "Easy Retrieve", the Bank's conversant voice response
banking system, the North Federal Banking Card, small business checking, and a
home equity line of credit; (4) will continue to focus on shifting liabilities
from higher cost certificates of deposit to lower cost, fee generating
transaction accounts; (5) will continue to develop relationships with local high
transaction volume customer businesses in order to place additional ATM
terminals off premises; (6) will continue to evaluate deposit acquisitions and
new branch locations; (7) will continue to develop relationships with other
financial institutions in order to participate in multi-family apartment
lending; (8) will enter the secondary lending market by participating with the
Federal Home Loan Bank of Chicago in their Home Loan Program; (9) will expand
our marketing efforts in order to promote products to individuals and families
who move into the area, and will continue to promote our products and services
on the Bank's Internet Web page; (10) will continue a review of employee benefit
plans in order to achieve cost savings while providing more flexible and
attractive benefit programs; and (11) will proceed with a review of development
alternatives for the Bank's parking lot.

         Management believes that although the Company is less vulnerable to
adverse changes in interest rates as a result of the reallocation of its assets
into shorter term and adjustable-rate mortgages, it may experience a decrease
in its net interest margin due to historically low interest rates and an
accompanying surge in refinancing activity that began in the fourth quarter of
1997 and continues into 1998. See "Asset/Liability Management" for the Bank's
interest rate sensitivity ratios at December 31, 1997.


                                        5

<PAGE>


ASSET/LIABILITY MANAGEMENT

         A key component of successful asset/liability management is the
monitoring and management of interest rate risk sensitivity, which includes the
repricing and maturity of interest-earning assets and interest-bearing
liabilities. The Bank has an Asset Liability-Risk Management Committee that is
composed of the Bank's Chairman, President, Executive Vice President, and Vice
President/Treasurer. The committee meets on a regular basis to review the
business plan and assess the Bank's investment portfolio and deposit pricing,
and meets quarterly to assess economic conditions and consider methods of
managing the Bank's asset and liability mix and overall sensitivity to interest
rates.

         A financial institution with a positive interest rate sensitivity gap
for a given period means that the amount of its interest-earnings assets
maturing or otherwise repricing within such period exceeds the amount of its
interest-bearing liabilities maturing or otherwise repricing within the same
period. Accordingly, in an increasing interest rate environment, financial
institutions with a positive interest rate sensitivity gap generally will
experience greater increases in the yield of their interest-earnings assets than
the cost of their interest-bearing liabilities. Conversely, in an environment of
decreasing interest rates the yield on their interest-earning assets generally
will decrease more quickly than the cost of their interest-bearing liabilities.
Changes in interest rates generally will have the opposite effect on financial
institutions with a negative interest rate sensitivity gap. At December 31,
1997, based on management assumptions for loans, mortgage-backed securities,
investment securities and other interest-earning assets, total interest-earning
assets maturing or repricing within one year exceeded total interest-bearing
liabilities maturing or repricing in the same period by $6.0 million,
representing a cumulative one year gap as a percentage of interest-earning
assets of a positive 4.94%.

         The following table sets forth the repricing dates of the Company's
interest-earning assets and interest-bearing liabilities at December 31, 1997
and the Company's interest rate sensitivity gap percentages at the dates
indicated. The interest rate sensitivity gap is defined as the amount by which
assets repricing within the respective periods exceed liabilities repricing
within such periods. One- to four-family fixed-rate mortgage loans with a
contractual maturity of less than five years are assumed to prepay at an annual
rate of 13.9% and such loans with a contractual maturity in excess of five years
are assumed to prepay at an annual rate of 11.1% per year. Consumer loans with
contractual maturities of less than five years are assumed to prepay at an
annual rate of 13.9% and such loans with contractual maturities of more than
five years are assumed to prepay at an annual rate of 11.1%. Mortgage-backed
securities with contractual maturities of less than five years are assumed to
prepay at an annual rate of 13.9% and those with maturities of more than five
years are assumed to prepay at an annual rate of 11.1%, depending on the stated
interest rate. Passbook accounts are assumed to be withdrawn at annual rates of
17.0%, 17.0%, 17.0%, 16.0% and 33.0%, respectively, during the periods shown.
Money market deposit accounts are assumed to be withdrawn at annual rates of
79.0% in the first six months and 21.0% during the subsequent periods. Finally,
transaction accounts are assumed to be withdrawn at annual rates of 37.0% during
the first year, 32.0% between one and three years, 17.0% between three and five
years and 14.0% for over five years. All prepayment and liability repricing
assumptions are those selected by management for the purpose of assessing the
interest rate sensitivity.

         The effect of these assumptions is to quantify the dollar amount of
items that are interest-sensitive and can be repriced within each of the periods
specified. Such repricing can occur in one of three ways: (1) the rate of
interest to be paid on an asset or liability may adjust periodically on the
basis of an index; (2) an asset or liability such as a mortgage loan may
amortize, permitting reinvestment of cash flows at the then prevailing interest
rates; or (3) an asset or liability may mature, at which time the proceeds can
be reinvested at current market rates.



                                        6

<PAGE>



         For purposes of this gap analysis loans are reduced by loans in
process, but are not reduced by deferred loan fees or allowance for loan losses.
Investment securities and mortgage-backed securities are shown at amortized
cost.

<TABLE>
<CAPTION>
                                                                        DECEMBER 31, 1997
                                      -------------------------------------------------------------------------------------
                                                        Over 6
                                        6 Months     Months to      Over 1-3       Over 3-5         Over
                                         or less      One Year         Years          Years       5 Years         Total
                                      -------------------------------------------------------------------------------------
                                          Amount        Amount        Amount         Amount        Amount        Amount
                                      -------------------------------------------------------------------------------------
                                                                     (Dollars in thousands)
                                      -------------------------------------------------------------------------------------
<S>                                    <C>           <C>           <C>           <C>           <C>           <C>
Fixed rate one-to-four family and
  multi-family real estate loans       $3,515        $3,135        $13,470       $12,068       $24,969       $57,157
Consumer and commercial loans             889            16             93            62            28         1,088
Mortgage-backed securities              1,352         1,708            601           694         1,486         5,841
Adjustable rate one-to-four family
  and multi-family real estate loans    1,117         1,344          7,455        11,146           ---        21,062
Investment securities and other(1)     31,243         3,097          1,000           100           ---        35,440
                                      ------------------------------------------------------------------------------
  Total interest-earning assets        38,116         9,300         22,619        24,070        26,483       120,588
                                      ------------------------------------------------------------------------------
Passbook accounts                      $1,299        $1,189         $3,980        $2,595        $6,219       $15,282
NOW accounts                            1,559         1,271          3,010           805         1,784         8,429
Money market deposit accounts           2,190           352          1,129           704         1,169         5,544
Certificate accounts                   19,761         5,804         14,948         4,019            10        44,578
Borrowed funds                          5,000         3,000          3,000        18,100           ---        29,100
                                      ------------------------------------------------------------------------------
  Total interest-bearing liabilities   29,809        11,652         26,067        26,223         9,182       102,933
                                      ------------------------------------------------------------------------------
Interest-earning assets less
 interest-bearing liabilities          $8,307       ($2,352)       ($3,448)      ($2,153)       $17,301       $17,655
                                      -------------------------------------------------------------------============
Cumulative interest
 rate sensitivity gap                  $8,307        $5,955         $2,507          $354        $17,655
                                      =================================================================
Cumulative interest rate gap as a
 percentage of total assets              6.75%         4.84%         2.04%          0.29%        14.34%
                                      =================================================================
Cumulative interest
 rate gap as a percentage of             6.89%         4.94%         2.08%          0.29%        14.64%
 interest-earning assets
                                      =================================================================



(1) Includes investment securities available for sale, FHLB stock and other
interest-earning assets.



         Certain shortcomings are inherent in the method of analysis presented
in the foregoing table. For example, although certain assets and liabilities may
have similar maturities or periods to repricing, they may react in different
degrees to changes in market interest rates. Also, the interest rates on certain
types of assets and liabilities may fluctuate in advance of changes in market
interest rates, while interest rates on other types may lag behind changes in
market rates. Additionally, certain assets, such as adjustable-rate mortgage
loans (ARMs), have features which restrict changes in interest rates on a short
term basis and over the life of the asset. Further, in the event of a change in
interest rates, prepayment and early withdrawal levels would likely
deviate significantly from those assumed in calculating the table. Finally, the
ability of many borrowers to service their debt may decrease in the event of an
interest rate increase.

                                       7

</TABLE>
<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 volume of interest-earning assets and
interest-bearing liabilities and the interest rate earned or paid on them.

         The following table presents for the periods indicated the total dollar
amount of interest income from average interest-earning assets and the resultant
yields, as well as the interest expense on average interest-bearing liabilities,
expressed both in dollars and rates. No tax equivalent adjustments were made.
All average balances are monthly average balances.

<TABLE>
<CAPTION>
                                            1995                           1996                           1997
                               ---------------------------------------------------------------------------------------------
                                  Average   Interest              Average Interest                Average Interest
                              Outstanding    Earned\  Yield\  Outstanding  Earned\    Yield\  Outstanding   Earned\   Yield\
                                  Balance       Paid    Rate      Balance     Paid      Rate      Balance      Paid     Rate
                               ---------------------------------------------------------------------------------------------
                                                                  (Dollars in thousands)
                               ---------------------------------------------------------------------------------------------


<S>                               <C>         <C>       <C>       <C>       <C>         <C>       <C>        <C>        <C>
INTEREST-EARNING
ASSETS:
  Loans receivable (1)            $51,412     $4,184    8.14%     $65,030   $5,168      7.95%     $76,376    $5,968     7.81%
  Investment                       30,773      1,817    5.90       33,125    2,324      7.02       27,558     1,933     7.02
securities
  Mortgage-backed                  17,089      1,157    6.77        9,956      659      6.62        6,737       470     6.98
securities
  Federal funds sold                3,769        233    6.18        3,087      165      5.34        3,627       207     5.71
  Other                             2,983        134    4.49        2,535      152      6.00        3,989       173     4.34
                               ---------------------------------------------------------------------------------------------
   Total interest-earning assets  106,026      7,525    7.10      113,733    8,468      7.45      118,287     8,751     7.40
                               ---------------------------------------------------------------------------------------------

INTEREST-BEARING
LIABILITIES:
  MMDA & NOW accounts              12,409        310    2.50       13,775      336      2.44       13,928       372     2.67
  Passbook accounts                17,862        492    2.75       16,790      459      2.73       15,495       426     2.75
  Certificate accounts             42,344      2,513    5.93       43,954    2,490      5.67       42,082     2,403     5.71
  Borrowed funds                   11,127        829    7.45       19,776    1,355      6.86       28,192     1,772     6.29
                               ---------------------------------------------------------------------------------------------
   Total interest-bearing          83,742      4,144    4.95       94,295    4,640      4.92       99,697     4,973     4.99
     liabilities
                               ---------------------------------------------------------------------------------------------

Net interest income                           $3,381                        $3,828                           $3,778
                                         -----------                    ----------                       ----------

Net interest rate spread                                2.15%                           2.53%                           2.41%
                                                    ----------                    -----------                     ----------

Net earning assets                $22,284                        $19,438                        $18,590
                               ----------                     ----------                     ----------


Net yield on average
 interest-earning assets
                                                        3.19%                           3.36%                           3.19%
                                                    ----------                    -----------                     ----------
Average interest-earning assets
 to average interest-bearing liabilities      126.61%                       120.61%                          118.65%
                                         -----------                    ----------                       ----------



(1) Calculated net of deferred loan fees, loan discounts, loans in process and
allowance for loan losses.
</TABLE>

                                        8

<PAGE>


WEIGHTED AVERAGE YIELD ANALYSIS

         The following table presents the yields received on loans,
mortgage-backed securities, investment securities, federal funds and other and
the rates paid on deposits and borrowed funds and the resultant interest rate
spreads at the dates indicated.


<TABLE>
<CAPTION>
                                                                        At December 31,
                                                            1995              1996              1997
                                                     ------------------------------------------------------
<S>                                                         <C>               <C>               <C>
WEIGHTED AVERAGE YIELD ON:
  Loans receivable                                          7.90%             7.81%             7.78%
  Investment securities                                     6.50              6.76              6.90
  Mortgage-backed securities                                6.87              7.15              7.18
(1)
  Federal funds                                             5.63              6.25              5.92
  Other                                                     5.66              6.09              5.80
                                                     ------------------------------------------------------
   Combined weighted average
yield                                                       7.22              7.44              7.42
   on interest-earning assets
                                                     ------------------------------------------------------

WEIGHTED AVERAGE RATE PAID ON:
  Passbook accounts                                         2.75              2.75              2.75
  MMDA & NOW accounts                                       2.58              2.54              2.55
  Certificate accounts                                      5.88              5.62              5.80
  Borrowed funds                                            7.44              6.49              5.82
                                                     ------------------------------------------------------
   Combined weighted average rate paid
     on interest-bearing liabilities                        4.98              4.87              4.91
                                                     ------------------------------------------------------
SPREAD                                                      2.24%             2.57%             2.51%
                                                     ======================================================

(1) Mortgage-backed securities are net of premiums and discounts
</TABLE>
                                        9

<PAGE>

RATE AND VOLUME ANALYSIS

         The following schedule presents the dollar amount of changes in
interest income and interest expense for major components of interest-earning
assets and interest-bearing liabilities. It distinguishes between the increase
related to changes in outstanding balances (volume) and that due to changes in
interest rates (rates). For each category of interest-earning assets and
interest-bearing liabilities, information is provided on changes attributable to
(I) changes in volume (i.e., changes in volume multiplied by current rate) and
(ii) changes in rate (i.e., changes in rate multiplied by old volume). Changes
attributable to both rate and volume which cannot be segregated have been
allocated proportionately to the change due to volume and the change due to
rate.



<TABLE>
<CAPTION>
                                                                  YEAR ENDED DECEMBER 31,
                                          1994 vs 1995                    1995 vs 1996                1996 vs 1997
                               ---------------------------------------------------------------------------------------------
                                        Increase                         Increase                      Increase
                                       (Decrease)                       (Decrease)                    (Decrease)
                                         Due to            Total          Due to          Total         Due to         Total
                               ---------------------------------------------------------------------------------------------
                                                        Increase                       Increase                     Increase
                                   Volume       Rate   (Decrease)     Volume    Rate  (Decrease)   Volume      Rate(Decrease)
                               ---------------------------------------------------------------------------------------------
                                                                      (In Thousands)
                               ---------------------------------------------------------------------------------------------
<S>                                <C>          <C>       <C>        <C>        <C>        <C>       <C>       <C>      <C>
INTEREST-EARNING
ASSETS:
  Loans receivable (1)             $1,335       $(74)     $1,261     $1,082     $(98)      $984      $887      $(87)    $800
  Investment                         (234)       261          27        165      342        507      (391)      ---     (391)
securities (2)
  Mortgage-backed                    (125)       (33)       (158)      (472)     (26)      (498)     (225)       36     (189)
securities (3)
  Federal funds sold                  (52)       118          66       (36)      (32)       (68)       31        11       42
  Other                               (29)        48          19       (27)       45         18        63       (42)      21
                               ---------------------------------------------------------------------------------------------
    TOTAL                              895       320       1,215        712      231        943       365       (82)     283
INTEREST-EARNING ASSETS
                               ---------------------------------------------------------------------------------------------

INTEREST-BEARING
LIABILITIES:
  MMDA & NOW accounts                 (75)        27         (48)        33       (7)        26         4        32       36
  Passbook accounts                   (71)         2         (69)       (29)      (4)       (33)      (36)        3      (33)
  Certificate accounts                327        356         683         91     (114)       (23)     (106)       19      (87)
  Borrowed funds                      663         35         698        592      (66)       526       529      (112)     417
                               ---------------------------------------------------------------------------------------------
    TOTAL                            $844       $420      $1,264       $687    $(191)      $496      $391      $(58)    $333
INTEREST-BEARING LIABILITIES
                               ---------------------------------------------------------------------------------------------

CHANGE IN NET INTEREST INCOME                               $(49)                          $447                         $(50)
                                                       ==========                     ==========                     ==========



(1) Calculated net of deferred loan fees, loan discounts, loans in process and
allowance for loan losses. (2) Includes investments classified as available for
sale and held to maturity. (3) Includes mortgage-backed securities classified as
available for sale and held to maturity.
</TABLE>


                                       10
<PAGE>


YEAR 2000 COMPLIANCE

         The Company utilizes and is dependent upon data processing systems and
software to conduct its business. The data processing systems and software
include those developed and maintained by the Company's third-party data
processor and other software purchased which is operated on in-house personal
computers and a local area network. During 1997, the Company initiated a review
and formed a committee to conduct an assessment of all hardware and software
systems to confirm they will function properly in the year 2000. To date, we
have not found anything material that would affect the operations of the Company
and the vendors who have been contacted have indicated that their hardware and
software is or will be Year 2000 compliant during the time frames established by
our regulators. The costs associated with the compliance efforts have yet to be
determined but are not expected to have a significant impact on the Company's
ongoing results of operations.



FINANCIAL CONDITION

         Total assets increased $5.6 million or 4.8% from $117.5 million on
December 31, 1996 to $123.1 million on December 31, 1997. The increase was
primarily attributable to a $5.6 million or 7.6% increase in net loans
receivable from $73.4 million on December 31, 1996 to $79.0 million on December
31, 1997 attributable to the marketing of one- to four-family investor property
loans through the bank's mortgage broker network.

         Deposit accounts increased by $1.4 million or 1.9% from $73.6 million
at December 31, 1996 to $75.0 million at December 31, 1997. The increase was
primarily attributable to a certificate of deposit promotion during the second
and third quarters. Although the Bank promoted a "Bonus Certificate" for a short
time during the year it is still focusing its efforts on attracting non-interest
bearing checking and other low cost deposit accounts. The Bank will continue to
promote its "Free Checking" account and a small business checking account
product during 1998. In addition, the Bank is planning to introduce an enhanced
version of its Money Market Deposit Account during 1998.

         Borrowed funds increased by $5.0 million or 20.7% from $24.1 million at
December 31, 1996 to $29.1 million at December 31, 1997. The increase in
borrowed funds was used to fund new loan originations and loan participations.
The Company anticipates a reduction in the average cost of borrowed funds during
1998 as a result of refinancing a $5.0 million FHLB advance in November 1997 at
a lower rate, the anticipated refinance, at lower rates, of $8.0 million in FHLB
advances during 1998, and lower borrowing costs in general due to the decline in
interest rates.

         Stockholders' equity decreased $1.4 million or 7.9% from $17.8 million
on December 31, 1996 to $16.4 million at December 31, 1997. The decrease was
primarily attributable to a $2.4 million increase in treasury stock as a result
of $2.8 million in stock repurchased offset by $437,000 in stock options
exercised. In addition, there was a $622,000 decrease in unrealized losses on
securities available-for-sale, a $112,000 decrease in common stock acquired for
the ESOP resulting from the 1997 allocation, and $485,000 in dividend payments.
These decreases were partially offset by $636,000 in net income. Book value per
share increased from $11.23 at December 31,1996 to $11.50 at December 31, 1997.



                                       11

<PAGE>


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

         GENERAL. Net income for the year ended December 31, 1997 increased by
$144,000 or 29.3% from $492,000 for the year ended December 31, 1996 to $636,000
for the year ended December 31, 1997. Basic earnings per share, after adjusting
for the three-for-two stock split, increased by $.14 from $.31 per share for the
year ended December 31, 1996 to $.45 per share for the year ended December 31,
1997.

         INTEREST INCOME. Interest income for the year ended December 31, 1997
increased by $284,000 or 3.4% from $8.5 million for the year ended December 31,
1996 to $8.8 million for the year ended December 31, 1997. The increase was
attributable to a $4.6 million increase in average interest- earning assets from
$113.7 million for the year ended December 31, 1996 to $118.3 million for the
year ended December 31, 1997. The yield on average interest-earning assets
decreased from 7.45% for the year ended December 31, 1996 to 7.40% for the year
ended December 31, 1997. Management believes that the yield on average
interest-earning assets will continue to decline during 1998, if the decline in
long term interest rates that has spurred a large number of mortgage
refinancings continues .

         INTEREST EXPENSE. Interest expense for the year ended December 31, 1997
increased by $333,000 or 7.2% from $4.6 million for the year ended December 31,
1996 to $5.0 million for the year ended December 31, 1997. The increase was
attributable to a $5.4 million increase in average interest-bearing liabilities
from $94.3 million for the year ended December 31, 1996 to $99.7 million for the
year ended December 31, 1997. In addition, there was an increase in the average
cost of interest-bearing liabilities from 4.92% for the year ended December 31,
1996 to 4.99% for the year ended December 31, 1997. Management believes that the
average cost of interest-bearing liabilities will decline during 1998 as
certificate of deposit accounts renew at lower rates and due to the anticipated
refinance of $8.0 million in FHLBB advances.

         PROVISION FOR LOAN LOSSES. The Company did not make an allocation to
its provision for loan losses during 1997 compared with $8,000 for the year
ended December 31, 1996. The total allowance for loan losses amounted to
$208,000 at December 31, 1997 and at December 31, 1996. The allowance for loan
losses, at December 31, 1997, represented .26% of the Company's net loans
receivable. At that date the Company had no non-performing loans. Management
continuously evaluates the adequacy of its allowance for loan losses, based on
past loan experience, known and inherent risks in the portfolio, adverse
situations that may affect the borrower's ability to repay, estimated value of
the underlying collateral, and current and prospective market conditions. Future
additions to the Bank's allowance for loan losses are dependent upon the
performance and composition of the Bank's loan portfolio, the economy, changes
in real estate values and interest rates, and the view of the regulatory
authorities toward reserve levels and inflation.

         NON-INTEREST INCOME. Non-interest income decreased by $10,000 or 3.3%
from $301,000 for the year ended December 31, 1996 to $291,000 for the year
ended December 31, 1997. The decrease was attributable to a $28,000 decrease in
gains on the sale of securities offset by a $18,000 increase in fees, service
charges and other non-interest income. The increase in fees and services
charges was attributable to an increase in the total number of transaction
accounts that produce fee income, interchange fees from foreign ATM
transactions and MasterCard(C) Master Money(TM) transactions and increased
safe deposit vault rentals.

         NON-INTEREST EXPENSE. Non-interest expense decreased by $393,000 or
11.4% from $3.5 million for the year ended December 31, 1996 to $3.1 million for
the year ended December 31, 1997. The decrease was primarily attributable to the
absence of the $486,000 SAIF special assessment recorded during 1996 partially
offset by a $164,000 increase in compensation expense which was primarily
related to the increase in the market price of the Company's stock that was
allocated under the Employee Stock Ownership Plan, and to increases in staff as
a result of the Bank's expanded hours of operation. For 1997, the Company
recorded $158,000 in additional ESOP expense due to the increase in the market
price of the Company's stock during the year, compared with $62,000 for 1996. An
offsetting entry to additional paid in capital is recorded on the consolidated
statements of financial condition and therefore stockholders' equity is
unaffected.


                                       12

<PAGE>


         INCOME TAX EXPENSE. The allocation for federal and state income taxes
increased by $198,000 or 120.0% from $165,000 for the year ended December 31,
1996 to $363,000 for the year ended December 31, 1997. The effective tax rate
increased from 25.1% in 1996 to 36.3% in 1997. The reasons for the increase in
the effective tax rate are an increase in net income before taxes and a decrease
in capital gains generated during 1997, which are offset against a capital loss
carryforward recognized for tax purposes during 1995. A capital loss
carryforward of approximately $297,000 remains available, as of December 31,
1997 to offset future capital gains and will expire in the year 2000.


COMPARISON OF OPERATING RESULTS FOR THE YEARS ENDED DECEMBER 31, 1996
AND DECEMBER 31, 1995

         GENERAL. Net income for the year ended December 31, 1996 amounted to
$492,000 compared with $696,000 for the year ended December 31, 1995. This
represented a decrease of $204,000 or 29.3%. The decrease was primarily
attributable to a $285,000 after-tax charge for the FDIC SAIF Special
Assessment. Without the FDIC SAIF Special Assessment, net income would have
increased by $81,000 or 11.6% from $696,000 for the year ended December 31, 1995
to $777,000 for the year ended December 31, 1996.

         Basic earnings per share for the year ended December 31, 1996, after
adjusting for the stock split, amounted to $.31 per share, a decrease of $.07
compared with $.38 for the year ended December 31, 1995. The decrease was due
primarily to the SAIF Special Assessment. Without the SAIF Special Assessment
per share earnings for the year ended December 31, 1996 would have increased by
$.10 per share or 26.3% from $.38 per share for the year ended December 31, 1995
to $.48 per share for the year ended December 31, 1996.

         INTEREST INCOME. Interest income for the year ended December 31, 1996
increased by $1.0 million or 13.3% from $7.5 million for the year ended December
31, 1995 to $8.5 million for the year ended December 31, 1996. The increase was
attributable to a $7.7 million increase in average interest earning assets from
$106.0 million for the year ended December 31, 1995 to $113.7 million for the
year ended December 31, 1996 accompanied by an increase in the overall yield on
the Bank's interest-earning assets as a result of a reallocation of lower
yielding shorter term investment securities into mortgage loans. The yield on
average interest-earning assets increased from 7.10% for the year ended December
31, 1995 to 7.45% for the year ended December 31, 1996.

         INTEREST EXPENSE. Interest expense for the year ended December 31, 1996
increased by $496,000 or 12.1% from $4.1 million for the year ended December 31,
1995 to $4.6 million for the year ended December 31, 1996. The increase was
attributable to a $10.6 million increase in average interest-bearing liabilities
from $83.7 million for the year ended December 31, 1995 to $94.3 million for the
year ended December 31, 1996. The increase in interest expense was partially
offset by a slight decrease in the average cost of interest-bearing liabilities
from 4.95% for the year ended December 31, 1995 to 4.92% for the year ended
December 31, 1996.

         PROVISION FOR LOAN LOSSES. The Company allocated $8,000 to its
provision for loan losses during 1996 compared with $40,000 for the year ended
December 31, 1995, a decrease of $32,000. The total allowance for loan losses
amounted to $208,000 on December 31, 1996 compared with $200,000 at December 31,
1995. The increase in the total allowance was attributable to the increase in
net loans receivable. The allowance for loan losses, at December 31, 1996,
represented .28% of the Company's net loans receivable. At that date the Company
had no non-performing loans. Management continuously evaluates the adequacy of
its allowance for loan losses, based on past loan experience, known and inherent
risks in the portfolio, adverse situations that may affect the borrower's
ability to repay, estimated value of the underlying collateral, and current and
prospective market conditions. Future additions to the Bank's allowance for loan
losses are dependent upon the performance of the Bank's loan portfolio, the
economy, changes in real estate values and interest rates, and the view of the
regulatory authorities toward reserve levels and inflation.

                                       13

<PAGE>


         NON-INTEREST INCOME. Non-interest income decreased by $83,000 or 21.6%
from $384,000 for the year ended December 31, 1995 to $301,000 for the year
ended December 31, 1996. The decrease was primarily attributable to a $157,000
decrease in gains on the sales of securities from $245,000 for the year ended
December 31, 1995 to $88,000 for the year ended December 31, 1996, due primarily
to a one-time gain of $167,000 on the sale of mutual funds recorded during 1995.
Fees and service charges and other non-interest income increased by $74,000 or
53.2% from $139,000 for the year ended December 31, 1995 to $213,000 for the
year ended December 31, 1996. The increase was attributable to increased fees
from checking accounts and interchange fees from foreign ATM transactions and
MasterCard(C) Master Money(TM) transactions, resulting from a 37% increase in
the number of checking accounts.

         NON-INTEREST EXPENSE. Non-interest expense increased by $688,000 or
24.6% from $2.8 million for the year ended December 31, 1995 to $3.5 million for
the year ended December 31, 1996. The increase was primarily attributable to the
FDIC SAIF Special Assessment which amounted to $486,000. In addition,
advertising expenses increased by $54,000, which was related to the Bank's 110th
Anniversary promotions and $126,000 was added to a specific reserve established
for the Arlington Heights Credit Enhancement.

         INCOME TAX EXPENSE. The allocation for federal and state income taxes
decreased by $88,000 or 34.8% from $253,000 for the year ended December 31, 1995
to $165,000 for the year ended December 31, 1996. The effective tax rate
decreased from 26.7% in 1995 to 25.1% in 1996. The reasons for the decrease in
the effective tax rate were a decrease in net income before taxes related to the
FDIC SAIF special assessment and capital gains generated during 1996 were offset
against a capital loss carryforward recognized for tax purposes during 1995. A
capital loss carryforward of approximately $356,000 was still available as of
December 31, 1996 to be carried forward for an additional three years to offset
future capital gains.


LIQUIDITY AND CAPITAL RESOURCES

         The Bank's primary source of funds are deposits, borrowings from the
FHLB of Chicago, amortization and prepayment of loans, mortgage-backed
securities and sales, maturities of other investment securities, and
occasionally the use of reverse repurchase agreements. The Bank can also borrow
from its correspondent banks through the use of reverse federal funds. During
1997, the Bank borrowed an additional $5.0 million from the FHLB of Chicago.
Advances from the FHLB of Chicago at December 31, 1997 totaled $29.1 million.
Total deposits increased by $1.4 million during 1997. The Bank uses its liquid
resources to fund loan commitments, meet operating expenses, to invest and to
fund deposit withdrawals. Management believes that loan repayments and the other
sources of funds will be adequate to meet the liquidity needs of the Bank.

         The OTS requires minimum levels of liquid assets. OTS regulations
currently require the Bank to maintain an average daily balance of liquid assets
equal to at least 4% of the sum of its average daily balance of net withdrawable
accounts and borrowings payable in one year or less. At December 31, 1997, the
Bank's liquidity ratio was 15.0% compared with 15.6% for the year ended December
31, 1996. The decrease in liquidity was the result of the redeployment of
shorter term, lower yielding liquid assets into longer term, higher yielding
mortgage loans.

         The primary investing activities of the Bank are lending on owner
occupied and non-owner occupied single family, condominium and multi-family
residential properties, and purchasing of U.S. government agency securities and
mortgage-backed securities. Management intends to continue to focus its lending
efforts on these type of properties, while expanding its consumer lending with a
home equity line of credit product and manufactured housing loans.

         During the year ended December 31, 1997, the Company originated and
purchased $18.1 million in mortgage, consumer, and commercial loans compared
with $26.8 million during 1996. The Company also purchased $11.7 million of
securities, and repurchased $2.8 million in Company stock during 1997.


                                       14

<PAGE>


         At December 31, 1997, the Company had $1.1 million in outstanding loan
commitments and unused lines of credit.

         Certificates of deposit scheduled to mature in one year or less at
December 31, 1997, totaled approximately $25.6 million. Management believes,
based on its ability to adjust rates on those accounts to market levels, that a
significant portion of such deposits will remain with the Company. The Company
will continue to focus on shifting its liability mix from higher cost
certificates of deposit to lower cost transaction accounts that produce fee
income.

         The Company's liquidity, represented by cash and cash equivalents, is a
combination of its operating, investing and financing activities. These
activities are summarized in the Consolidated Statements of Cash Flows for the
years ended December 31, 1995, 1996 and 1997.


CAPITAL REQUIREMENTS

         Current regulatory standards impose the following capital requirements
on the Bank and other thrifts: a risk-based capital standard expressed as a
percentage of risk-adjusted assets, a leverage ratio of core capital to total
adjusted assets, and a tangible capital ratio expressed as a percentage of total
adjusted assets. As of December 31, 1997, the Bank exceeded its regulatory
capital standards. At such date, the Bank's tangible capital, core capital and
risk-based capital of $11.5 million, $11.5 million and $11.7 million,
respectively, exceeded the applicable minimum requirements by $9.7 million or
7.9%, $7.9 million or 6.5%, and $8.0 million or 17.6%, respectively.

IMPACT OF INFLATION AND CHANGING PRICES

         The Consolidated Financial Statements and Notes thereto have been
prepared in accordance with generally accepted accounting principles, which
generally requires the measurement of financial position and operating results
without considering the change in the relative purchasing power of money over
time due to inflation. Unlike most industrial companies, nearly all of the
assets and liabilities of the Company are monetary. As a result, interest rates
have a greater impact on the Company's performance than do the effects of
general levels of inflation. Interest rates do not necessarily move in the same
direction or to the same extent as the prices of goods and services.

IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS

         In June 1997, FASB issued SFAS No. 130, "Reporting Comprehensive
Income", which is effective for fiscal years beginning after December 15, 1997.
This statement establishes standards for reporting and display of comprehensive
income and its components (revenues, expenses, gains and losses) in a full set
of general-purpose financial statements. This statement requires that all items
that are required to be recognized under accounting standards as components of
comprehensive income be reported in a financial statement that is displayed with
the same prominence as other financial statements. The Company does not expect
the adoption of this statement to have a material effect on the Company's
financial statements.

         In June 1997, FASB issued SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information", which is effective for fiscal years
beginning after December 15, 1997. This statement establishes standards for the
way that public business enterprises report information about operating segments
in annual financial statements and requires that those enterprises report
selected information about operating segments in interim financial reports
issued to shareholders. It also establishes standards for related disclosures
about products and services, geographic areas, and major customers. The Company
does not expect the adoption of this statement to have a material effect on the
Company's financial statements.


                                       15

<PAGE>


PROPOSED LEGISLATION

         Legislation has been introduced in Congress that would eliminate the
federal thrift charter by requiring each federal thrift to convert to a national
bank or a state bank or thrift. The pending legislation would allow savings and
loan holding companies, such as the Company, to continue to engage in any
activity they are currently allowed, provided they remain "qualified bank
holding companies." A thrift institution which is a subsidiary of a qualified
bank holding company must continue to satisfy the qualified thrift lender test
and comply with certain investment limitations. If a savings and loan holding
company failed to meet these tests it would become subject to certain
restrictions applicable to bank holding companies. In addition, Congress is also
considering expanding the authority of bank holding companies to engage in
securities and insurance activities. Management cannot predict or determine the
ultimate form of this legislation or the impact such final legislation would
have on the operations of the Company or the Bank.

                                       16

<PAGE>


                          INDEPENDENT AUDITORS' REPORT


     The Board of Directors
     North Bancshares, Inc.
     Chicago, Illinois:


     We have  audited the  accompanying  consolidated  statements  of  financial
     condition of North Bancshares, Inc. and subsidiary (Company) as of December
     31, 1997 and 1996, and the related  consolidated  statements of operations,
     changes in  stockholders'  equity,  and cash flows for each of the years in
     the three-year period ended December 31, 1997. These consolidated financial
     statements  are  the  responsibility  of  the  Company's  management.   Our
     responsibility  is to express an  opinion on these  consolidated  financial
     statements based on our audits.

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

     In our opinion,  the consolidated  financial  statements  referred to above
     present fairly, in all material  respects,  the financial position of North
     Bancshares,  Inc. and  subsidiary as of December 31, 1997 and 1996, and the
     results of their  operations  and their cash flows for each of the years in
     the three-year  period ended December 31, 1997 in conformity with generally
     accepted accounting principles.





     February 13, 1998

                                       17


<PAGE>


NORTH BANCSHARES, INC.
AND SUBSIDIARY

Consolidated Statements of Financial Condition
December 31, 1996 and 1997
(In thousands, except share data)

<TABLE>
<CAPTION>

-------------------------------------------------------------------------------------------------------------------
                                       Assets                                                1996              1997
-------------------------------------------------------------------------------------------------------------------

<S>                                                                                    <C>              <C>

Cash and due from banks                                                                $      618       $      727
Interest-bearing deposits                                                                   2,644            2,937
Federal funds sold                                                                          4,800            5,976
Investment in dollar denominated mutual funds                                                 547            1,477
------------------------------------------------------------------------------------------------------------------
Total cash and cash equivalents                                                             8,609           11,117
Investment securities available for sale, at fair value (note 2)                           24,426           23,250
Mortgage-backed securities held to maturity, at amortized cost (note 3)                     7,465            5,841
Stock in Federal Home Loan Bank of Chicago, at cost (note 8)                                1,205            1,705
Loans receivable, net of allowance for loan losses of $208 (note 4)                        73,378           79,031
Accrued interest receivable (note 5)                                                        1,025            1,060
Premises and equipment, net (note 6)                                                        1,061            1,043
Other assets                                                                                  304               31
------------------------------------------------------------------------------------------------------------------
Total assets                                                                           $  117,473       $  123,078
==================================================================================================================
</TABLE>

See accompanying notes to consolidated financial statements.

                                       18


<PAGE>


NORTH BANCSHARES, INC.
AND SUBSIDIARY

Consolidated Statements of Financial Condition
December 31, 1996 and 1997
(In thousands, except share data)

<TABLE>
<CAPTION>

-------------------------------------------------------------------------------------------------------------------
                        Liabilities and Stockholders Equity                                1996          1997
-------------------------------------------------------------------------------------------------------------------

<S>                                                                                    <C>              <C>

Deposit accounts (note 7)                                                              $      73,611        75,041
Borrowed funds (note 8)                                                                       24,100        29,100
Advance payments by borrowers for taxes and
    insurance                                                                                  1,203         1,239
Accrued interest payable and other liabilities                                                   736         1,250
-------------------------------------------------------------------------------------------------------------------

Total liabilities                                                                             99,650       106,630
-------------------------------------------------------------------------------------------------------------------

Preferred stock, $.01 par value.  Authorized 500,000 shares;
    none outstanding                                                                             --           --
Common stock, $.01 par value.  Authorized 3,500,000 shares;
    issued 1,914,105 shares                                                                       14            19
Additional paid-in capital                                                                    13,688        13,767
Retained earnings, substantially restricted                                                   10,988        11,139
Treasury stock, at cost (379,551 and 484,293 shares in 1996 and 1997)                         (5,340)       (7,706)
Unrealized loss on securities available for sale, net of
    income taxes                                                                                (678)          (56)
Additional pension liability, net of tax                                                        (108)         (160)
Common stock acquired by Employee Stock Ownership
    Plan (note 13)                                                                              (667)         (555)
Deferred compensation (note 14)                                                                  (74)          --
-------------------------------------------------------------------------------------------------------------------

Total stockholders equity                                                                     17,823        16,448

Commitments and contingencies (notes 3, 8 and 16)
-------------------------------------------------------------------------------------------------------------------

Total liabilities and stockholders equity                                              $     117,473       123,078
-------------------------------------------------------------------------------------------------------------------

</TABLE>

                                       19


<PAGE>


NORTH BANCSHARES, INC.
AND SUBSIDIARY

Consolidated Statements of Operations
Years ended December 31, 1995, 1996, and 1997
(In thousands, except share data)

<TABLE>
<CAPTION>

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

                                                                              1995         1996          1997
----------------------------------------------------------------------------------------------------------------

<S>                                                                        <C>            <C>          <C>

Interest income:
    Loans receivable                                                      $    4,184         5,168        5,968
    Interest-bearing deposits and federal funds sold                             328           246          280
    Investment securities available for sale                                   1,630         2,301        1,832
    Investment securities held to maturity                                        64           --           --
    Mortgage-backed securities available for sale                                479            77          --
    Mortgage-backed securities held to maturity                                  678           582          470
    Investment in mutual funds                                                   123            23          101
    Dividends on FHLB stock                                                       39            71          100
----------------------------------------------------------------------------------------------------------------

Total interest income                                                          7,525         8,468        8,751
----------------------------------------------------------------------------------------------------------------

Interest expense:
    Deposit accounts                                                           3,315         3,285        3,201
    Borrowed funds                                                               829         1,355        1,772
----------------------------------------------------------------------------------------------------------------

Total interest expense                                                         4,144         4,640        4,973
----------------------------------------------------------------------------------------------------------------

Net interest income before provision for loan losses                           3,381         3,828        3,778
Provision for loan losses (note 4)                                                40             8
----------------------------------------------------------------------------------------------------------------

Net interest income after provision for loan losses                            3,341         3,820        3,778
----------------------------------------------------------------------------------------------------------------

Noninterest income:
    Gain on sale of investment securities available for sale
       and mutual funds, net                                                     245            88           60
    Fees and service charges                                                     120           190          211
    Other                                                                         19            23           20
----------------------------------------------------------------------------------------------------------------

Total noninterest income                                                         384           301          291
----------------------------------------------------------------------------------------------------------------

Noninterest expense:
    Compensation and benefits (notes 11, 12 and 13)                            1,418         1,438        1,602
    Occupancy expense                                                            429           424          474
    Professional fees                                                            158           166          149
    Data processing                                                               94           127          169
    Advertising and promotion                                                    102           156          133
    Federal deposit insurance premium                                            199           200           47
    SAIF assessment                                                              --            486           --
    Recognition and retention plan (note 14)                                     116            75           74
    Other                                                                        260           392          422
----------------------------------------------------------------------------------------------------------------

Total noninterest expense                                                      2,776         3,464        3,070
----------------------------------------------------------------------------------------------------------------

Income before income taxes                                                       949           657          999
Income tax expense (note 9)                                                      253           165          363
----------------------------------------------------------------------------------------------------------------

Net income                                                                $      696           492          636
----------------------------------------------------------------------------------------------------------------

Earnings per share:
    Basic                                                                 $   .38           .31          .45
    Diluted                                                                   .38           .30          .42
----------------------------------------------------------------------------------------------------------------

</TABLE>

See accompanying notes to consolidated financial statements.

                                       20


<PAGE>


NORTH BANCSHARES, INC.
AND SUBSIDIARY

Consolidated Statements of Changes in Stockholders Equity
Years ended December 31, 1995, 1996, and 1997
(In thousands, except share data)

<TABLE>
<CAPTION>

-----------------------------------------------------------------------------------------------------------------------------------
                                                                                                                      Unrealized
                                                                                                                      gain (loss)
                                                                                  Additional                          on securities
                                                                        Common    paid-in    Retained    Treasury     available
                                                                        stock      capital    earnings     stock      for sale, net
-----------------------------------------------------------------------------------------------------------------------------------

<S>                                                                <C>           <C>          <C>         <C>         <C>

Balance at December 31, 1994                                       $       14        13,607      10,577        (950)    (492)

Net income                                                                  --          --          696         --          --
Change in unrealized loss on securities available for sale, net             --          --          --          --         582
Payment on ESOP loan                                                        --          --          --          --          --
Market adjustment for common ESOP shares                                    --          22          --          --          --
Amortization of award of RRP Stock                                          --          --          --          --          --
Purchase of treasury stock, 128,148 shares                                  --          --          --        (1,649)       --
Cash dividend ($0.17 per share)                                             --          --         (324)        --          --
Additional liability adjustment for employee pension plan, net              --          --          --          --          --
------------------------------------------------------------------------------------------------------------------------------------

Balance at December 31, 1995                                                14        13,629     10,949      (2,599)        90

Net income                                                                  --          --         492          --          --
Change in unrealized loss on securities available for sale, net             --          --          --          --        (768)
Payment on ESOP loan                                                        --          --          --          --          --
Market adjustment for common ESOP shares                                    --          62          --          --          --
Options exercised                                                           --          (3)         --          18          --
Amortization of award of RRP Stock                                          --          --          --          --          --
Purchase of treasury stock, 175,916 shares                                  --          --          --        (2,759)       --
Cash dividend ($.27 per share)                                              --          --        (453)         --          --
Additional liability adjustment for employee pension plan, net              --          --          --          --          --
----------------------------------------------------------------------------------------------------------------------------------

Balance at December 31, 1996                                               14        13,688      10,988      (5,340)      (678)

Net income                                                                  --          --          636         --          --
Change in unrealized loss on securities available for sale, net             --          --          --          --         622
Payment on ESOP loan                                                        --          --          --          --          --
Market adjustment for common ESOP shares                                    --         158          --          --          --
Options exercised                                                           --         (74)         --          437         --
Amortization of award of RRP Stock                                          --          --          --          --          --
Purchase of treasury stock, 134,350 shares                                  --          --          --       (2,803)        --
Cash dividend ($.32 per share)                                              --          --         (485)        --          --
Additional liability adjustment for employee pension plan, net              --          --          --          --          --
3 for 2 stock split effected in the form of a stock dividend                5           (5)         --          --          --
---------------------------------------------------------------------------------------------------------------------------------

Balance at December 31, 1997                                       $       19        13,767      11,139      (7,706)     (56)
---------------------------------------------------------------------------------------------------------------------------------

<CAPTION>

----------------------------------------------------------------------------------------------------------------------------------
                                                                                      Common
                                                                    Additional        stock            Deferred
                                                                    pension          acquired by        compen-
                                                                    liability          ESOP            sation          Total
---------------------------------------------------------------------------------------------------------------------------------

<S>                                                                 <C>            <C>               <C>             <C>


Balance at December 31, 1994                                            --             (889)           (265)           21,602

Net income                                                                               --              --               696
Change in unrealized loss on securities available for sale, net         --               --              --               582
Payment on ESOP loan                                                    --              111              --               111
Market adjustment for common ESOP shares                                --               --              --                22
Amortization of award of RRP Stock                                      --               --             116               116
Purchase of treasury stock, 128,148 shares                              --               --              --            (1,649)
Cash dividend ($0.17 per share)                                         --               --              --              (324)
Additional liability adjustment for employee pension plan, net       (128)               --              --              (128)
-------------------------------------------------------------------------------------------------------------------------------

Balance at December 31, 1995                                         (128)              (778)           (149)           21,028

Net income                                                              --                --              --               492
Change in unrealized loss on securities available for sale, net         --                --              --              (768)
Payment on ESOP loan                                                    --                111             --               111
Market adjustment for common ESOP shares                                --                --              --                62
Options exercised                                                       --                --              --                15
Amortization of award of RRP Stock                                      --                --              75                75
Purchase of treasury stock, 175,916 shares                              --                --              --            (2,759)
Cash dividend ($.27 per share)                                          --                --              --              (453)
Additional liability adjustment for employee pension plan, net         20                 --              --                20
-------------------------------------------------------------------------------------------------------------------------------

Balance at December 31, 1996                                         (108)              (667)            (74)           17,823

Net income                                                             --                 --              --               636
Change in unrealized loss on securities available for sale, net        --                 --              --               622
Payment on ESOP loan                                                   --                 112             --               112
Market adjustment for common ESOP shares                               --                 --              --               158
Options exercised                                                      --                 --              --               363
Amortization of award of RRP Stock                                     --                 --              74                74
Purchase of treasury stock, 134,350 shares                             --                 --              --            (2,803)
Cash dividend ($.32 per share)                                         --                 --              --              (485)
Additional liability adjustment for employee pension plan, net        (52)                --              --               (52)
3 for 2 stock split effected in the form of a stock dividend           --                 --              --                --
-------------------------------------------------------------------------------------------------------------------------------

Balance at December 31, 1997                                         (160)              (555)             --            16,448
------------------------------------------------------------------------------------------------------------------------------

</TABLE>

See accompanying notes to consolidated financial statements.

                                       21


 <PAGE>


 NORTH BANCSHARES, INC.
 AND SUBSIDIARY

 Consolidated Statements of Cash Flows
 Years ended December 31, 1995, 1996, and 1997
 (In thousands)

<TABLE>
<CAPTION>

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

                                                                                         1995         1996         1997
----------------------------------------------------------------------------------------------------------------------------

<S>                                                                                 <C>              <C>           <C>

Cash flows from operating activities:
    Net income                                                                      $        696           492          636
    Adjustments to reconcile net income to net cash
       provided by (used in) operating activities:
         Depreciation and amortization                                                        57            63           96
         Provision for deferred income taxes                                                  76           125           43
         Provision for loan losses                                                            40             8           --
         Deferred loan fees, net of amortization                                             (94)         (110)          36
         Amortization of premiums and discounts                                              (76)         (100)         (43)
         ESOP and RRP compensation expense                                                   227           186          344
         Gain on sale of investment securities available for sale
            and mutual funds, net                                                           (245)          (88)         (60)
         Federal Home Loan Bank of Chicago
            stock dividend                                                                    (8)           --           --
         Changes in assets and liabilities:
            Increase in accrued interest receivable                                          (29)          (66)         (35)
            (Increase) decrease in other assets                                              (21)         (233)         273
            Increase (decrease) in other liabilities, net                                  1,065          (418)          47
----------------------------------------------------------------------------------------------------------------------------

Net cash provided by (used in) operating activities                                        1,688          (141)       1,337
----------------------------------------------------------------------------------------------------------------------------

Cash flows from investing activities:
    Proceeds from sales of mutual funds available for sale                                 7,963           --          --
    Maturities of investment securities available for sale                                14,000         5,000        5,250
    Maturities of investment securities held to maturity                                   4,500           500         --
    Purchase of investment securities available for sale                                 (22,251)      (15,746)     (11,694)
    Purchase of investment securities held to maturity                                    (1,469)          --          --
    Proceeds from sales of investment securities available for sale                        6,005        12,180        8,780
    Proceeds from sales of mortgage-backed securities
       available for sale                                                                   --           6,600         --
    Repayments of mortgage-backed securities
       available for sale                                                                   --             237         --
    Purchase of mortgage-backed securities held to maturity                               (1,960)           --         --
    Repayments of mortgage-backed securities held to maturity                              2,747         1,953        1,628
    Loan originations                                                                    (18,718)      (26,844)     (18,093)
    Loan repayments                                                                        7,899         9,729       12,404
    Purchase of Federal Home Loan Bank of
       Chicago stock                                                                        (113)         (581)        (500)
    Purchase of premises and equipment                                                       (87)         (290)         (78)
----------------------------------------------------------------------------------------------------------------------------

Net cash used in investing activities                                               $     (1,484)       (7,262)      (2,303)
----------------------------------------------------------------------------------------------------------------------------

                                       22


<PAGE>
<CAPTION>

NORTH BANCSHARES, INC.
AND SUBSIDIARY
Consolidated Statements of Cash Flows, Continued
(in thousands)
----------------------------------------------------------------------------------------------------------------------------

                                                                                         1995         1996         1997
----------------------------------------------------------------------------------------------------------------------------

<S>                                                                                <C>              <C>           <C>

Cash flows from financing activities:
    Increase (decrease) in deposit accounts                                         $      4,991        (1,558)       1,430
    (Decrease) increase in borrowed funds                                                 (1,226)       12,350        5,000
    (Decrease) increase in advance payments by
       borrowers for taxes and insurance                                                     (88)          124           36
    Payment of cash dividend                                                                (324)         (453)        (485)
    Proceeds from stock options exercised                                                     --            15          296
    Purchase of treasury stock                                                            (1,649)       (2,759)      (2,803)
----------------------------------------------------------------------------------------------------------------------------

Net cash provided by financing activities                                                  1,704         7,719        3,474
----------------------------------------------------------------------------------------------------------------------------

Net increase in cash and cash equivalents                                                  1,908           316        2,508

Cash and cash equivalents at beginning of year                                             6,385         8,293        8,609
----------------------------------------------------------------------------------------------------------------------------

Cash and cash equivalents at end of year                                            $      8,293         8,609       11,117
----------------------------------------------------------------------------------------------------------------------------

Supplemental disclosures of cash flow information:
    Cash payments during the year for:
       Interest                                                                     $      4,154         4,586        4,949
       Income taxes                                                                          175           136          --
    Noncash activities  transfer of mortgage-backed
       securities held to maturity to mortgage-backed
       securities available for sale                                                       6,834            --          --
----------------------------------------------------------------------------------------------------------------------------

</TABLE>

See accompanying notes to consolidated financial statements.

                                       23


<PAGE>


NORTH BANCSHARES, INC.
AND SUBSIDIARY

Notes to Consolidated Financial Statements
December 31, 1995, 1996, and 1997
------------------------------------------------------------------------------

 (1)    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ORGANIZATION

        North Bancshares,  Inc. (the Company) was incorporated in August 1993 as
        a holding  company to purchase 100% of the common stock of North Federal
        Savings Bank (Savings Bank) and  subsidiary.  The Savings Bank converted
        from the mutual form to a stock form institution,  and North Bancshares,
        Inc. completed its initial public offering on December 21, 1993 at which
        time it purchased all of the outstanding shares of the Savings Bank. The
        accounting  and reporting  policies of the Company  conform to generally
        accepted accounting principles and to general practice within the thrift
        industry.

        The following is a description of the more significant of those policies
        which the Company  follows in preparing and presenting its  consolidated
        financial statements.

        (A)   PRINCIPLES OF CONSOLIDATION

        The  consolidated  financial  statements  include  the  accounts  of the
        Company,  the  Savings  Bank,  and its wholly  owned  subsidiary,  North
        Financial  Corporation.   All  significant   intercompany  balances  and
        transactions have been eliminated in consolidation.

        (B)   MANAGEMENT ESTIMATES

        In order to prepare the consolidated  financial statements in conformity
        with generally accepted accounting principles, management is required to
        make  certain   estimates  that  affect  the  amounts  reported  in  the
        consolidated   financial   statements  and  accompanying   notes.  These
        estimates may differ from actual results.

        (C)   INVESTMENT AND MORTGAGE-BACKED SECURITIES AVAILABLE FOR SALE

        Investment  and  mortgage-backed   securities  available  for  sale  are
        securities which may be sold in the future and are recorded at estimated
        fair  value.  Unrealized  gains and  losses are  included  as a separate
        component of  stockholders'  equity,  net of related tax effects.  Other
        than temporary declines in the market value of securities  available for
        sale  are  charged  to  operations.  Gains  and  losses  on the  sale of
        securities are determined using the specific identification method.

        (D)   INVESTMENT AND MORTGAGE-BACKED SECURITIES HELD TO MATURITY

        Investment and  mortgage-backed  securities held to maturity are carried
        at amortized cost,  adjusted for amortization of premium or accretion of
        discount over the term of the security using the  straight-line  method.
        Other than temporary  declines in the market value of securities held to
        maturity are charged to operations.  The Company has the positive intent
        and ability to hold such securities to maturity.

        (E)   INVESTMENT IN MUTUAL FUNDS

        The  investment  in mutual funds is carried at estimated  market  value.
        Market  value is based on the  month-end  net asset value as provided by
        the funds.  Other than temporary  declines in the market value of mutual
        funds are charged to operations.  Cost of securities  sold is determined
        on the basis of average cost.

                                       24

<PAGE>


        (F)   LOANS RECEIVABLE

        Loans  receivable  are  stated at  unpaid  principal  balances  less net
        deferred  loan  origination  fees and  allowance  for loan losses.  Loan
        origination   fees  and  certain  direct  costs   associated  with  loan
        originations  are  deferred.  The net amount  deferred  is  accreted  to
        interest income using the interest  method over the contractual  life of
        the loan.

        The  allowance for losses on loans is increased by charges to operations
        and decreased by charge-offs (net of recoveries).  Management's periodic
        evaluation  of the adequacy of the  allowance is based on past loan loss
        experience,   known  and  inherent  risks  in  the  portfolio,   adverse
        situations  that may affect the borrowers'  ability to repay,  estimated
        value of  underlying  collateral,  and  current and  prospective  market
        conditions.  In addition,  various regulatory  agencies,  as an integral
        part of their  examination  process,  periodically  review  the  Savings
        Bank's  allowance  for losses on loans.  Such  agencies  may require the
        Savings Bank to  recognize  additions  to the  allowance  based on their
        judgments  about  information  available  to them at the  time of  their
        examination.  In the opinion of management, the allowance, when taken as
        a whole, is adequate to absorb  foreseeable  losses.  Interest income on
        loans is not recognized on loans which are 90 days or greater delinquent
        or on loans which management believes are uncollectible.

        Impaired loans are measured at the present value of expected future cash
        flows  discounted  at the  loan's  effective  interest  rate,  or,  as a
        practical  expedient,  at the loan's observable market price or the fair
        value of the  collateral if the loan is collateral  dependent.  Impaired
        loans  exclude  homogenous  loans that are  collectively  evaluated  for
        impairment,  including  one-to-four  family  mortgage loans and consumer
        loans.

        (G)   PREMISES AND EQUIPMENT

        Depreciation of office  property and equipment is accumulated  primarily
        on the  straight-line  method  over the  estimated  useful  lives of the
        related assets.  Leasehold improvements are amortized over the lesser of
        the  estimated  useful  life of the asset or the  remaining  term of the
        lease.

        (H)   INCOME TAXES

        Deferred  tax  assets  and  liabilities  are  recognized  for future tax
        consequences  attributable to the temporary differences existing between
        the financial  statement  carrying amounts of assets and liabilities and
        their  respective  tax bases,  as well as operating  loss and tax credit
        carryforwards.  Deferred tax assets and  liabilities  are measured using
        enacted tax rates  expected  to apply to taxable  income in the years in
        which  those  temporary  differences  are  expected to be  recovered  or
        settled.  The effect on deferred tax assets and  liabilities of a change
        in tax rates is  recognized  as an  increase  or  decrease in income tax
        expense in the period such change is enacted.

        (I)   EARNINGS PER SHARE

        In 1997, the Financial  Accounting  Standards Board issued  Statement of
        Financial  Accounting  Standards  (SFAS) No. 128,  "Earnings per Share,"
        which replaced the calculation of primary and fully diluted earnings per
        share with basic and diluted  earnings  per share.  Basic  earnings  per
        share is calculated by dividing income available to common  stockholders
        by the weighted  average  number of common shares  outstanding.  Diluted
        earnings per share is  calculated by dividing net income by the weighted
        average number of shares adjusted for the dilutive effect of outstanding
        stock options.


                                       25


<PAGE>


        The Company  adopted  SFAS 128 at December  31,  1997.  All earnings per
        share amounts for prior years have been restated under the provisions of
        SFAS 128. The following  table sets forth the  computation  of basic and
        diluted earnings per share for the periods indicated:
<TABLE>
<CAPTION>

---------------------------------------------------------------------------------------------------------------------------
                                                                                  FOR THE YEARS ENDED DECEMBER 31,
---------------------------------------------------------------------------------------------------------------------------
        (In thousands, except share data)                                   1995                1996              1997
---------------------------------------------------------------------------------------------------------------------------

<S>                                                                   <C>                   <C>                <C>

        Numerator:
             Net income                                               $          696                 492              636
        Denominator:
             Basic earnings per share-weighted average
                shares outstanding                                         1,811,996           1,603,879        1,424,476
             Effect of dilutive stock options outstanding                     37,699              61,158           77,084
             Diluted earnings per share-adjusted weighted
                average shares outstanding                                 1,849,695           1,665,037        1,501,560
        Basic earnings per share                                                 .38                .31               .45
        Diluted earnings per share                                               .38                .30               .42
---------------------------------------------------------------------------------------------------------------------------
</TABLE>

        (J)   STOCK SPLIT

        The Company  declared a 3 for 2 common stock split on November 11, 1997,
        effected in the form of a stock  dividend  payable  December 29, 1997 to
        stockholders  of record on  December  8,  1997.  All  references  in the
        consolidated  financial statements and notes thereto as to the number of
        shares,  per share  amounts and market  prices of the  Company's  common
        stock,  excluding  treasury stock, have been restated giving retroactive
        recognition to the stock split.

        (K)   CASH AND CASH EQUIVALENTS

        For purposes of the consolidated statements of cash flows, cash and cash
        equivalents include cash and due from banks,  interest-bearing deposits,
        dollar denominated mutual funds, and federal funds sold.

        (L)   EMPLOYEE STOCK OWNERSHIP (ESOP)

        Compensation expense under the ESOP is equal to the fair value of common
        shares released or committed to be released  annually to participants in
        the ESOP.  Common stock  purchased  by the ESOP and not  committed to be
        released to participants is included in the  consolidated  statements of
        financial condition at cost as a reduction of stockholders' equity.

        (M)   RECLASSIFICATION

        Certain  reclassifications  of prior  years'  amounts  have been made to
        conform with the current year presentation.


                                       26


<PAGE>
<TABLE>


 (2)    INVESTMENT SECURITIES AVAILABLE FOR SALE

        The  amortized  cost and estimated  fair value of investment  securities
        available  for sale as of December 31, 1996 and 1997 are  summarized  as
        follows:

---------------------------------------------------------------------------------------------------------------------------
                                                                                   Gross         Gross
---------------------------------------------------------------------------------------------------------------------------
                                                                 Amortized      unrealized    unrealized        Estimated
                                                                   cost            gains        losses         fair value

<S>                                                           <C>               <C>           <C>             <C>

        December 31, 1996:
           U.S. Treasury notes                                 $    2,241            -                (4)         2,237
           U.S. Government agency securities                       23,000            -            (1,156)        21,844
---------------------------------------------------------------------------------------------------------------------------
           Equity securities                                          240             5               -             245
---------------------------------------------------------------------------------------------------------------------------
           Other                                                      100            -                -             100

                                                               $   25,581             5           (1,160)        24,426
---------------------------------------------------------------------------------------------------------------------------

                                                                                   Gross         Gross
---------------------------------------------------------------------------------------------------------------------------

<CAPTION>

                                                                 Amortized      unrealized    unrealized        Estimated
                                                                   cost            gains        losses         fair value

<S>                                                           <C>              <C>            <C>              <C>

        December 31, 1997:
           U.S. Government agency securities                   $   22,727             6             (103)        22,630
---------------------------------------------------------------------------------------------------------------------------
           Equity securities                                          418             5               (3)           420
---------------------------------------------------------------------------------------------------------------------------
           Other                                                      200            -                -             200

                                                               $   23,345            11             (106)        23,250
---------------------------------------------------------------------------------------------------------------------------
</TABLE>

        The  amortized  cost and estimated  fair value of investment  securities
        available  for sale by  contractual  maturity  at  December 31 are shown
        below. Actual maturities may differ from contractual  maturities because
        the borrowers may have the right to call or prepay  obligations  with or
        without prepayment penalties.
<TABLE>
<CAPTION>

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

                                                                           1996                          1997
                                                              ---------------------------     ---------------------------
                                                               Amortized        Estimated      Amortized        Estimated
                                                                 cost          fair value        cost          fair value

<S>                                                           <C>              <C>             <C>             <C>

        Due in less than one year                             $    3,241          3,235           1,000             995
        Due after one through five years                           3,000          2,939           4,000           3,996
        Due after five years through ten years                     4,100          3,906           4,196           4,191
---------------------------------------------------------------------------------------------------------------------------
        Due after ten years                                       15,000         14,101          13,731          13,648
---------------------------------------------------------------------------------------------------------------------------
        No stated maturity - equity securities                       240            245             418             420
---------------------------------------------------------------------------------------------------------------------------
                                                              $   25,581         24,426          23,345          23,250
---------------------------------------------------------------------------------------------------------------------------
</TABLE>

                                       27


<PAGE>


        Proceeds from sales of investment  securities  available for sale during
        1995 were  $6,005,  with  gross  gains of $74,  and gross  losses of $1.
        Proceeds from sales of investment  securities  available for sale during
        1996 were  $12,180,  with gross  gains of $97,  and gross  losses of $9.
        Proceeds from sales of investment  securities  available for sale during
        1997 were $8,780, with gross gains of $217, and gross losses of $157.


 (3)    MORTGAGE-BACKED SECURITIES HELD TO MATURITY

        The  amortized  cost  and  estimated   fair  value  of   mortgage-backed
        securities held to maturity are summarized as follows as of December 31,
        1996 and 1997:
<TABLE>
<CAPTION>

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

                                                                                   Gross          Gross         Estimated
                                                                 Amortized      unrealized     unrealized         fair
                                                                   cost            gains         losses           value
---------------------------------------------------------------------------------------------------------------------------

<S>                                                           <C>               <C>            <C>            <C>

        December 31, 1996:
           Government National Mortgage
               Association                                     $      229            12              (1)            240
           Federal Home Loan Mortgage
               Corporation                                          6,114           125            (106)          6,133
           Federal National Mortgage
---------------------------------------------------------------------------------------------------------------------------
               Association                                          1,122             5             (32)          1,095

                                                               $    7,465           142            (139)          7,468
---------------------------------------------------------------------------------------------------------------------------

        December 31, 1997:
           Government National Mortgage
               Association                                      $     182             9              -              191
           Federal Home Loan Mortgage
               Corporation                                          4,696           155             (57)          4,794
           Federal National Mortgage
---------------------------------------------------------------------------------------------------------------------------
               Association                                            963            14             (26)            951
---------------------------------------------------------------------------------------------------------------------------

                                                                $   5,841           178             (83)          5,936
---------------------------------------------------------------------------------------------------------------------------
</TABLE>

        There  were no  sales of  mortgage-backed  securities  held to  maturity
        during 1995, 1996, or 1997.

        At  December   31,   1996,   the  Savings   Bank  had  pledged   certain
        mortgage-backed  securities  with an  amortized  cost  of  approximately
        $1,250 as collateral for certain multifamily housing revenue bonds. This
        commitment was settled during 1997, and there are no pledged  securities
        at December 31, 1997 for these revenue bonds.

                                       28


<PAGE>
<TABLE>
<CAPTION>

 (4)    LOANS RECEIVABLE

        Loans  receivable  are summarized as follows as of December 31, 1996 and 1997:

---------------------------------------------------------------------------------------------------------------------------
                                                                                                       1996          1997
---------------------------------------------------------------------------------------------------------------------------

<S>                                                                                              <C>            <C>

        Mortgage loans:
            One- to four-family                                                                   $   67,542        71,770
            Multifamily                                                                                5,057         6,459
---------------------------------------------------------------------------------------------------------------------------

        Total mortgage loans                                                                          72,599        78,229

---------------------------------------------------------------------------------------------------------------------------
        Commercial loans                                                                                 790           806
---------------------------------------------------------------------------------------------------------------------------
        Consumer loans                                                                                   239           282

        Total loans receivable                                                                        73,628        79,317
            Less:
                Deferred loan fees, net                                                                   42            78
                Allowance for loan losses                                                                208           208
---------------------------------------------------------------------------------------------------------------------------

                                                                                                  $   73,378        79,031
---------------------------------------------------------------------------------------------------------------------------

---------------------------------------------------------------------------------------------------------------------------
        Weighted average interest rate                                                                7.81%         7.78%
---------------------------------------------------------------------------------------------------------------------------

<CAPTION>

        Activity in the allowance for loan losses is summarized as follows:
---------------------------------------------------------------------------------------------------------------------------
                                                                                           1995         1996         1997
---------------------------------------------------------------------------------------------------------------------------

<S>                                                                                   <C>           <C>            <C>

        Balance at beginning of year                                                    $   160          200          208
        Provision for loan losses                                                            40            8           -
---------------------------------------------------------------------------------------------------------------------------

        Balance at end of year                                                          $   200          208          208
---------------------------------------------------------------------------------------------------------------------------

        Loans receivable  delinquent three months or more at December 31, are as follows:
---------------------------------------------------------------------------------------------------------------------------

<CAPTION>

                                                                                                               Percentage
                                                                                 Number                         of total
                                                                                of loans       Amount             loans
---------------------------------------------------------------------------------------------------------------------------

<S>                                                                             <C>          <C>              <C>

        1995                                                                       1         $   24               .04%
        1996                                                                       1              1               .00
        1997                                                                       -              -               .00

</TABLE>

                                       29


<PAGE>


        The Company did not identify any loans  considered to be impaired during
        1995, 1996 or 1997.

        Mortgage loans serviced for others amounted to approximately  $144,
        $137, and $129 at December 31,  1995, 1996, and 1997, respectively.


 (5)    ACCRUED INTEREST RECEIVABLE

        Accrued interest  receivable is summarized as follows as of December 31,
1996 and 1997:
<TABLE>
<CAPTION>

---------------------------------------------------------------------------------------------------------------------------
                                                                                                          1996        1997
---------------------------------------------------------------------------------------------------------------------------

<S>                                                                                                   <C>           <C>

        Loans receivable                                                                              $    440         488
        Mortgage-backed securities                                                                          86          68
        Investment securities                                                                              480         504
        Stock in Federal Home Loan Bank of Chicago                                                          19          -
---------------------------------------------------------------------------------------------------------------------------

                                                                                                      $  1,025       1,060
---------------------------------------------------------------------------------------------------------------------------

</TABLE>

 (6)    PREMISES AND EQUIPMENT

        The cost of premises and equipment,  less  accumulated  depreciation and
        amortization, is summarized as follows as of December 31, 1996 and 1997:
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------
                                                                                                         1996         1997
---------------------------------------------------------------------------------------------------------------------------

<S>                                                                                                   <C>           <C>

        Land                                                                                          $    280         280
        Office building                                                                                  1,134       1,134
        Furniture, fixtures, and equipment                                                               1,010       1,088
        Leasehold improvements                                                                              87          87
---------------------------------------------------------------------------------------------------------------------------

                                                                                                         2,511       2,589
        Less accumulated depreciation and amortization                                                   1,450       1,546
---------------------------------------------------------------------------------------------------------------------------
                                                                                                      $  1,061       1,043
---------------------------------------------------------------------------------------------------------------------------
</TABLE>

        Included  in  occupancy  expense is  depreciation  and  amortization  of
        premises and equipment of $57, $63, and $96 for the years ended December
        31, 1995, 1996, and 1997, respectively.


                                       30


<PAGE>
<TABLE>
<CAPTION>

NORTH BANCSHARES INC.
AND SUBSIDIARY

Notes to Consolidated Financial Statements

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

(7)      Deposit Accounts
         Deposit accounts are summarized as follows as of December 31, 1996 and 1997:
----------------------------------------------------------------------------------------------------------------------------

                                                                 1996                                 1997
                                                -----------------------------------   -----------------------------------
                                                     Weighted                              Weighted
                                                     average                              average
                                                    or stated                             or stated
                                                       rate        Amount    Percent         rate       Amount    Percent
----------------------------------------------------------------------------------------------------------------------------

<S>                                              <C>              <C>        <C>        <C>           <C>         <C>

         Passbook                                        2.75%  $   16,197      22.0%         2.75%  $  15,282        20.4%
         Non-interest bearing demand accounts            --            998       1.3          --         1,208         1.6
         NOW accounts                                    2.02        8,298      11.3          2.02       8,429        11.2
         Money market deposit accounts                   3.30        6,233       8.5          3.35       5,544         7.4
----------------------------------------------------------------------------------------------------------------------------

                                                                    31,726      43.1                    30,463        40.6
----------------------------------------------------------------------------------------------------------------------------

         Certificate accounts:
            Fixed rate                              5.75-8.11          457        .6     5.75-8.11         447          .6
            Money market certificates:
               91 day                                    4.75          863       1.2          4.90         736         1.0
               Six month                                 5.16        7,699      10.4          5.43       7,423         9.9
               One year                                  5.24        9,750      13.2          5.61       9,491        12.6
               One and one-half year                     5.84        4,312       5.9          5.85       8,002        10.7
               Two year                                  5.74        2,785       3.8          5.55       2,722         3.6
               Two and one-half year                     5.65        1,219       1.7          5.74       1,093         1.5
               Three, four, and five year                6.03       14,800      20.1          6.14      14,664        19.5
----------------------------------------------------------------------------------------------------------------------------

                                                                    41,885      56.9                    44,578        59.4
----------------------------------------------------------------------------------------------------------------------------

         Total deposit accounts                                 $   73,611     100.%                 $  75,041       100.%
----------------------------------------------------------------------------------------------------------------------------

         Weighted average interest rate                  4.35%                                4.51%
----------------------------------------------------------------------------------------------------------------------------

         Contractual maturity of
            certificate accounts:
               Under 12 months                                  $   23,778      56.8%                $  25,601        57.5%
               12 to 36 months                                      11,437      27.3                    14,948        33.5
               Over 36 months                                        6,670      15.9                     4,029         9.0
----------------------------------------------------------------------------------------------------------------------------

                                                                $   41,885     100.0%                $  44,578       100.0%
----------------------------------------------------------------------------------------------------------------------------

</TABLE>

 Certificates of deposit of $100 or more totaled $4,601, $5,780, and $6,137
at December 31, 1995, 1996, and 1997, respectively.

                                       31


<PAGE>
<TABLE>
<CAPTION>

        Interest  expense for deposit  accounts is summarized as follows for the
        years ended December 31, 1995, 1996, and 1997:

---------------------------------------------------------------------------------------------------------------------------
                                                                                             1995        1996        1997
---------------------------------------------------------------------------------------------------------------------------

<S>                                                                                    <C>           <C>          <C>

        Passbook                                                                        $     492         458         426
        NOW Accounts                                                                          123         144         158
        Money market deposit accounts                                                         187         192         214
        Certificate accounts                                                                2,513       2,491       2,403
---------------------------------------------------------------------------------------------------------------------------

                                                                                        $   3,315       3,285       3,201
---------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>

 (8)    BORROWED FUNDS

        Borrowed  funds are  summarized  as follows as of December  31, 1996 and 1997:
---------------------------------------------------------------------------------------------------------------------------
                                                                         1996                              1997
                                                            ----------------------------      ----------------------------
                                                            Weighted                          Weighted
                                                            interest rate        Amount       interest rate         Amount

<S>                                                        <C>              <C>              <C>                <C>

        Secured advances from
      the FHLB of Chicago maturing:
                1997                                            6.97%        $    10,000            - %        $        -
                1998                                            5.97               3,000          6.17               8,000
                1999                                            6.11               3,000          6.11               3,000
                2001                                            5.89               7,350          5.89               7,350
                2002                                            5.89                 750          5.43              10,750
---------------------------------------------------------------------------------------------------------------------------

                                                                6.49%        $    24,100          5.82%        $    29,100
---------------------------------------------------------------------------------------------------------------------------
</TABLE>

        The Savings Bank has adopted a collateral  pledge  agreement  whereby it
        has  agreed to at all  times  keep on hand,  free of all other  pledges,
        liens, and encumbrances,  first mortgages with unpaid principal balances
        aggregating no less than 167% of the outstanding  secured  advances from
        the Federal Home Loan Bank of Chicago  (FHLB of  Chicago).  All stock in
        the FHLB of  Chicago  is  pledged  as  additional  collateral  for these
        advances.

                                       32


<PAGE>
<TABLE>
<CAPTION>

 (9)    INCOME TAXES

        Income tax expense (benefit) is comprised as follows for the years ended
        December 31, 1995, 1996, and 1997:

---------------------------------------------------------------------------------------------------------------------------
                                                                                             1995        1996        1997
---------------------------------------------------------------------------------------------------------------------------

<S>                                                                                      <C>           <C>         <C>

        Federal:
            Current                                                                      $    228          91         336
            Deferred                                                                           67         110          46
---------------------------------------------------------------------------------------------------------------------------

                                                                                              295         201         382
---------------------------------------------------------------------------------------------------------------------------

        State:
            Current                                                                           (51)        (51)        (16)
            Deferred                                                                            9          15          (3)
---------------------------------------------------------------------------------------------------------------------------

                                                                                              (42)        (36)        (19)
---------------------------------------------------------------------------------------------------------------------------
                                                                                         $    253         165         363
---------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>

        Income tax expense resulted in an effective tax rate of 26.7%, 25.1% and
        36.4%,   for  the  years  ended  December  31,  1995,  1996,  and  1997,
        respectively.  The reasons for the difference  between the effective tax
        rate and the statutory Federal income tax rate are shown below.

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

                                                                                               Percentage of earnings
                                                                                                 before income taxes

                                                                                              YEARS ENDED DECEMBER 31,
                                                                                             1995         1996      1997
---------------------------------------------------------------------------------------------------------------------------

<S>                                                                                        <C>         <C>         <C>

        Federal income tax rate                                                              34.0%        34.0       34.0
        Items affecting Federal income tax rate:
              State income tax, net of federal benefit                                       (3.3)        (7.8)      (1.0)
              Utilization of capital loss carryforward                                       (5.9)        (4.2)      (2.3)
              Other, net                                                                      1.9          3.1        5.7
---------------------------------------------------------------------------------------------------------------------------

        Effective income tax rate                                                            26.7%        25.1       36.4
---------------------------------------------------------------------------------------------------------------------------

</TABLE>

                                       33


<PAGE>
<TABLE>
<CAPTION>

        The tax  effects of  existing  temporary  differences  that give rise to
        significant  portions of the deferred tax  liabilities  and deferred tax
        assets at December 31 are:

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

                                                                                                         1996        1997
---------------------------------------------------------------------------------------------------------------------------

<S>                                                                                                  <C>            <C>

        Deferred tax liabilities:
            Dividends received in stock, not recognized for tax purposes                              $    33           33
            Tax depreciation in excess of book depreciation                                                38           34
            Excess of tax bad debt reserve over base year                                                 156          156
            Recognition and Retention Plan Section 83(b) election                                          17           -
---------------------------------------------------------------------------------------------------------------------------
            Deferred loan fees                                                                             56           71
---------------------------------------------------------------------------------------------------------------------------
            Pension expense                                                                                43           -

        Gross deferred tax liabilities                                                                    343          294
---------------------------------------------------------------------------------------------------------------------------

        Deferred tax assets:
            State net operating loss carryforwards                                                        113          104
            Capital loss carryforward                                                                     141          115
            Unrealized loss on securities available for sale                                              449           39
            Pension expense                                                                                -            66
            Allowance for losses on loans                                                                  81           81
---------------------------------------------------------------------------------------------------------------------------
            Other                                                                                           3           -
---------------------------------------------------------------------------------------------------------------------------

            Gross deferred tax assets                                                                     787          405
            Less valuation allowance                                                                     (141)        (115)
---------------------------------------------------------------------------------------------------------------------------

            Net deferred tax assets                                                                       646          290
---------------------------------------------------------------------------------------------------------------------------

        Net deferred tax liability (asset)                                                            $  (303)           4
---------------------------------------------------------------------------------------------------------------------------
</TABLE>

        The Company  believes,  except as stated  below,  that it is more likely
        than not that the net  deferred  tax assets  will be  realized  based on
        historical  taxable income levels and  anticipated  future  earnings and
        taxable income  levels.  A valuation  allowance has been  established to
        offset the capital loss carryforward at December 31, 1996 and 1997.

        Retained  earnings at December  31,  1997  includes  $3,137 for which no
        provision for Federal income tax has been made.  This amount  represents
        allocations  of income to bad debt  deductions  for tax  purposes  only.
        Reduction of amounts so allocated  for purposes  other than tax bad debt
        losses will create income for tax purposes  only,  which will be subject
        to the then current corporate income tax rate.

        The Company has a capital loss carryforward of $297 which will expire in
        the year 2000, and net operating loss carryforwards for state income tax
        purposes of approximately $2,371 which will expire in the year 2012.


                                       34


<PAGE>


(10)    CONVERSION TO STOCK FORM OF OWNERSHIP

        On December 21, 1993,  the Company issued  2,082,938  shares of $.01 par
        value common stock at $6.67 share,  and became the parent company of the
        Savings Bank. Net proceeds, after deducting conversion expenses of $842,
        were  $13,044.  During 1994,  the Company  credited  additional  paid-in
        capital for the overaccrual of expenses  related to the stock conversion
        in the  amount of $73.  As part of the  conversion,  the ESOP  purchased
        166,635  shares of common  stock with the use of a loan from the Company
        in the amount of $1,111.

        As part of the conversion, the Company established a liquidation account
        for the benefit of eligible  depositors  as of September  30, 1992,  the
        eligibility  date, who continue to maintain deposits in the Savings Bank
        following the  conversion.  The balance in this account  decreases  each
        year in which deposit balances of eligible  account holders decline.  In
        the unlikely event of a complete  liquidation of the Savings Bank,  each
        eligible depositor who has continued to maintain deposits in the Savings
        Bank following the conversion  will be entitled to receive a liquidation
        distribution from the liquidation account,  based on their proportionate
        share of the then  total  remaining  qualifying  deposits,  prior to any
        distribution to the Company as the sole shareholder of the Savings Bank.
        Dividends  cannot  be  paid  from  retained  earnings  allocated  to the
        liquidation account.


(11)    PENSION PLAN

        The  Company  has a  qualified  noncontributory  pension  plan  covering
        substantially all full-time  employees employed more than six months and
        over 20-1/2 years of age,  including  part-time  employees  working over
        1,000 hours per year. The Savings  Bank's  funding policy  provides that
        payments to the plan shall be  consistent  with the Employee  Retirement
        Income  Security Act of 1974 using the frozen entry age  actuarial  cost
        method.


                                       35


<PAGE>
<TABLE>
<CAPTION>

        The  Company's  pension plan data for the years ended  December 31, 1996
        and 1997 is shown below.

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

                                                                                                         1996       1997
---------------------------------------------------------------------------------------------------------------------------

<S>                                                                                                 <C>           <C>

        Actuarial  present value of benefit  obligations  - accumulated  benefit
            obligation, including vested benefits of $2,663 and $2,862 at
            December 31, 1996 and 1997, respectively                                                  $  2,685      2,882
---------------------------------------------------------------------------------------------------------------------------

        Plan assets at fair value                                                                        2,524      2,702
        Less projected benefit obligation for services
            rendered to date                                                                             2,856      3,085
---------------------------------------------------------------------------------------------------------------------------

        Projected benefit obligation in excess of plan assets                                             (332)      (383)

        Unrecognized prior service cost                                                                    (12)       (11)
        Unrecognized net loss from past experience different from that assumed                             389        502
        Unrecognized net transition asset being recognized over 13 years                                   (24)       (20)
---------------------------------------------------------------------------------------------------------------------------

        Prepaid pension cost                                                                                21         88
        Additional liability                                                                              (182)      (268)
---------------------------------------------------------------------------------------------------------------------------

        Accrued pension cost                                                                          $   (161)      (180)
---------------------------------------------------------------------------------------------------------------------------

<CAPTION>

        Net pension cost for the years ended  December 31, 1995,  1996, and 1997
        includes the following components:

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

                                                                                                1995       1996      1997
---------------------------------------------------------------------------------------------------------------------------

<S>                                                                                         <C>          <C>        <C>

        Service cost benefits earned during the year                                         $   48         74         43
        Interest cost on projected benefit obligation                                           197        208        219
        Actual return on plan assets                                                           (172)      (181)      (187)
        Net amortization and deferral                                                           (26)       (13)       (31)
---------------------------------------------------------------------------------------------------------------------------

                                                                                             $   47         88         44
---------------------------------------------------------------------------------------------------------------------------
</TABLE>

        The  projected  benefit  obligation  was  determined  using  an  assumed
        weighted  average  discount rate of 7.5%, 8.0%, and 7.75% in 1995, 1996,
        and 1997,  respectively,  and an assumed compensation  increase of 4% in
        1995,  1996, and 1997. The assumed  weighted  average  long-term rate of
        return on plan assets was assumed to be 9% in 1995, 1996, and 1997.


(12)    STOCK OPTION PLAN

        In 1993, the Company  adopted a stock option plan (the Plan) pursuant to
        which the  Company's  Board of  Directors  may grant  stock  options  to
        directors,  officers and  employees of the Company and the Savings Bank.
        The number of common shares authorized under the Plan is 208,294,  equal
        to 10% of the total


                                       36


<PAGE>


        number  of shares issued in the initial stock  offering and are 100%
        vested upon date of  grant.  The  exercise  price is equal to the fair
        value of the common  stock at the date of grant.  The option  term
        cannot  exceed 10 years from the  commencement  date of the Plan of
        December 21, 1993.  At December 31, 1997,  there were 19,247
        additional  shares  available for grant under the Plan.

        As of December 31, 1996, the Company  adopted the disclosure  provisions
        of Financial  Accounting  Standards Board Statement No. 123, "Accounting
        for  Stock-Based  Compensation"  (SFAS No. 123).  The per share weighted
        average  fair value of stock  options  granted  during 1995 and 1997 was
        $2.11  and  $1.99,  respectively,  on  the  dates  of  grant  using  the
        Black-Scholes  option  pricing  model.  The following  weighted  average
        assumptions were used for grants issued for the years ended December 31,
        1995 and 1997,  respectively:  expected  dividend yield of 2.5% for both
        1995 and 1997; expected  volatility factors of .05% and .04%;  risk-free
        interest  rates  of 7.2% and  5.4%;  and  expected  lives of 8.8 and 6.5
        years. There were no stock options granted in 1996.

        Under SFAS No. 123,  the  Company is required to disclose  pro forma net
        income  and  earnings  per  share  for  1995,   1996,  and  1997  as  if
        compensation  expense  relative to the fair value of options granted had
        been included in earnings. Had the Company determined  compensation cost
        based on the fair  value at the grant date for its stock  options  under
        SFAS No. 123,  the  Company's  net income would have been reduced to the
        pro forma amounts indicated below:

<TABLE>
<CAPTION>

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

                                                                                             1995        1996        1997
---------------------------------------------------------------------------------------------------------------------------

<S>                                                                                    <C>           <C>           <C>

        Net income:
             As reported                                                                $     696         492         636
             Pro forma                                                                        674         492         620

        Earnings per share:
             Basic:
               As reported                                                                    .38         .31         .45
               Pro forma                                                                      .37         .31         .44

             Diluted:
               As reported                                                                    .38         .30         .42
               Pro forma                                                                      .36         .30         .41
---------------------------------------------------------------------------------------------------------------------------

</TABLE>

                                       37


<PAGE>


        A summary of the status of the Company's stock option transactions under
        the Plan for the  years  ended  December  31,  1995,  1996,  and 1997 is
        presented below:

<TABLE>
<CAPTION>

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

                                                      1995                          1996                      1997
                                                ---------------------    -------------------------     --------------------
                                                           Weighted-                     Weighted-                Weighted-
                                                            average                       average                  average
                                                           exercise                      exercise                 exercise
                 Options                        Shares       price       Shares            price      Shares        price
---------------------------------------------------------------------------------------------------------------------------

<S>                                           <C>          <C>          <C>            <C>          <C>         <C>

        Outstanding at beginning of year        162,462     $   6.67      176,631   $        6.75     174,549    $   6.75
        Granted                                  14,169         7.75           -              -        12,416       13.66
        Exercised                                     -          -          2,082            6.67      44,412        6.67
---------------------------------------------------------------------------------------------------------------------------

        Outstanding and exercisable
              at end of year                     176,631  `     6.75      174,549            6.75     142,553        7.39

        Weighted average grant-date
           fair value of options
           granted during the year                           $30,000                                              $25,000
---------------------------------------------------------------------------------------------------------------------------
</TABLE>

        At December 31, 1997, the range of exercise prices and weighted  average
        remaining  contractual  life of outstanding  options was $6.67 to $14.83
        and 6 years, respectively.


(13)    EMPLOYEE STOCK OWNERSHIP PLAN

        In conjunction with the Savings Bank's conversion, the Company formed an
        Employee Stock Ownership Plan (ESOP). The ESOP covers  substantially all
        employees  with more than six months of employment who have attained the
        age of  20-1/2.  The plan was  funded by a loan in the  amount of $1,111
        from  North  Bancshares,  Inc.  to the  ESOP  Trust at a rate of 8% with
        principal and interest  payments due quarterly  maturing on December 31,
        2002.  The loan is  secured  by the  shares  of North  Bancshares,  Inc.
        purchased with the loan proceeds. The Savings Bank has committed to make
        contributions  to the ESOP sufficient to allow the ESOP to fund its debt
        service  requirements  on the loan.  The ESOP  purchased  166,635 common
        shares  of  North  Bancshares,  Inc.  in the  conversion  with  the loan
        proceeds.  In accordance with generally accepted accounting  principles,
        the  balance  of the ESOP  loan  has been  reported  as a  reduction  of
        stockholders'  equity  on  the  Company's  consolidated   statements  of
        financial condition in the amounts of $667 and $555 at December 31, 1996
        and  1997,  respectively.  In 1996 and 1997,  contributions  to the ESOP
        which were used to fund  principal  and  interest  payments  on the ESOP
        debt, totaled $170 and $161, respectively.


(14)    RECOGNITION AND RETENTION PLAN

        In conjunction with the Savings Bank's conversion,  the Company formed a
        Recognition  and Retention Plan (RRP).  Pursuant to the RRP,  restricted
        stock  awards  representing  up to 4% of the shares of common stock that
        would be outstanding  upon completion of the conversion  (83,318 shares)
        may be granted to  directors  and  executive  officers  of the  Company.
        Restricted   stock  awards  for  73,314  shares  were  distributed  from
        authorized  but  unissued  shares.  The awards vest at a rate of 20% per
        year,  beginning December 31, 1993. The cost of common shares awarded is
        amortized to compensation expense as the


                                       38


<PAGE>


        participants vest in the shares and the unamortized cost is reflected as
        a  reduction  of  stockholders'  equity  as  deferred  compensation.  At
        December 31, 1996 and 1997, respectively,  58,650 and 73,314 shares have
        vested.  The Company  recorded  compensation  expense in 1995, 1996, and
        1997 of $116, $75, and $74, respectively. The awards are fully vested as
        of December 31, 1997.


(15)    REGULATION AND SUPERVISION

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

        Quantitative  measures  established  by  regulation  to  ensure  capital
        adequacy require the Savings Bank to maintain minimum amounts and ratios
        (set forth in the table  below) of total and Tier I capital (as defined)
        to  risk-weighted  assets (as  defined),  Tier I capital (as defined) to
        average  assets  (as  defined),   and  tangible  capital  (as  defined).
        Management  believes,  as of December  31,  1997,  that the Savings Bank
        meets all capital adequacy requirements to which they are subject.

        As of December 31, 1996 and 1997, the most recent  notification from the
        Office  of the  Thrift  Supervision  categorized  the  Savings  Bank  as
        adequately   capitalized  under  the  regulatory  framework  for  prompt
        corrective  action.  To be  categorized as adequately  capitalized,  the
        Savings Bank must maintain minimum total risk-based,  Tier I risk-based,
        Tier I leverage,  and tangible capital ratios as set forth in the table.
        There  are  no  conditions  or  events  since  that   notification  that
        management believes have changed the institution's category.

        The actual and  minimum  capital  amounts  and ratios of the  Savings
        Bank as of  December  31,  1996 and 1997 are presented in the
        table below.

<TABLE>
<CAPTION>

---------------------------------------------------------------------------------------------------------------------------
                                                                                                          For capital
                                                                                Actual              Adequacy Purposes
                                                                          Amount        Ratio         Amount        Ratio
---------------------------------------------------------------------------------------------------------------------------

<S>                                                                    <C>            <C>         <C>            <C>

        As of December 31, 1996:
           Total capital (to risk weighted assets)                    $      14,469       31.98%       3,620         8.0%
           Tier I capital (to risk weighted assets)                          14,261       31.52         N/A         N/A
           Tier I capital ( to average assets)                               14,261       12.43       3,443          3.0
           Tangible capital (to average assets)                              14,261       12.43       1,721          1.5
---------------------------------------------------------------------------------------------------------------------------

        As of December 31, 1997:
           Total capital (to risk weighted assets)                           11,771       25.38       3,710          8.0
           Tier I capital (to risk weighted assets)                          11,563       24.93         N/A         N/A
           Tier I capital ( to average assets)                               11,563        9.73       3,656          3.0
---------------------------------------------------------------------------------------------------------------------------
           Tangible capital (to average assets)                              11,563        9.73       1,828          1.5

</TABLE>
                                       39


<PAGE>


(16)    COMMITMENTS AND CONTINGENCIES AND FINANCIAL
              INSTRUMENTS WITH OFF-BALANCE SHEET RISK

        The Company is a party to financial  instruments with off-balance  sheet
        risk in the normal course of its  business.  These  instruments  include
        commitments  to originate  loans and lines of credit and involve  credit
        and  interest  rate  risk in  excess  of the  amount  recognized  in the
        consolidated  statements of financial  condition.  The Company evaluates
        each customer's creditworthiness on a case-by-case basis.

        Commitments to originate loans at December 31, 1996 and 1997 of $777 and
        $957,  respectively,  represent  amounts which the Company plans to fund
        within the normal commitment period of 60 to 90 days. The commitments to
        originate  loans at December 31, 1997  represent  commitments  for fixed
        rate  loans  with  an  average  interest  rate  of  8.31%.  Because  the
        creditworthiness  of each customer is reviewed prior to the extension of
        the  commitment,  the Company  adequately  controls credit risk on these
        commitments,   as  it  does  for  loans  recorded  on  the  consolidated
        statements of financial  condition.  The Company conducts  substantially
        all of its  lending  activities  in the  Chicagoland  area in  which  it
        serves.


(17)    DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INVESTMENTS

        Statement of Financial Accounting Standards No. 107,  "Disclosures about
        Fair Value of  Financial  Instruments"  (Statement  107),  requires  the
        disclosure  of  estimated  fair  values  of all  asset,  liability,  and
        off-balance  sheet  financial  instruments.  The  estimated  fair  value
        amounts under  Statement 107 have been determined as of a specific point
        in time utilizing various available market information, assumptions, and
        appropriate  valuation  methodologies.  Accordingly,  the estimated fair
        values  presented  herein  are  not  necessarily  representative  of the
        underlying  value of the Company.  Rather the disclosures are limited to
        reasonable  estimates of the fair value of only the Company's  financial
        instruments. The use of assumptions and various valuation techniques, as
        well  as  the  absence  of  secondary   assets  for  certain   financial
        instruments,   will  likely  reduce  the  comparability  of  fair  value
        disclosures between financial institutions. The Company does not plan to
        sell most of its assets or settle most of its liabilities at these

                                       40


<PAGE>


fair values.  The estimated  fair values of the Company's  financial
instruments  as of  December 31  are set forth in the following table.

<TABLE>
<CAPTION>

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

                                                                      December 31, 1996               December 31, 1997
                                                                   -----------------------        ---------------------
                                                                     Carrying        Fair            Carrying        Fair
                                                                      amount         value            amount         value
---------------------------------------------------------------------------------------------------------------------------

<S>                                                              <C>             <C>              <C>              <C>

        Financial assets:
            Cash and due from banks                               $       618         618                 727          727
            Interest-bearing deposits                                   2,644       2,644               2,937        2,937
            Federal funds sold                                          4,800       4,800               5,976        5,976
            Investment in dollar denominated mutual funds                 547         547               1,477        1,477
            Investment securities available for sale                   24,426      24,426              23,250       23,250
            Mortgage-backed securities held to maturity                 7,465       7,468               5,841        5,936
            Loans receivable                                           73,378      73,858              79,031       80,679
---------------------------------------------------------------------------------------------------------------------------
            Accrued interest receivable                                 1,025       1,025               1,060        1,060
---------------------------------------------------------------------------------------------------------------------------

                                                                  $   114,903     115,386             120,299      122,042
---------------------------------------------------------------------------------------------------------------------------

        Financial liabilities:
            Deposit accounts                                           73,611      74,431              75,041       75,215
            Borrowed funds                                             24,100      23,993              29,100       28,703
            Accrued interest payable                                      212         212                 236          236
---------------------------------------------------------------------------------------------------------------------------

                                                                  $    97,923      98,636             104,377      104,154
---------------------------------------------------------------------------------------------------------------------------

</TABLE>

        The  following  methods  and  assumptions  were used by the  Company  to
        estimate the fair value of its financial instruments.

        (a)   CASH AND DUE FROM BANKS, INTEREST-BEARING DEPOSITS, AND
                 FEDERAL FUNDS SOLD

        For these  short-term  instruments,  the carrying amount is a reasonable
        estimate of fair value.

        (b)   INVESTMENT IN DOLLAR DENOMINATED MUTUAL FUNDS

        The fair value of investment in dollar denominated mutual funds is based
        on quoted market prices.

        (c)   INVESTMENT AND MORTGAGE-BACKED SECURITIES

        The fair  value of  investment  and  mortgage-backed  securities  is the
        quoted  market  price,  if  available.  If a quoted  market price is not
        available,  fair  value is  estimated  using  quoted  market  prices for
        similar securities.

                                       41


<PAGE>


        (d)   LOANS RECEIVABLE

        Fair  values are  estimated  for  portfolios  of  performing  loans with
        similar financial characteristics. For certain homogeneous categories of
        loans,  such as some  residential real estate  mortgages,  fair value is
        estimated  using quoted market prices.  If no quoted market price exists
        for a category of loans, fair value is estimated based on current prices
        offered by the Savings  Bank for similar  loans.  For loans that reprice
        frequently at market rates, the carrying amount is a reasonable estimate
        of fair value.

        (e)   ACCRUED INTEREST RECEIVABLE AND PAYABLE

        The  carrying   value  of  accrued   interest   receivable  and  payable
        approximates  fair  value  due to the  relatively  short  period of time
        between accrual and expected realization.

        (f)   DEPOSIT ACCOUNTS

        The fair value of deposits  with no stated  maturity,  such as passbook,
        NOW accounts,  and money market deposit  accounts is equal to the amount
        payable on demand.  The fair value of fixed  maturity  time  deposits is
        based on the discounted  value of contractual cash flows using the rates
        offered by the Savings Bank for deposits of similar remaining maturities
        at December 31.

        (g)   BORROWED FUNDS

        The fair value of shorter term  borrowings  approximates  carrying value
        due to the relatively  short periods of time between the  origination of
        the instruments and their expected payment.

        The fair  value of fixed rate  borrowings  is the  present  value of the
        contractual  cash  flows,  discounted  by the current  rate  offered for
        similar remaining maturities.

                                       42


<PAGE>


(18)    PARENT COMPANY ONLY FINANCIAL INFORMATION

        The condensed  statements of financial condition as of December 31, 1996
        and 1997 and the condensed  statements of operations  and cash flows for
        each of the years in the  three-year  period ended December 31, 1997 for
        the  Parent  Company  only is  presented  below  and  should  be read in
        conjunction with other notes to the consolidated financial statements.
<TABLE>
<CAPTION>

---------------------------------------------------------------------------------------------------------------------------
             STATEMENTS OF FINANCIAL CONDITION (PARENT COMPANY ONLY)
---------------------------------------------------------------------------------------------------------------------------
                                                                                                         1996        1997
---------------------------------------------------------------------------------------------------------------------------

<S>                                                                                               <C>             <C>

        Assets:
             Cash held at Savings Bank                                                              $      586         852
             Interest-bearing deposits                                                                     130         141
             Investment in dollar denominated mutual funds                                                  83         581
             Investment securities available for sale                                                      345         620
             Accrued interest receivable                                                                     7           8
             Other assets                                                                                3,026       2,778
             Investment in Savings Bank                                                                 13,643      11,507
---------------------------------------------------------------------------------------------------------------------------

        Total assets                                                                                    17,820      16,487
---------------------------------------------------------------------------------------------------------------------------

        Liabilities - other liabilities                                                                     (3)         39
---------------------------------------------------------------------------------------------------------------------------

        Stockholders' equity:
             Common stock                                                                                   14          19
             Additional paid-in capital                                                                 13,688      13,767
             Retained earnings                                                                          10,988      11,139
             Treasury stock, at cost                                                                    (5,340)     (7,706)
             Unrealized loss on securities available for sale, net of income taxes                        (678)        (56)
             Additional pension liability, net of tax                                                     (108)       (160)
             Common stock acquired by Employee Stock Ownership Plan                                       (667)       (555)
             Deferred compensation                                                                         (74)         -
---------------------------------------------------------------------------------------------------------------------------

        Total stockholders' equity                                                                      17,823      16,448
---------------------------------------------------------------------------------------------------------------------------

        Total liabilities and stockholders' equity                                                  $   17,820      16,487
---------------------------------------------------------------------------------------------------------------------------

</TABLE>

                                       43


<PAGE>
<TABLE>
<CAPTION>


                 STATEMENTS OF OPERATIONS (PARENT COMPANY ONLY)
---------------------------------------------------------------------------------------------------------------------------

                                                                                               1995      1996        1997
---------------------------------------------------------------------------------------------------------------------------

<S>                                                                                         <C>        <C>          <C>

        Equity in earnings of the Savings Bank                                               $  640       439          576
        Interest income                                                                         296       157          181
        Gain on sale of investment securities available for sale, net                             5        81           67
        Other income                                                                              2         4           -
        Noninterest expense                                                                    (229)     (203)        (195)
---------------------------------------------------------------------------------------------------------------------------

        Income before income taxes                                                              714       478          629
        Income tax benefit (expense)                                                            (18)       14            7
---------------------------------------------------------------------------------------------------------------------------

        Net income                                                                           $  696       492          636
---------------------------------------------------------------------------------------------------------------------------

</TABLE>
<TABLE>
<CAPTION>

---------------------------------------------------------------------------------------------------------------------------
                 STATEMENTS OF CASH FLOWS (PARENT COMPANY ONLY)
---------------------------------------------------------------------------------------------------------------------------
                                                                                              1995       1996        1997
---------------------------------------------------------------------------------------------------------------------------

<S>                                                                                       <C>         <C>          <C>

        Cash flows from operating activities:
             Net income                                                                    $    696        492         636
             Adjustments to reconcile net income to net cash
                from operating activities:
                   Amortization of premiums and discounts                                        (3)         1          (2)
                   Amortization of cost of stock benefit plans                                  227        186         186
                   Decrease (increase) in accrued interest                                        3         63          (1)
                   (Decrease) increase in other liabilities                                     (47)        20         108
                   (Increase) decrease in other assets                                           (1)    (3,025)        248
                   Gain on sale of investment securities
---------------------------------------------------------------------------------------------------------------------------
                      available for sale, net                                                    -         (81)        (67)
---------------------------------------------------------------------------------------------------------------------------
                   Equity in earnings of the Savings Bank                                      (640)      (439)       (576)
---------------------------------------------------------------------------------------------------------------------------

        Net cash provided by (used in) operating activities                                     235     (2,783)        532
---------------------------------------------------------------------------------------------------------------------------

        Cash flows from investing activities:
             Proceeds from sale of mutual funds available for sale                              891         -           -
             Purchase of investment securities available for sale                            (1,345)      (625)     (2,994)
             Maturities of investment securities available for sale                           2,500      1,000       1,000
             Proceeds from sale of investment securities
---------------------------------------------------------------------------------------------------------------------------
                available for sale                                                               -       2,207       1,785

        Net cash provided by (used in) investing activities                                $  2,046      2,582        (209)
---------------------------------------------------------------------------------------------------------------------------

                                       44


<PAGE>
<CAPTION>

                                                                                              1995       1996        1997
---------------------------------------------------------------------------------------------------------------------------

<S>                                                                                        <C>         <C>          <C>

        Cash flows from financing activities:
             Cash dividend from Savings Bank                                               $    347      3,332       3,444
             Payment of cash dividends                                                         (324)      (453)       (485)
             Proceeds from stock options exercised                                               -          15         296
---------------------------------------------------------------------------------------------------------------------------
             Purchase of treasury stock                                                      (1,649)    (2,759)     (2,803)

        Net cash (used in) provided by financing activities                                  (1,626)       135         452
---------------------------------------------------------------------------------------------------------------------------

        Net increase (decrease) in cash and cash equivalents                                    655        (66)        775
        Cash and cash equivalents at beginning of year                                          210        865         799
---------------------------------------------------------------------------------------------------------------------------

        Cash and cash equivalents at end of year                                           $    865        799       1,574
---------------------------------------------------------------------------------------------------------------------------

</TABLE>
<TABLE>
<CAPTION>

(19)    QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

        The following table sets forth certain  unaudited income and expense and
        per  share  data on a  quarterly  basis  for  the  three  month  periods
        indicated:

---------------------------------------------------------------------------------------------------------------------------
                                                                                      YEAR ENDED DECEMBER 31, 1997
                                                                               1st Qtr      2nd Qtr     3rd Qtr     4th Qtr
---------------------------------------------------------------------------------------------------------------------------
                                                                                             (in thousands)

<S>                                                                      <C>              <C>          <C>         <C>

        Interest income                                                  $      2,143       2,195        2,195       2,218
        Interest expense                                                        1,174       1,225        1,286       1,288
---------------------------------------------------------------------------------------------------------------------------

        Net interest income before provision for loan losses                      969         970          909         930
        Provision for loan losses                                                  -           -            -            -
---------------------------------------------------------------------------------------------------------------------------

        Net interest income after provision for loan losses                       969         970          909         930
        Fees and service charges                                                   46          57           53          55
        Gain (loss) on sale of investment securities
           and mutual funds                                                        48           6           (1)          7
        Other noninterest income                                                    4           5            4           7
        Noninterest expense                                                       746         796          798         730
---------------------------------------------------------------------------------------------------------------------------

        Income before income tax expense                                          321         242          167         269
        Income tax expense                                                         92          67           55         149
---------------------------------------------------------------------------------------------------------------------------

        Net income  $                                                    229      175         112          120
---------------------------------------------------------------------------------------------------------------------------

        Basic earnings per share                                         $        .16         .12          .08         .09
---------------------------------------------------------------------------------------------------------------------------

        Diluted earnings per share                                       $        .15         .12          .08         .08
---------------------------------------------------------------------------------------------------------------------------

        Cash dividends declared per share                                $        .08         .08          .08         .08
---------------------------------------------------------------------------------------------------------------------------
</TABLE>

                                       45


<PAGE>


                               BOARD OF DIRECTORS


MARY ANN HASS               ELMER L. HASS               GREGORY W. ROSE
Chairman of the Board       Retired-Cragin Metals       Director and
Chief Executive Officer     Products, Inc.              Managing Partner
                                                        Monarch Tool & Die Co.


JAMES L. FERSTEL            JOSEPH A. GRABER            ROBERT H. RUSHER
Attorney at Law             President and               Retired-President and
                            Chief Operating Officer     Chief Operating Officer


                            CURRENT OFFICERS

MARY ANN HASS               JOSEPH A. GRABER            VICTOR E. CAPUTO
Chief Executive Officer     President and               Executive Vice President
                            Chief Operating Officer     Secretary

MARTIN W. TROFIMUK          KARLA A. LAUER              JOHN K. TAYLOR
Vice President and          Vice President-Services     Vice President-Loans
Treasurer                   North Federal Savings Bank  North Federal
                                                        Savings Bank

EMILIE V. REITER            CATHERINE HARPER            SUSAN L. RODRIGUEZ
Assistant Secretary         Assistant Vice President    Assistant Secretary
North Federal Savings Bank  North Federal Savings Bank

D. ROBERT HARLESS
Assistant Vice President
North Federal Savings Bank

CORPORATE INFORMATION

STOCK PRICE INFORMATION
The Company's common stock trades on The Nasdaq Stock Market under the symbol:
NBSI. The table below shows the high and low sales prices of the common stock
during the periods indicated in fiscal 1997 and 1996. The prices have been
adjusted to reflect a three-for-two stock split distributed on December 29,
1997. The Common Stock began trading on December 21, 1993. On March 2, 1998,
North Bancshares, Inc. had approximately 220 shareholders of record and 400
beneficial shareholders. As of such date, there were 1,300,281 shares of common
stock issued and outstanding.

<TABLE>
                        1997            1996
<CAPTION>
                    HIGH     LOW    HIGH     LOW
<S>               <C>     <C>     <C>      <C>
First Quarter     13.167  10.500  10.833   9.167
Second Quarter    13.417  12.750  10.833  10.167
Third Quarter     16.333  12.833  10.833  10.167
Fourth Quarter    18.875  15.667  11.000  10.500
</TABLE>
                                       46

<PAGE>


INVESTORS INFORMATION
A copy of North Bancshares, Inc.'s annual report on Form 10-KSB, to be filed
with the Securities and Exchange Commission, is available without charge by
writing our Corporate Office:

VICTOR E. CAPUTO, SECRETARY
North Bancshares, Inc.
100 West North Avenue
Chicago, Illinois 60610-1399
(312) 664-4320  E-Mail: northfedl@aol.com  http://www.northfederal.com

Shareholders, investors and analysts interested in additional information may
contact the above.

ANNUAL MEETING OF SHAREHOLDERS
The Annual Meeting of the Shareholders of North Bancshares, Inc. will
be held at 10:00 A.M., April 22, 1998, at the Chicago
Historical Society, 1601 N. Clark St., Chicago, Illinois:

STOCK TRANSFER AGENT AND REGISTRAR
Inquiries regarding stock transfer, registration, lost certificate, lost
dividend checks or changes in name and address should be directed to the stock
transfer agent and registrar by calling 312-360-5296 or by writing:

HARRIS TRUST AND SAVINGS BANK
Post Office Box 755
Chicago, IL 60690
Attn: Shareholder Services

CORPORATE COUNSEL/WASHINGTON,D.C.
Silver, Freedman & Taff, L.L.P.
1100 New York Avenue, N.W.
Washington, D.C. 20005-3934

CORPORATE COUNSEL/CHICAGO, IL
John P. Koch
100 West North Avenue
Chicago, IL 60610-1399

INDEPENDENT AUDITORS
KPMG Peat Marwick LLP
Peat Marwick Plaza
303 East Wacker Drive
Chicago, IL 60601-5255

                                       47