BEVERLY BANCORPORATION INC, 424B4, 1996-08-22

BEVERLY BANCORPORATION INC
424B4, 1996-08-22
COMMERCIAL BANKS, NEC

Previous: BANKERS SECURITY VARIABLE ANNUITY FUNDS D E F G H & I, N-30D, 1996-08-22

Next: PRINCIPAL CAPITAL ACCUMULATION FUND INC, NSAR-A, 1996-08-22

<PAGE>

1,000,000 SHARES

[LOGO]

COMMON STOCK

All of the shares of Common Stock, par value $.01 per share (the "Common
Stock"), offered hereby are being issued and sold by Beverly Bancorporation,
Inc. (the "Company").

The Company's Common Stock is traded occasionally in the over-the-counter
market and the bid price is quoted in the National Quotation Bureau's "pink
sheets." See "Market for Common Stock and Dividends." For information relating
to the determination of the initial public offering price of the Common Stock,
see "Underwriting." The Common Stock has been approved for quotation on the
Nasdaq National Market under the symbol "BEVB."

INVESTORS SHOULD CAREFULLY CONSIDER THE FACTORS SET FORTH UNDER "RISK
FACTORS" BEGINNING ON PAGE 6.
------------------------
THE SHARES OF COMMON STOCK OFFERED HEREBY ARE NOT SAVINGS ACCOUNTS OR
DEPOSITS AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE BANK INSURANCE FUND, THE SAVINGS ASSOCIATION
INSURANCE FUND OR ANY OTHER GOVERNMENT AGENCY.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.

<TABLE>
<CAPTION>
UNDERWRITING PROCEEDS TO
PRICE TO PUBLIC DISCOUNT (1) COMPANY (2)
<S> <C> <C> <C>
Per Share................................ $15.00 $1.05 $13.95
Total (3)................................ $15,000,000 $1,050,000 $13,950,000
</TABLE>

(1) See "Underwriting" for information concerning indemnification arrangements
with the Underwriters.

(2) Before deducting expenses of the offering, estimated at $450,000.

(3) The Company has granted the Underwriters a 30-day option to purchase up to
150,000 additional shares of Common Stock solely to cover over-allotments,
if any, on the same terms and conditions as shown above. If such option is
exercised in full, the total Price to Public, Underwriting Discount and
Proceeds to Company will be $17,250,000, $1,207,500 and $16,042,500,
respectively.

The shares of Common Stock being offered hereby are being offered severally
by the Underwriters named herein subject to receipt and acceptance by them and
subject to the right to reject any order in whole or in part. See
"Underwriting." It is anticipated that delivery of the certificates for the
shares of Common Stock will be made against payment therefor on or about August
27, 1996.

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

HOWE BARNES INVESTMENTS, INC.

August 22, 1996

<PAGE>
[LOGO]

[MAP]

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK OF
THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED IN THE NASDAQ NATIONAL MARKET OR
OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.

The Company intends to furnish its stockholders with annual reports
containing financial statements audited by an independent public accounting firm
for each fiscal year and with quarterly reports containing unaudited summary
information for the first three quarters of each fiscal year.

2
<PAGE>
PROSPECTUS SUMMARY

THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND CONSOLIDATED FINANCIAL STATEMENTS AND NOTES THERETO APPEARING
ELSEWHERE IN THIS PROSPECTUS. UNLESS OTHERWISE INDICATED, THE INFORMATION
CONTAINED IN THIS PROSPECTUS (I) ASSUMES THE REINCORPORATION OF BEVERLY
BANCORPORATION, INC., AN ILLINOIS CORPORATION ("BEVERLY ILLINOIS"), AS A
DELAWARE CORPORATION, WHICH TOOK PLACE ON AUGUST 16, 1996 (THE
"REINCORPORATION"), (II) GIVES EFFECT TO THE ISSUANCE OF FIVE SHARES OF COMMON
STOCK OF THE COMPANY FOR EACH SHARE OF COMMON STOCK OF BEVERLY ILLINOIS IN
CONNECTION WITH THE REINCORPORATION AND ALL STOCK DIVIDENDS PAID THROUGH THE
DATE HEREOF, AND (III) ASSUMES NO EXERCISE OF THE UNDERWRITERS' OVER-ALLOTMENT
OPTION. PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE MATTERS SET FORTH IN
"RISK FACTORS."

THE COMPANY

Beverly Bancorporation, Inc. (the "Company") is a community-based financial
services holding company headquartered in Chicago, Illinois. Through its
subsidiaries, the Company provides a full range of banking services and also
provides personal and corporate trust services. The Company's principal
operating subsidiaries are Beverly Bank, Beverly Bank Matteson, First National
Bank of Wilmington ("Wilmington") and Beverly Bank Lockport (collectively, the
"Banks"), and Beverly Trust Company ("Beverly Trust"). The Banks are chartered
as Illinois state banks, with the exception of Wilmington, which was federally
chartered in 1863 and is the second oldest active national bank in Illinois.

As of December 31, 1995, the Company's total assets were $591.2 million and
net income for the year ended December 31, 1995 was $6.2 million, with a return
on average assets of 1.09% and a return on average equity of 13.37% for the year
then ended. As of June 30, 1996, the Company's total assets had grown to $614.6
million, with net income of $3.0 million for the six months then ended, an
increase in net income of 5.4% from the six months ended June 30, 1995.

The Company's strategy is to continue to increase its core banking business
through its commercial community banking presence and its retail product sales
and distribution system. The Company will also pursue an increased market share
in personal and corporate trust services and intends to further develop its
securities sales and insurance activities. Where opportunities arise, the
Company may seek to augment its internal growth through the establishment of
additional branches and offices, as well as acquisitions or joint ventures in
both banking and non-banking areas. In 1996, Wilmington formed a joint venture,
currently in its initial stages, with a prominent realtor for the purpose of
increasing its mortgage origination business.

The Company was incorporated in Delaware on June 13, 1996 as a wholly-owned
subsidiary of Beverly Bancorporation, Inc., an Illinois corporation ("Beverly
Illinois"). Beverly Illinois was organized in 1969 and prior to the
Reincorporation owned all of the outstanding capital stock of the Banks and
Beverly Trust. Pursuant to the Reincorporation, which took place on August 16,
1996, Beverly Illinois was merged with and into the Company and the Company is
the surviving corporation. As a

3
<PAGE>

result of the Reincorporation, the Company owns all of the outstanding capital
stock of the Banks and Beverly Trust. In connection with the Reincorporation,
each outstanding share of common stock of Beverly Illinois was converted into
five shares of Common Stock of the Company.

The Company intends to merge Beverly Bank, Beverly Bank Matteson and Beverly
Bank Lockport with and into Wilmington by year-end 1996. Pursuant to the merger,
Wilmington will be renamed Beverly National Bank and will remain a nationally
chartered bank. The anticipated result of the merger, assuming all regulatory
approvals are received, will be to consolidate the operations of the Banks and
to reduce the administrative costs under which the Banks presently operate.

The Company's principal executive offices are located at 1357 West 103rd
Street, Chicago, Illinois 60643, and its telephone number is (312) 881-2214.

Except where the context otherwise requires, when used herein the term
"Company" refers to Beverly Bancorporation, Inc., a Delaware corporation, its
predecessor and its subsidiaries.

THE OFFERING

<TABLE>
<S> <C>
Common Stock offered.............. 1,000,000 shares
Common Stock to be outstanding
after the offering (1)........... 4,974,942 shares
Nasdaq symbol..................... BEVB
Use of Proceeds................... The Company will use a portion of the net proceeds from
the sale of shares of Common Stock offered hereby to
repay outstanding short-term borrowings of $9.0 million.
The remaining net proceeds will be used for general
corporate purposes including, if and when opportunities
arise, establishing additional branches and offices and
acquiring businesses complementary to those of the
Company. See "Use of Proceeds."
</TABLE>

- ------------------------
(1) Based on the number of shares of Common Stock outstanding as of June 30,
1996 and excluding 7,159 shares of Common Stock issued on July 15, 1996
pursuant to the reinvestment of dividends and the payment of directors' fees
and 1,100 shares of Common Stock issued on July 23, 1996 pursuant to the
exercise of options. In addition, as of June 30, 1996, 532,945 shares of
Common Stock were reserved for issuance under the Company's stock option
plan pursuant to which options to purchase 418,040 shares of Common Stock
were outstanding, 146,610 of which were exercisable.

4
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL DATA

<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, (1) YEAR ENDED DECEMBER 31,
-------------------- -----------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
--------- --------- --------- --------- --------- --------- ---------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Total interest income................... $ 20,778 $ 19,512 $ 39,970 $ 35,206 $ 33,468 $ 36,583 $ 42,328
Total interest expense.................. 9,649 8,335 17,184 12,949 12,805 15,256 20,858
--------- --------- --------- --------- --------- --------- ---------
Net interest income..................... 11,129 11,177 22,786 22,257 20,663 21,327 21,470
Provision for loan losses............... 75 103 159 311 1,299 3,577 2,923
Other income............................ 4,149 3,762 7,870 8,017 9,820 11,300 9,048
Operating expenses...................... 10,879 10,727 21,416 20,875 22,169 23,127 22,513
Income tax expense...................... 1,317 1,257 2,877 2,672 2,143 1,519 1,036
Cumulative effect of change in
accounting principle................... -- -- -- -- 374 -- --
--------- --------- --------- --------- --------- --------- ---------
Net income.............................. $ 3,007 $ 2,852 $ 6,204 $ 6,416 $ 5,246 $ 4,404 $ 4,046
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
PER SHARE DATA (2):
Income before cumulative effect of
change in accounting principle......... $ .74 $ .58 $ 1.26 $ 1.34 $ 1.05 $ .96 $ .89
Net income.............................. .74 .58 1.26 1.34 1.13 .96 .89
Cash dividends declared................. .10 .10 .19 .18 .17 .17 .12
Book value at end of period............. 10.19 9.87 10.35 8.44 8.58 7.72 6.94
Net tangible book value at end of
period................................. 9.92 9.57 10.02 8.11 8.14 7.18 6.29
Stock dividends declared................ 5.00% 5.00% 5.00% 5.00% 5.00% -- --
SELECTED FINANCIAL RATIOS:
Return on average assets................ 1.00% 1.02% 1.09% 1.20% 1.03% .90% .85%
Return on average equity................ 14.58 13.03 13.37 16.10 13.33 12.61 12.95
Dividend payout ratio (dividends
declared per share to net income per
share)................................. 13.51 17.24 15.08 13.43 15.04 17.71 13.48
Average equity to average assets........ 6.86 7.84 8.17 7.47 7.72 7.17 6.53
Net interest margin (tax equivalent).... 4.18 4.49 4.49 4.66 4.52 5.05 5.27
Allowance for loan losses to total loans
at end of period....................... 1.21 1.24 1.13 1.37 1.51 1.79 1.51
Non-performing loans to total loans at
end of period.......................... .55 .57 .57 .82 1.05 1.76 2.70
Net loans charged off (recoveries) to
average loans.......................... (.11) .06 .21 .13 .70 1.23 2.02
</TABLE>

<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
-------------------- -----------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
--------- --------- --------- --------- --------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
SELECTED BALANCE SHEET DATA:
Total assets..................... $ 614,569 $ 567,312 $ 591,203 $ 561,339 $ 519,635 $ 510,642 $ 467,287
Total earning assets............. 566,425 524,183 539,842 505,307 477,196 462,549 422,185
Loans............................ 324,573 314,572 312,160 291,042 267,517 251,062 279,511
Total deposits................... 553,792 507,946 527,131 504,445 459,132 454,917 418,134
Short-term borrowings............ 14,770 7,678 17,292 11,414 13,346 15,795 12,884
Long-term obligations............ 596 -- -- -- -- -- --
Total stockholders' equity....... 40,587 47,951 40,961 40,808 40,055 35,253 31,266
Net tangible book value.......... 39,426 46,510 39,660 39,202 38,017 32,784 28,365
</TABLE>

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

(1) Ratios for interim periods are stated on an annualized basis. However,
interim operating results and ratios for the six months ended June 30, 1996
are not necessarily indicative of results that may be experienced for the
full year.

(2) All per share amounts have been adjusted to give effect to the issuance of
five shares of Common Stock of the Company for each share of common stock of
Beverly Illinois in connection with the Reincorporation and all stock
dividends paid through the date hereof.

5
<PAGE>
RISK FACTORS

IN ADDITION TO THE OTHER INFORMATION IN THIS PROSPECTUS, THE FOLLOWING
FACTORS SHOULD BE CONSIDERED CAREFULLY IN EVALUATING THE COMPANY AND ITS
BUSINESS AND DECIDING WHETHER TO PURCHASE ANY OF THE COMMON STOCK OFFERED
HEREBY.

ADVERSE IMPACT OF CHANGES IN INTEREST RATES AND OTHER ECONOMIC CONDITIONS

The Company's earnings depend to a great extent upon the level of net
interest income, which is the difference between total interest income earned on
earning assets and total interest expense paid on interest bearing liabilities.
Although management believes that the maturities of the Company's assets are
well balanced in relation to maturities of liabilities ("asset/liability
management"), asset/ liability management involves estimates as to how changes
in the general level of interest rates will impact the yields earned on assets
and the rates paid on liabilities. As community banks, the Banks are primarily
dependent on local deposits as a source of funds. Additionally, the Company uses
a number of funding sources as alternatives to local area deposits. These
alternatives include repurchase agreements, municipal deposits and federal funds
purchased from correspondent banks. See "Management's Discussion and Analysis of
Results of Operations and Financial Condition -- Asset/ Liability Management."
Because the Banks are community banks operating solely in the Chicago
metropolitan area, the success of the Company is also dependent to a certain
extent upon the general economic conditions in the Chicago metropolitan area.

NO ASSURANCE AS TO SUFFICIENCY OF ALLOWANCE FOR LOAN LOSSES

The Company's allowance for loan losses is maintained at a level considered
adequate by management to absorb anticipated losses in its loan portfolio. The
amount of future loan losses is susceptible to changes in economic, operating
and other conditions, including changes in interest rates, that may be beyond
the Company's control. Such losses may exceed current estimates. Although
management believes that the Company's allowance for loan losses is adequate,
there can be no assurance that the allowance will prove sufficient to cover
actual loan losses in the future. See "Management's Discussion and Analysis of
Results of Operations and Financial Condition -- Financial Condition -- Analysis
of Allowance for Loan Losses."

LIMITED PUBLIC MARKET FOR COMMON STOCK

Prior to this offering, there has been a limited public market for the
Common Stock. See "Market for Common Stock and Dividends." While the Common
Stock has been approved for quotation on the Nasdaq National Market, there can
be no assurance that following this offering an active public market for the
Common Stock will develop or be sustained. The initial public offering price of
the Common Stock has been determined by negotiations between the Company and the
Underwriters and may not be indicative of the market price of the Common Stock
after this offering. See "Underwriting."

ADVERSE IMPACT OF CURRENT AND FUTURE GOVERNMENT REGULATION

The Company, the Banks and Beverly Trust are subject to extensive federal
and state legislation, regulation and supervision. Since April 1994, the Company
and each of the Banks have undergone at least one regulatory examination. Future
legislation and regulations may have significant impact on the financial
services industry. Some of the legislative and regulatory changes may benefit
the Company; others, however, may increase the Company's costs of doing business
and assist competitors of the Company. See "Supervision and Regulation."

Although the Company has certain investments and expects to continue to
generate some revenues at the holding company level, the Company has been and is
likely to continue to be largely dependent upon the receipt of dividends from
the Banks to fund dividends on the Company's Common Stock. Dividends payable by
the Banks are limited by law and applicable capital adequacy requirements and
are also subject to regulation by the various regulators. At June 30, 1996, the
amount of

6
<PAGE>
retained earnings of the Banks available for dividends, while maintaining the
Banks in a well-capitalized status, totaled approximately $14,000,000. See
"Supervision and Regulation -- Regulation of Banks -- Dividends."

COMPETITION

The financial services business is highly competitive. The Company
encounters strong direct competition for deposits, loans and other financial
services. The Company's principal competitors include other commercial banks,
savings banks, savings and loan associations, mutual funds, money market funds,
finance companies, credit unions, mortgage companies, private issuers of debt
obligations and suppliers of other investment alternatives, such as securities
firms. In addition, in recent years, several major multi-bank holding companies
have entered or expanded in the Chicago metropolitan market. Generally, these
financial institutions are significantly larger than the Company and have access
to greater capital and other resources. Many of the Company's non-bank
competitors are not subject to the same degree of regulation as that imposed on
bank holding companies, federally insured banks and national or Illinois
chartered banks. As a result, such non-bank competitors have advantages over the
Company in providing certain services. See "Business -- Competition."

NO ASSURANCE OF ACQUISITIONS OR EXPANSION

A portion of the net proceeds from the offering is intended to be used to
support future growth, which may include establishing additional branches and
offices and acquiring businesses complementary to those of the Company. See "Use
of Proceeds." Acquisition candidates may not be available on terms favorable to
the Company. The Company must compete with a variety of institutions and
individuals for suitable acquisition candidates. In recent years, several major
bank holding companies have actively pursued acquisition opportunities in the
Chicago metropolitan area. Competition from other institutions could affect the
Company's ability to make acquisitions and increase the price that the Company
pays for certain acquisitions. Furthermore, acquisitions of financial
institutions are subject to regulatory approval. There can be no assurance that
potential acquisitions which meet the Company's investment criteria will be
available on terms acceptable to the Company or that the required regulatory
approval of any proposed acquisitions will be obtained. There can also be no
assurance that the Company will continue to experience growth or be able to
successfully operate and manage any business that it does acquire so as to
establish, maintain or increase profitability. At present, the Company is not a
party to any understanding, letter of intent or agreement with respect to the
acquisition of the stock or assets of another entity.

LOSS OF KEY PERSONNEL

The Company's success has been and will be largely dependent on its
continuing ability to retain the services of its existing senior management and,
as it expands, to attract and retain qualified additional senior and middle
management. The loss of the services of any of its key management personnel, or
the inability to recruit and retain qualified personnel in the future, could
have an adverse effect on the Company's business and financial results. See
"Management."

ADVERSE IMPACT ON MARKET PRICE AS A RESULT OF SHARES ELIGIBLE FOR FUTURE SALE

Following completion of the offering, the Company will have 4,983,201 shares
of Common Stock issued and outstanding (5,133,201 shares if the Underwriters'
over-allotment option is exercised in full). The 1,000,000 shares offered hereby
(1,150,000 shares if the over-allotment option is exercised in full) along with
2,815,237 previously issued and outstanding shares will be freely tradeable
without restriction under the Securities Act of 1933, as amended (the "1933
Act"), except for any shares which are purchased in this offering by affiliates
of the Company. Additionally, approximately 964,600 additional shares of Common
Stock currently outstanding will become eligible for public sale 90 days after
completion of the offering pursuant to the provisions of Rule 144 under the 1933
Act. However, the Company and all the directors and executive officers of the
Company have agreed with the Underwriters not to offer, sell or otherwise
dispose of any shares of Common Stock (except, in the case of the Company,
shares issuable pursuant to outstanding options, reinvestment of dividends and
payment of directors' fees) for a period of 180 days after the date of this
Prospectus without the prior

7
<PAGE>
written consent of the Representative of the Underwriters. Upon expiration of
this 180-day period, however, all of these shares (representing 19.4% of the
total number of shares which will be outstanding following completion of the
offering) could be resold by these and other persons who are affiliates of the
Company, subject to certain requirements of Rule 144 under the 1933 Act. As of
June 30, 1996, options to purchase 418,040 shares of Common Stock were
outstanding, of which options with respect to 146,610 shares of Common Stock
were exercisable. Sales of substantial amounts of Common Stock in the public
market following the offering could adversely affect the market price of the
Company's Common Stock. See "Shares Eligible for Future Sale" and
"Underwriting."

DILUTION

Purchasers of shares of Common Stock offered hereby will suffer an immediate
and substantial dilution in net tangible book value per share of Common Stock.
The net tangible book value of the Company at June 30, 1996 was approximately
$39.4 million or $9.92 per share of Common Stock. Based upon an initial public
offering price of $15.00 per share, the dilution per share to new stockholders
is $4.36. See "Dilution."

CERTAIN ANTI-TAKEOVER PROVISIONS

Certain provisions in the Company's Certificate of Incorporation and Bylaws
could discourage potential acquisition proposals and could delay or prevent a
change in control of the Company. Such provisions could diminish the
opportunities for stockholders to participate in tender offers, including tender
offers at a price above the then current market value of the Common Stock, or
proxy contests. These provisions, among other things, (i) establish certain
advance notice procedures with regard to the nomination of candidates for
election as directors and the proposal of business to be considered at annual
stockholders meetings, (ii) provide that stockholders may not take action by
written consent and (iii) provide that special meetings of stockholders may only
be called by the Chairman of the Board or the Board of Directors. In addition,
the Board of Directors, without further stockholder approval, may issue
Preferred Stock with such terms as the Board of Directors may determine. See
"Description of Capital Stock." Additionally, bank regulatory laws require
advance approval by certain governmental agencies of any change in control of
banks and bank holding companies. Any purchaser of 20% or more of the
outstanding shares of Common Stock will be presumed to have acquired control of
the Banks and the Company. The need for such approval may deter, delay or
prevent certain transactions affecting the control or the ownership of Common
Stock, including transactions that could be advantageous to the stockholders of
the Company. See "Supervision and Regulation -- Regulation of Banks -- Change In
Control."

USE OF PROCEEDS

The net proceeds to the Company from the sale of the 1,000,000 shares of
Common Stock offered hereby are estimated to be approximately $13.5 million
($15.6 million if the over-allotment option is exercised in full), after
deducting the underwriting discount and estimated offering expenses.

The Company will use a portion of the net proceeds to repay $9.0 million of
outstanding short-term bank borrowings under a demand note, bearing interest at
adjusted LIBOR rates (a weighted average of 7.49% at June 30, 1996) and
collateralized by the common stock of the Banks, issued to finance the Company's
repurchase of 881,340 shares of Common Stock in December 1995. The remaining net
proceeds will be used for general corporate purposes including, if and when
opportunities arise, establishing additional branches and offices and acquiring
businesses complementary to those of the Company. At present, the Company is not
a party to any understanding, letter of intent or agreement with respect to the
acquisition of the stock or assets of another entity. Pending such uses, the
Company intends to invest the net proceeds in short-term, marketable, investment
grade interest bearing securities.

8
<PAGE>
MARKET FOR COMMON STOCK AND DIVIDENDS

LIMITED PRIOR TRADING MARKET

The Company's Common Stock trades occasionally in the over-the-counter
market and the bid price is quoted in the National Quotation Bureau's "pink
sheets." Accordingly, although a limited market for the Company's Common Stock
exists, quotations of the bid and ask prices may not be indicative of the fair
value of the Common Stock.

On August 20, 1996, the last reported bid and ask prices for the Common
Stock as quoted by Howe Barnes Investments, Inc. were $67.25 and $75.00,
respectively (or $13.45 and $15.00, respectively, as adjusted to give effect to
the issuance of five shares of Common Stock of the Company for each share of
common stock of Beverly Illinois in connection with the Reincorporation). As of
the close of business on June 30, 1996, the Company had 314 holders of record of
its Common Stock.

It is expected that the Common Stock will trade in the over-the-counter
market and will be quoted on the Nasdaq National Market under the symbol "BEVB."
There can be no assurance, however, that an active or liquid trading market will
develop in the Common Stock.

DIVIDENDS

The Company has paid quarterly cash dividends on the Common Stock since June
1991. Since January 1, 1994, the Company has declared per share cash dividends
with respect to its Common Stock as follows:

<TABLE>
<S> <C>
1994
First Quarter................................................... $ .04513
Second Quarter.................................................. .04513
Third Quarter................................................... .04513
Fourth Quarter.................................................. .04513
1995
First Quarter................................................... .04750
Second Quarter.................................................. .04750
Third Quarter................................................... .04750
Fourth Quarter.................................................. .04750
1996
First Quarter................................................... .05000
Second Quarter.................................................. .05000
</TABLE>

The Company has declared a five percent stock dividend on the Common Stock
in the first quarter of each year since 1993.

Holders of Common Stock are entitled to receive such dividends as may be
declared by the Board of Directors from time to time and paid out of funds
legally available therefor. Because the Company's consolidated net income
consists largely of the net income of the Banks, the Company's ability to pay
dividends depends, in part, upon its receipt of dividends from the Banks. The
Banks' ability to pay dividends is regulated by banking statutes. See
"Supervision and Regulation -- Regulation of Banks -- Dividends." The
declaration of dividends by the Company is discretionary and will depend on the
Company's earnings and financial condition, regulatory limitations, tax
considerations, and other factors. While the Board of Directors expects to
continue to declare dividends quarterly, there can be no assurance that
dividends will be paid in the future.

9
<PAGE>
CAPITALIZATION

The following table sets forth the consolidated short-term borrowings and
capitalization of the Company as of June 30, 1996, and as adjusted to give
effect to the sale of the 1,000,000 shares of Common Stock offered hereby (after
deducting the underwriting discount and estimated offering expenses) and the
application of the net proceeds as described in "Use of Proceeds."

<TABLE>
<CAPTION>
JUNE 30, 1996
----------------------
ACTUAL AS ADJUSTED
--------- -----------
(IN THOUSANDS)
<S> <C> <C>
Short-Term Borrowings
Securities sold under agreements to repurchase, funds purchased, and treasury tax
deposits.............................................................................. $ 5,770 $ 5,770
Short-term bank borrowings............................................................. 9,000 --
--------- -----------
Total short-term borrowings.......................................................... $ 14,770 $ 5,770
--------- -----------
--------- -----------
Long-term Obligations
Capitalized lease obligation........................................................... $ 596 $ 596
--------- -----------
Stockholders' Equity
Preferred Stock, par value $.01 per share -- 1,000,000 shares authorized; no shares
issued and outstanding................................................................ -- --
Common Stock, par value $.01 per share -- 8,000,000 shares authorized; 3,974,942 shares
issued and outstanding; 4,974,942 shares outstanding as adjusted (1).................. 40 50
Additional paid-in-capital (1)......................................................... 11,410 24,900
Retained earnings...................................................................... 33,392 33,392
Net unrealized loss on available-for-sale securities................................... (2,575) (2,575)
Notes receivable -- officer stockholders............................................... (1,680) (1,680)
--------- -----------
Total Stockholders' Equity........................................................... $ 40,587 $ 54,087
--------- -----------
Total Capitalization................................................................. $ 41,183 $ 54,683
--------- -----------
--------- -----------
</TABLE>

10
<PAGE>
DILUTION

The net tangible book value of the Company as of June 30, 1996 was $39.4
million or $9.92 per share of Common Stock. "Net tangible book value" is defined
as the total stockholders' equity of the Company less intangible assets. "Net
tangible book value per share" is determined by dividing the net tangible book
value of the Company by the number of outstanding shares of Common Stock.

After giving effect to the sale of the Common Stock offered hereby (after
deducting the underwriting discount and estimated offering expenses), the
Company's pro forma net tangible book value as of June 30, 1996 would have been
$52.9 million or $10.64 per share of Common Stock. This represents an immediate
increase in net tangible book value of $.72 per share to the existing
stockholders, and an immediate dilution of $4.36 per share to investors who
purchase shares of Common Stock in this offering. "Dilution" is the difference
between the offering price per share and the pro forma net tangible book value
per share as adjusted for the offering.

The following table illustrates this per share dilution as of June 30, 1996,
which is determined by subtracting the net tangible book value per share after
the offering from the price paid by a new investor.

<TABLE>
<S> <C> <C>
Initial public offering price per share (1)................................. $ 15.00
Net tangible book value per share as of June 30, 1996 (2)................. $ 9.92
Increase in net tangible book value per share attributable to payments by
new investors (3)........................................................ 0.72
---------
Pro forma net tangible book value per share after offering.................. 10.64
---------
Dilution of net tangible book value per share to new investors (4).......... $ 4.36
---------
---------
</TABLE>

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

(1) Before deducting the underwriting discount and estimated offering expenses.

(2) Based on the number of shares of Common Stock outstanding as of June 30,
1996 and excluding 7,159 shares of Common Stock issued on July 15, 1996
pursuant to the reinvestment of dividends and the payment of directors' fees
and 1,100 shares of Common Stock issued on July 23, 1996 pursuant to the
exercise of options.

(3) After deducting the underwriting discount and estimated offering expenses.

(4) After giving effect to the exercise of outstanding options to purchase
418,040 shares of Common Stock, the pro forma net tangible book value per
share after offering would be $10.45 and the dilution of net tangible book
value per share to new investors would be $4.55.

The following table summarizes as of June 30, 1996, the number of shares
purchased from the Company, the total consideration paid and the average price
per share paid by: (i) the officers, directors and affiliated persons of the
Company who acquired such shares since December 31, 1990 and (ii) investors in
this offering (before deducting the underwriting discount and estimated offering
expenses):

<TABLE>
<CAPTION>
NUMBER OF SHARES TOTAL AVERAGE PRICE
PURCHASED CONSIDERATION PER SHARE
----------------- -------------- -------------
<S> <C> <C> <C>
Officers, directors and affiliated persons (1).................. 148,678 $ 1,137,807 $ 7.65
New investors................................................... 1,000,000 15,000,000 15.00
</TABLE>

- ------------------------
(1) Excludes 7,159 shares of Common Stock issued on July 15, 1996 pursuant to
the reinvestment of dividends and the payment of directors' fees and 1,100
shares of Common Stock issued on July 23, 1996 pursuant to the exercise of
options.

11
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA

The following table sets forth selected consolidated financial and other
data of the Company. The selected statement of income and balance sheet data,
insofar as they relate to the five years in the five year period ended December
31, 1995, have been derived from the Company's audited consolidated financial
statements. The consolidated financial statements of the Company for each of the
three years in the period ended December 31, 1995 and as of December 31, 1995
and 1994 are included elsewhere herein. The selected financial data for the six
month periods ended June 30, 1996 and 1995 and as of June 30, 1996 and 1995 are
derived from the Company's unaudited interim financial statements. Such
unaudited interim financial statements include all adjustments (consisting only
of normal, recurring accruals) that the Company considers necessary for a fair
presentation of the financial position and the results of operation as of the
dates and for the periods indicated. Information for any interim period is not
necessarily indicative of results that may be anticipated for the full year. The
following information should be read in conjunction with "Management's
Discussion and Analysis of Results of Operations and Financial Condition" and
the Consolidated Financial Statements and Notes thereto included elsewhere
herein.

<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, (1) YEAR ENDED DECEMBER 31,
-------------------- -----------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
--------- --------- --------- --------- --------- --------- ---------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Total interest income...................... $ 20,778 $ 19,512 $ 39,970 $ 35,206 $ 33,468 $ 36,583 $ 42,328
Total interest expense..................... 9,649 8,335 17,184 12,949 12,805 15,256 20,858
--------- --------- --------- --------- --------- --------- ---------
Net interest income........................ 11,129 11,177 22,786 22,257 20,663 21,327 21,470
Provision for loan losses.................. 75 103 159 311 1,299 3,577 2,923
Other income............................... 4,149 3,762 7,870 8,017 9,820 11,300 9,048
Operating expenses......................... 10,879 10,727 21,416 20,875 22,169 23,127 22,513
Income before income tax expense........... 4,324 4,109 9,081 9,088 7,015 5,923 5,082
Income tax expense......................... 1,317 1,257 2,877 2,672 2,143 1,519 1,036
Cumulative effect of change in accounting
principle................................. -- -- -- -- 374 -- --
--------- --------- --------- --------- --------- --------- ---------
Net income................................. $ 3,007 $ 2,852 $ 6,204 $ 6,416 $ 5,246 $ 4,404 $ 4,046
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
PER SHARE DATA (2):
Income before cumulative effect of change
in accounting principle................... $ .74 $ .58 $ 1.26 $ 1.34 $ 1.05 $ .96 $ .89
Net income................................. .74 .58 1.26 1.34 1.13 .96 .89
Cash dividends declared.................... .10 .10 .19 .18 .17 .17 .12
Book value at end of period................ 10.19 9.87 10.35 8.44 8.58 7.72 6.94
Net tangible book value at end of period... 9.92 9.57 10.02 8.11 8.14 7.18 6.29
Stock dividends declared................... 5.00% 5.00% 5.00% 5.00% 5.00% -- --
SELECTED FINANCIAL RATIOS:
Return on average assets................... 1.00% 1.02% 1.09% 1.20% 1.03% .90% .85%
Return on average equity................... 14.58 13.03 13.37 16.10 13.33 12.61 12.95
Dividend payout ratios (dividends declared
per share to net income per share)........ 13.51 17.24 15.08 13.43 15.04 17.71 13.48
Average equity to average assets........... 6.86 7.84 8.17 7.47 7.72 7.17 6.53
Net interest margin (tax equivalent)....... 4.18 4.49 4.49 4.66 4.52 5.05 5.27
Allowance for loan losses to total loans at
end of period............................. 1.21 1.24 1.13 1.37 1.51 1.79 1.51
Nonperforming loans to total loans at end
of period................................. .55 .57 .57 .82 1.05 1.76 2.70
Net loans charged off (recoveries) to
average loans............................. (.11) .06 .21 .13 .70 1.23 2.02
Tier 1 risk-based capital.................. 11.50 15.24 12.25 14.78 13.15 12.97 9.74
Total risk-based capital................... 12.58 16.50 13.34 16.09 14.51 14.75 11.19
</TABLE>

12
<PAGE>

<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
-------------------- -----------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
--------- --------- --------- --------- --------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
SELECTED BALANCE SHEET DATA:
Total assets....................... $ 614,569 $ 567,312 $ 591,203 $ 561,339 $ 519,635 $ 510,642 $ 467,287
Total earning assets............... 566,425 524,183 539,842 505,307 477,196 462,549 422,185
Loans.............................. 324,573 314,572 312,160 291,042 267,517 251,062 279,511
Allowance for loan losses.......... 3,943 3,904 3,524 3,995 4,026 4,484 4,230
Total deposits..................... 553,792 507,946 527,131 504,445 459,132 454,917 418,134
Short-term borrowings.............. 14,770 7,678 17,292 11,414 13,346 15,795 12,884
Long-term obligations.............. 596 -- -- -- -- -- --
Total stockholders' equity......... 40,587 47,951 40,961 40,808 40,055 35,253 31,266
Net tangible book value............ 39,426 46,510 39,660 39,202 38,017 32,784 28,365
</TABLE>

- ------------------------------
(1) Ratios for interim periods are stated on an annualized basis. However,
interim operating results and ratios for the six months ended June 30, 1996
are not necessarily indicative of results that may be experienced for the
full year.

13
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION

The following discussion and analysis is intended as a review of significant
factors affecting the results of operations and the financial condition of the
Company for the periods indicated. This discussion should be read in conjunction
with the Consolidated Financial Statements and the Notes thereto and the
Selected Consolidated Financial Data presented herein.

OVERVIEW

The Company provides a full range of banking services, including personal
and corporate trust services. The strategy of the Company is to continue to
increase its core banking business and to further develop its mortgage, trust,
securities sales and insurance activities in order to provide an array of
household financial services encompassing banking and other investment products.
As of December 31, 1995, the Company's total assets were $591.2 million and net
income for the year ended December 31, 1995 was $6.2 million, with a return on
average assets of 1.09% and a return on average equity of 13.37% for the year
then ended. As of June 30, 1996, the Company's total assets had grown to $614.6
million, with net income of $3.0 million for the six months then ended, an
increase in net income of 5.4% from the six months ended June 30, 1995.

RESULTS OF OPERATIONS

NET INTEREST INCOME

Net interest income equals the difference between interest income earned on
assets and the interest expense paid on liabilities and is a measure of how
effectively management has balanced and allocated the Company's
interest-rate-sensitive assets and liabilities. Net interest income on a tax-
equivalent basis was constant at $11.6 million for the six months ended June 30,
1996 and 1995. Net interest income on a tax-equivalent basis increased 2.6% to
$23.6 million in 1995 from $23.0 million in 1994 and increased 8.1% in 1994 from
$21.3 million in 1993.

14
<PAGE>
The following tables set forth the average balances, net interest income and
expense and average yields and rates for the Company's earning assets and
interest-bearing liabilities for the indicated periods on a tax-equivalent basis
assuming a 34% tax rate.

<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED JUNE 30, (1)
------------------------------------------------------------------------------------
1996 1995
----------------------------------------- -----------------------------------------
AVERAGE BALANCE INTEREST YIELD/RATE(%) AVERAGE BALANCE INTEREST YIELD/RATE(%)
--------------- --------- ------------- --------------- --------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
INTEREST EARNING ASSETS:
Investment securities (2):
Taxable.................................. $ 195,107 $ 5,983 6.13% $ 188,080 $ 5,673 6.03%
Tax exempt (tax equivalent).............. 32,083 1,214 7.57 26,248 1,035 7.89
--------------- --------- --------------- ---------
Total investment securities............ 227,190 7,197 6.34 214,328 6,708 6.26
--------------- --------- --------------- ---------
Funds sold................................. 17,701 463 5.25 5,448 159 5.89
--------------- --------- --------------- ---------
Loans (3):
Commercial and industrial................ 50,983 2,372 9.33 51,061 2,457 9.70
Residential real estate.................. 150,669 5,677 7.54 149,408 5,693 7.62
Commercial real estate................... 73,119 3,314 9.09 66,095 2,985 9.11
Other consumer........................... 37,678 2,090 11.12 34,731 1,770 10.28
Fees on loans............................ -- 145 -- -- 171 --
--------------- --------- --------------- ---------
Total loans (tax equivalent)........... 312,449 13,598 8.73 301,295 13,076 8.75
--------------- --------- --------------- ---------
Total earning assets................. 557,340 $ 21,258 7.65 521,071 $ 19,943 7.72
--------- ---------
--------- ---------
Cash and due from banks.................. 26,612 23,577
Other assets............................. 18,629 15,173
--------------- ---------------
Total assets......................... $ 602,581 $ 559,821
--------------- ---------------
--------------- ---------------

INTEREST BEARING LIABILITIES:
Interest bearing deposits:
Interest bearing demand deposits......... $ 112,377 $ 1,222 2.18 $ 108,073 $ 1,473 2.75
Savings deposits......................... 108,207 1,447 2.68 109,395 1,567 2.89
Time deposits............................ 234,884 6,469 5.52 197,687 5,049 5.15
--------------- --------- --------------- ---------
Total interest bearing deposits........ 455,468 9,138 4.02 415,155 8,089 3.93
Short-term borrowings:
Securities sold under agreements to
repurchase, funds purchased, and
treasury tax deposits................. 5,113 142 5.57 7,180 195 5.48
Short-term bank borrowings............. 9,678 369 7.65 973 51 10.57
--------------- --------- --------------- ---------
Total interest bearing liabilities..... 470,259 $ 9,649 4.11 423,308 $ 8,335 3.97
--------- ---------
--------- ---------
Demand deposits.......................... 85,894 88,268
Other liabilities........................ 5,068 4,341
Stockholders' equity..................... 41,360 43,904
--------------- ---------------
Total liabilities and stockholders'
equity.................................. $ 602,581 $ 559,821
--------------- ---------------
--------------- ---------------
Net interest income (tax equivalent)....... $ 11,609 $ 11,608
--------- ---------
--------- ---------
Net interest margin (4).................... 4.18 4.49
Interest bearing liabilities to earning
assets.................................... 84.38% 81.24%
</TABLE>

- ------------------------------
(1) Yield/Rates are annualized.

(2) Based on amortized cost.

(3) Nonaccrual loans are included in average balances.

(4) Net interest margin is net interest income divided by average total earning
assets.

15
<PAGE>

<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
-----------------------------------------------------------------------------------
1995 1994 1993
----------------------------------- ----------------------------------- ---------
AVERAGE YIELD/RATE AVERAGE YIELD/RATE AVERAGE
BALANCE INTEREST (%) BALANCE INTEREST (%) BALANCE
--------- --------- ------------- --------- --------- ------------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
INTEREST EARNING ASSETS:
Investment securities (1):
Taxable............................... $ 184,703 $ 11,168 6.05% $ 192,760 $ 11,393 5.91% $ 198,052
Tax-exempt (tax equivalent)........... 26,271 2,048 7.80 23,211 1,882 8.11 17,395
--------- --------- --------- --------- ---------
Total investment securities......... 210,974 13,216 6.26 215,971 13,275 6.15 215,447
--------- --------- --------- --------- ---------
Funds sold.............................. 8,389 478 5.70 5,908 228 3.86 6,173
--------- --------- --------- --------- ---------
Loans (2):
Commercial and industrial............. 50,879 4,960 9.75 49,950 4,293 8.60 51,420
Residential real estate............... 150,028 11,634 7.75 128,034 9,197 7.18 98,206
Commercial real estate................ 70,240 6,373 9.07 60,249 5,196 8.62 55,850
Other consumer........................ 36,050 3,818 10.59 34,697 3,385 9.76 44,151
Fees on loans......................... -- 341 -- -- 414 -- --
--------- --------- --------- --------- ---------
Total loans (tax equivalent)........ 307,197 27,126 8.83 272,930 22,485 8.24 249,627
--------- --------- --------- --------- ---------
Total earning assets.............. 526,560 $ 40,820 7.75 494,809 $ 35,988 7.27 471,247
--------- ---------
--------- ---------
Cash and due from banks............... 24,647 22,041 20,034
Other assets.......................... 16,996 17,132 22,640
--------- --------- ---------
Total assets...................... $ 568,203 $ 533,982 $ 513,921
--------- --------- ---------
--------- --------- ---------
INTEREST BEARING LIABILITIES:
Interest bearing deposits:
Interest bearing demand deposits...... $ 108,487 $ 2,738 2.52 $ 104,784 $ 2,515 2.40 $ 105,441
Savings deposits...................... 108,656 3,072 2.83 112,397 2,981 2.65 106,539
Time deposits......................... 203,874 10,916 5.35 172,453 7,016 4.07 162,860
--------- --------- --------- --------- ---------
Total interest bearing deposits..... 421,017 16,726 3.97 389,634 12,512 3.21 374,840
Short-term borrowings:
Securities sold under agreements to
repurchase, funds purchased, and
treasury tax deposits.............. 7,211 379 5.26 5,680 231 4.07 9,547
Short-term bank borrowings.......... 781 79 10.12 2,971 206 6.93 6,000
--------- --------- --------- --------- ---------
Total interest bearing
liabilities........................ 429,009 $ 17,184 4.01 398,285 $ 12,949 3.25 390,387
--------- ---------
--------- ---------
Demand deposits....................... 88,009 91,474 81,274
Other liabilities..................... 4,783 4,372 2,904
Stockholders' equity.................. 46,402 39,851 39,356
--------- --------- ---------
Total liabilities and stockholders'
equity............................... $ 568,203 $ 533,982 $ 513,921
--------- --------- ---------
--------- --------- ---------
Net interest income (tax equivalent).... $ 23,636 $ 23,039
--------- ---------
--------- ---------
Net interest margin (3)................. 4.49 4.66
Interest bearing liabilities to earning
assets................................. 81.47% 80.49% 82.84%

<CAPTION>
YIELD/RATE
INTEREST (%)
--------- ---------------
<S> <C> <C>
INTEREST EARNING ASSETS:
Investment securities (1):
Taxable............................... $ 11,680 5.90%
Tax-exempt (tax equivalent)........... 1,538 8.84
---------
Total investment securities......... 13,218 6.14
---------
Funds sold.............................. 177 2.87
---------
Loans (2):
Commercial and industrial............. 3,929 7.64
Residential real estate............... 7,116 7.25
Commercial real estate................ 4,944 8.85
Other consumer........................ 4,339 9.83
Fees on loans......................... 390 --
---------
Total loans (tax equivalent)........ 20,718 8.30
---------
Total earning assets.............. $ 34,113 7.24
---------
---------
Cash and due from banks...............
Other assets..........................
Total assets......................
INTEREST BEARING LIABILITIES:
Interest bearing deposits:
Interest bearing demand deposits...... $ 2,398 2.27
Savings deposits...................... 3,104 2.91
Time deposits......................... 6,576 4.04
---------
Total interest bearing deposits..... 12,078 3.20
Short-term borrowings:
Securities sold under agreements to
repurchase, funds purchased, and
treasury tax deposits.............. 350 3.67
Short-term bank borrowings.......... 377 6.28
---------
Total interest bearing
liabilities........................ $ 12,805 3.28
---------
---------
Demand deposits.......................
Other liabilities.....................
Stockholders' equity..................
Total liabilities and stockholders'
equity...............................
Net interest income (tax equivalent).... $ 21,308
---------
---------
Net interest margin (3)................. 4.52
Interest bearing liabilities to earning
assets.................................
</TABLE>

- ------------------------------
(1) Based on amortized cost.

(2) Nonaccrual loans are included in average balances.

(3) Net interest margin is net interest income divided by average total earning
assets.

16
<PAGE>
Net interest income, on a tax-equivalent basis, was $11.6 million for the
six months ended June 30, 1996 and 1995. Interest income on total earning assets
increased $1.3 million for the six months ended June 30, 1996 as compared to the
six months ended June 30, 1995. Interest income on loans increased $522,000 for
the six months ended June 30, 1996 as compared to the six months ended June 30,
1995 due to a $11.2 million increase in average loans outstanding while average
loan rates decreased slightly. Interest expense on interest-bearing liabilities
increased $1.3 million for the six months ended June 30, 1996 as compared to the
six months ended June 30, 1995 as a result of a $1.0 million increase in
interest expense on deposits, which was due to a combination of a $40.3 million
increase in average deposits and an increase in the average rate paid to 4.02%
from 3.93%. The increase in the average rate on deposits is due to the
increasing market rates experienced over the past year plus a high rate
certificate of deposit promotion to introduce the Company's new Will-Cook branch
in February 1996. The $318,000 increase in interest expense on short-term bank
borrowings for the six months ended June 30, 1996 is attributable to the
borrowings incurred to finance the repurchase of the Company's Common Stock in
December 1995. Net interest margin decreased .31% to 4.18% for the six months
ended June 30, 1996 from 4.49% for the six months ended June 30, 1995 as a
result of the above factors.

Net interest income, on a tax-equivalent basis, was $23.6 million for the
year ended December 31, 1995 and $23.0 million for the year ended December 31,
1994. Interest income on total earning assets increased $4.8 million in 1995
from 1994. Interest income on loans increased $4.6 million in 1995 from 1994
primarily due to a combination of a $34.3 million increase in loans and an
increase in the average yield to 8.83% from 8.24%. Interest expense on interest
bearing deposits increased $4.2 million in 1995 from 1994 due to growth of $31.4
million in deposits and an increase in the average rate paid to 3.97% from
3.21%. Interest on securities sold under agreements to repurchase and funds
purchased increased $148,000 due to an increase of $1.5 million in the average
balance. Interest expense on short-term bank borrowings decreased $127,000 in
1995 from 1994 attributable to a decrease of $2.2 million in the average balance
of those borrowings. Net interest margin decreased .17% to 4.49% in 1995 from
4.66% in 1994 as a result of the above factors.

Net interest income, on a tax-equivalent basis, was $23.0 million for the
year ended December 31, 1994 and $21.3 million for the year ended December 31,
1993. Interest income on total earning assets increased $1.9 million in 1994
from 1993. Interest income on loans increased $1.8 million in 1994 from 1993
primarily due to a $23.3 million increase in loans. Interest expense on deposits
increased $434,000 in 1994 from 1993 due to an increase of $14.8 million in
deposits. Interest on securities sold under agreements to repurchase and funds
purchased decreased $119,000 due to a decrease of $3.0 million in the average
balance. Interest expense on short-term bank borrowings decreased $171,000 in
1994 from 1993 attributable to a decrease of $3.0 million in the average balance
of those borrowings. Net interest margin increased .14% to 4.66% in 1994 from
4.52% in 1993 as a result of the above factors.

The changes in net interest income from period to period are reflective of
changes in the rate environment, changes in the composition of assets and
liabilities as to type and maturity (and the inherent rate differences related
thereto), and volume changes. The Company's emphasis on residential loans, as
compared to commercial loans which generally bear higher rates, has also had an
impact on net interest income. Later sections of this discussion and analysis
address the changes in maturity composition of loans and investments, and in the
asset and liability repricing gaps associated with interest rate risk, all of
which contribute to changes in net interest margin.

The following table sets forth an analysis of volume and rate changes in
interest income and interest expense of the Company's average earning assets and
average interest-bearing liabilities for the indicated periods on a
tax-equivalent basis assuming a 34% tax rate. The table distinguishes between
the changes related to average outstanding balances (changes in volume holding
the initial interest rate constant) and the changes related to

17
<PAGE>
average interest rates (changes in average rate holding the initial outstanding
balance constant). The change in interest due to both volume and rate has been
allocated to volume and rate changes in proportion to the relationship of the
absolute dollar amounts of the change in each.

<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
FOR THE SIX MONTHS ----------------------------------------------
ENDED JUNE 30, 1994
--------------------------------- COMPARED TO
1993
1996 COMPARED TO 1995 1995 COMPARED TO 1994 -----------
--------------------------------- ---------------------------------
CHANGE DUE
CHANGE DUE TO CHANGE DUE TO TO
--------------------------------- --------------------------------- -----------
VOLUME RATE NET VOLUME RATE NET VOLUME
----------- --------- --------- ----------- --------- --------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
INTEREST EARNED ON:
Investment securities:
Taxable.................................... $ 428 $ (118) $ 310 $ (476) $ 251 $ (225) $ (510)
Tax-exempt................................. 460 (281) 179 248 (82) 166 514
Funds sold................................. 722 (418) 304 96 154 250 (8)
Total loans................................ 976 (454) 522 2,824 1,817 4,641 1,934
----------- --------- --------- ----------- --------- --------- -----------
Total Interest Earned...................... 2,586 (1,271) 1,315 2,692 2,140 4,832 1,930
----------- --------- --------- ----------- --------- --------- -----------
INTEREST PAID ON:
Interest bearing demand deposits........... 118 (369) (251) 89 134 223 (15)
Savings deposits........................... (34) (86) (120) (99) 190 91 170
Time deposits.............................. 1,916 (496) 1,420 1,279 2,621 3,900 388
Short-term borrowings:
Securities sold under agreements to
repurchase, funds purchased, and
treasury tax deposits................... (113) 60 (53) 62 86 148 (142)
Short-term bank borrowings............... 920 (602) 318 (152) 25 (127) (190)
----------- --------- --------- ----------- --------- --------- -----------
Total Interest Paid.......................... 2,807 (1,493) 1,314 1,179 3,056 4,235 211
----------- --------- --------- ----------- --------- --------- -----------
Net Interest Income.......................... $ 82 $ (81) $ 1 $ 1,513 $ (916) $ 597 $ 1,719
----------- --------- --------- ----------- --------- --------- -----------
----------- --------- --------- ----------- --------- --------- -----------

RATE NET
--------- ---------

<S> <C> <C>
INTEREST EARNED ON:
Investment securities:
Taxable.................................... $ 223 $ (287)
Tax-exempt................................. (170) 344
Funds sold................................. 59 51
Total loans................................ (167) 1,767
--------- ---------
Total Interest Earned...................... (55) 1,875
--------- ---------
INTEREST PAID ON:
Interest bearing demand deposits........... 132 117
Savings deposits........................... (293) (123)
Time deposits.............................. 52 440
Short-term borrowings:
Securities sold under agreements to
repurchase, funds purchased, and
treasury tax deposits................... 23 (119)
Short-term bank borrowings............... 19 (171)
--------- ---------
Total Interest Paid.......................... (67) 144
--------- ---------
Net Interest Income.......................... $ 12 $ 1,731
--------- ---------
--------- ---------
</TABLE>

OTHER INCOME

The Company's total other income for the six months ended June 30, 1996
increased $387,000 to $4.1 million from $3.8 million for the six months ended
June 30, 1995. The Company's total other income decreased $147,000 to $7.9
million in 1995 from $8.0 million in 1994 and decreased $1.8 million in 1994
from $9.8 million in 1993. The following table sets forth the Company's other
income for the indicated periods.

<TABLE>
<CAPTION>
FOR THE SIX MONTHS FOR THE YEARS ENDED
ENDED JUNE 30, DECEMBER 31,
-------------------- -------------------------------
1996 1995 1995 1994 1993
--------- --------- --------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Income from fiduciary activities............................................ $ 998 $ 954 $ 1,927 $ 1,872 $ 1,764
Service charges on deposit accounts......................................... 2,172 1,988 4,078 4,256 4,123
Net gains on sales of investment securities................................. 35 33 49 207 1,421
Mortgage origination fees................................................... 202 246 555 336 1,266
Securities sales............................................................ 123 55 132 174 117
Insurance activities........................................................ 132 111 207 218 183
Loan servicing fees......................................................... 110 97 206 196 198
Other....................................................................... 377 278 716 758 748
--------- --------- --------- --------- ---------
Total other income...................................................... $ 4,149 $ 3,762 $ 7,870 $ 8,017 $ 9,820
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>

The $387,000 increase in total other income for the six months ended June
30, 1996 over the six months ended June 30, 1995 is primarily due to a $184,000
increase in service charges on deposit accounts, additional fees from securities
sales of $68,000 and modest increases in most other income categories, which
offset the decrease in mortgage origination fees. The $147,000 decrease in 1995
from 1994 is primarily attributable to a $178,000 decrease in service charges on
deposit accounts and a reduction of $158,000 in net gains on sales of

18
<PAGE>
investment securities, offset by increases in mortgage origination fees of
$219,000. The $1.8 million decrease in total other income in 1994 from 1993 is
attributable to a $930,000 decrease in mortgage origination fees due to an
unusually high level of refinancings in 1993 and decreases in net gains on sales
of investment securities.

OPERATING EXPENSES

The Company's total operating expenses increased $152,000 to $10.9 million
from $10.7 million for the six months ended June 30, 1996 compared to the six
months ended June 30, 1995. The Company's total operating expenses increased
$541,000 to $21.4 million in 1995 from $20.9 million in 1994 and decreased $1.3
million in 1994 from $22.2 million in 1993. The following table sets forth the
Company's operating expenses for the indicated periods.

<TABLE>
<CAPTION>
FOR THE SIX MONTHS FOR THE YEARS ENDED DECEMBER
ENDED JUNE 30, 31,
-------------------- -------------------------------
1996 1995 1995 1994 1993
--------- --------- --------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Salaries and employee benefits..................................... $ 5,372 $ 5,382 $ 10,730 $ 10,496 $ 10,486
Occupancy.......................................................... 1,188 1,068 2,134 2,003 2,102
Equipment.......................................................... 797 1,111 1,918 2,155 2,156
FDIC insurance..................................................... 4 551 570 1,035 999
Marketing and promotion............................................ 427 413 952 647 854
Computer system and services....................................... 515 56 492 124 158
Supplies........................................................... 456 341 724 717 782
Loan, legal and collection fees.................................... 184 136 257 143 443
Other real estate.................................................. 13 -- 53 50 388
Other.............................................................. 1,923 1,669 3,586 3,505 3,801
--------- --------- --------- --------- ---------
Total operating expenses....................................... $ 10,879 $ 10,727 $ 21,416 $ 20,875 $ 22,169
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>

The increase in total operating expenses for the six months ended June 30,
1996 is primarily due to the following factors. Occupancy expense increased
$120,000 for the six months ended June 30, 1996 compared to the six months ended
June 30, 1995 due to the addition of the Will-Cook branch and additional
depreciation due to expansion and remodeling of other facilities. The remaining
operating expenses increased $32,000 for the six months ended June 30, 1996
compared to the six months ended June 30, 1995 due primarily to an increase of
$459,000 for computer system and services which were outsourced in mid-1995 and
an increase in other expenses of $254,000, offset by decreases of $547,000 for
FDIC insurance and a decrease in equipment cost of $314,000 primarily due to the
outsourcing of data processing. The increase of $541,000 in total operating
expenses in 1995 from 1994 is attributable to increases in salaries and employee
benefits, occupancy, marketing and promotion and other operating expenses. The
$1.3 million decrease in total operating expenses in 1994 compared to 1993 is
primarily attributable to a decrease in other operating expenses resulting from
a reduction in collection and repossessed asset costs.

FEDERAL INCOME TAX

The Company's consolidated income tax rate varies from statutory rates
principally due to interest income from tax-exempt securities and loans. The
Company recorded income tax expenses totaling $2.9 million in 1995, $2.7 million
in 1994, and $2.1 million in 1993, reflecting changes in income. The provision
for income taxes was constant at $1.3 million for the six months ended June 30,
1996 and 1995.

19
<PAGE>
FINANCIAL CONDITION

LOANS

The Company's loan portfolio largely reflects the profile of the communities
in which it operates. The following table sets forth the composition of the
Company's loan portfolio as of the indicated dates.

<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
----------- --------------------------------------------------
1996 1995 1994 1993 1992
----------- ----------- ----------- ----------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Commercial and industrial............................... $ 54,414 $ 50,258 $ 50,339 $ 51,162 $ 53,970
Residential real estate................................. 128,755 119,153 110,045 80,172 50,746
Home equity lines of credit............................. 29,053 31,152 32,256 37,684 42,848
Commercial real estate.................................. 73,630 74,199 64,789 56,774 54,308
Other consumer.......................................... 38,721 37,398 33,613 41,725 49,190
----------- ----------- ----------- ----------- -----------
Total loans......................................... 324,573 312,160 291,042 267,517 251,062
Allowance for loan losses............................... (3,943) (3,524) (3,995) (4,026) (4,484)
----------- ----------- ----------- ----------- -----------
Net loans........................................... $ 320,630 $ 308,636 $ 287,047 $ 263,491 $ 246,578
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------

1991
-----------

<S> <C>
Commercial and industrial............................... $ 58,372
Residential real estate................................. 51,949
Home equity lines of credit............................. 48,293
Commercial real estate.................................. 54,236
Other consumer.......................................... 66,661
-----------
Total loans......................................... 279,511
Allowance for loan losses............................... (4,230)
-----------
Net loans........................................... $ 275,281
-----------
-----------
</TABLE>

Total loans increased $12.4 million as of June 30, 1996 from December 31,
1995. This increase is primarily attributable to an increase in commercial and
industrial loans and residential real estate loans. Total loans increased $21.1
million to $312.2 million as of December 31, 1995 from $291.0 million as of
December 31, 1994. This increase in total loans was principally due to increased
residential and commercial real estate loans.

Commercial and industrial loans increased $4.1 million to $54.4 million as
of June 30, 1996 from $50.3 million as of December 31, 1995. The net increase in
1996 is attributable to purchases of short-term commercial leases aggregating
$5.6 million. Commercial and industrial loans remained relatively constant at
$50.3 million at December 31, 1995 and December 31, 1994.

Residential real estate loans increased $9.6 million to $128.8 million as of
June 30, 1996 from $119.2 million as of December 31, 1995 due to increased
origination of adjustable rate mortgages. The Company originates fixed-rate
residential loans for the secondary market, retaining the servicing rights. See
"Business -- Services." As of December 31, 1995, residential real estate loans
increased $9.1 million from December 31, 1994. As of December 31, 1995,
residential real estate loans increased $67.2 million from December 31, 1991.
The increase in this category since 1991 is due to the Company's mortgage
origination operation and emphasis on residential real estate lending.

Home equity lines of credit decreased $2.1 million to $29.1 million as of
June 30, 1996 from $31.2 million as of December 31, 1995. As of December 31,
1995, home equity lines of credit decreased $1.1 million from December 31, 1994.
As of December 31, 1995, home equity lines of credit decreased $17.1 million
from December 31, 1991. Management believes this trend is due to mortgage
refinancings which include the home equity lines, and aggressive competition
within the banking industry for home equity lines of credit.

Commercial real estate loans decreased $569,000 to $73.6 million as of June
30, 1996 from $74.2 million as of December 31, 1995. As of December 31, 1995,
commercial real estate loans increased $9.4 million from December 31, 1994. As
of December 31, 1995, commercial real estate loans increased $20.0 million from
December 31, 1991. This increase in commercial real estate loans reflects the
overall improvement in the commercial real estate market during this period.

Other consumer loans increased $1.3 million to $38.7 million as of June 30,
1996 from $37.4 million as of December 31, 1995. As of December 31, 1995, other
consumer loans increased $3.8 million from December 31, 1994. As of December 31,
1995, other consumer loans decreased $29.3 million from December 31, 1991. The
significant decreases in consumer loans were due to the sale of the credit card
portfolio in 1992 and the run-off of other installment loans, including indirect
auto loans in 1993 and 1994. The Company's recent increase in consumer loans is
due primarily to the moderate re-entry into the indirect auto loan market. As of
June 30, 1996, the Company's consumer loan portfolio included $8.7 million of
indirect auto loans. These loans generally carry a

20
<PAGE>
slightly higher risk than direct loans because they are originated through auto
dealers to individuals who do not have other banking relationships with the
Company. However, the same underwriting criteria are applied to indirect auto
loans as are applied to other consumer loans.

Although the risk of non-payment for any reason exists with respect to all
loans, certain other more specific risks are associated with each type of loan.
The primary risks associated with commercial loans are quality of the borrower's
management and the impact of local economic factors. Risks associated with real
estate loans include concentrations of loans in a loan type such as commercial
or residential and fluctuating land values. Consumer loans also have risks
associated with concentrations of loans in a single type of loan. Consumer loans
additionally face the risk of a borrower's unemployment as a result of
deteriorating economic conditions.

The Company attempts to balance the types of loans in its portfolio with the
objective of reducing risk. While the Company has a sizable portion of its loan
portfolio secured by real estate in one form or another, almost all of those
loans have adjustable or floating interest rates. The Company believes that its
philosophy in extending credit is relatively conservative in nature, with a
presumption that most credit should have both a primary and a secondary source
of repayment, and that the primary source should generally be operating cash
flows, while the secondary source should generally be disposition of collateral.
The Company engages in very little unsecured lending, and generally requires
personal guarantees of principals for business obligations. The Company
practices a system of concurrence in the approval of commercial credit whereby
the documented concurrence of a higher-ranking officer (or approval by the board
or a board committee, where applicable) is obtained in addition to that of the
recommending officer. This system is intended to assure that commercial credit
is subjected to the independent objective review of at least two lending
officers.

LOAN MATURITIES

The following table sets forth the remaining maturities, based upon
contractual dates, for selected loan categories as of June 30, 1996.

<TABLE>
<CAPTION>
ONE YEAR
OR LESS TOTAL
-------- --------
OVER 1 YEAR
THROUGH 5 YEARS OVER 5 YEARS
-------------------------- --------------------------
FIXED RATE FLOATING RATE FIXED RATE FLOATING RATE
---------- ------------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS)
Commercial and industrial.......... $ 16,753 $17,099 $ 8,617 $ 6,340 $ 5,605 $ 54,414
Residential real estate............ 7,313 15,840 241 4,816 100,545 128,755
Home equity lines of credit........ 5,037 -- 17,743 -- 6,273 29,053
Commercial real estate............. 11,894 33,178 7,087 1,099 20,372 73,630
Other consumer..................... 4,139 30,393 1,652 2,537 -- 38,721
-------- ---------- ------------- ---------- ------------- --------
Total.......................... $ 45,136 $96,510 $35,340 $14,792 $132,795 $324,573
-------- ---------- ------------- ---------- ------------- --------
-------- ---------- ------------- ---------- ------------- --------
</TABLE>

21
<PAGE>
NON-PERFORMING LOANS

The Company discontinues the accrual of interest income on any loan when, in
the opinion of management, there is reasonable doubt as to the timely
collectibility of interest or principal. Generally, the Company discontinues the
accrual of interest on a loan once it becomes 90 days past due. All accrued and
uncollected interest is charged against income at the time a loan is placed on
nonaccrual status. Nonaccrual loans are returned to an accrual status when, in
the opinion of management, the financial position of the borrower indicates that
there is no longer any reasonable doubt as to the timely payment of principal
and interest. There are no potential problem loans as to which management has
serious doubts as to collectibility that are not included in the following
table.

The following table sets forth information on the Company's non-performing
loans and other assets as of the indicated dates.

<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
--------- -----------------------------------------------------
1996 1995 1994 1993 1992 1991
--------- --------- --------- --------- --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Nonaccrual loans................................... $ 1,639 $ 1,606 $ 2,221 $ 2,599 $ 3,006 $ 4,571
Other loans 90 days past due....................... 159 177 167 227 1,416 2,964
Other real estate.................................. 988 858 1,081 1,401 3,238 2,344
--------- --------- --------- --------- --------- ---------
Total nonperforming assets....................... $ 2,786 $ 2,641 $ 3,469 $ 4,227 $ 7,660 $ 9,879
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
Nonaccrual and other loans 90 days past due to
total loans....................................... .55% .57% .82% 1.05% 1.76% 2.70%
Nonperforming assets to total loans plus other real
estate............................................ .86 .84 1.19 1.57 3.01 3.50
Nonperforming assets to total assets............... .45 .45 .62 .81 1.50 2.11
</TABLE>

For the six month period ended June 30, 1996, gross interest income that
would have been recorded if the nonaccrual loans had been current in accordance
with their original terms and had been outstanding throughout the period was
$65,000. During the six months ended June 30, 1996, the Company recognized
interest income on such nonaccrual loans of $42,000.

Nonperforming assets have decreased in each of the last five years and
constitute .45% of total assets as of June 30, 1996, down from 2.11% as of
December 31, 1991. Management believes that the significant improvement in the
level of nonperforming assets is due to the Company's conservative lending
philosophy and increased collection efforts, along with improved economic
conditions. See "Business -- History."

ANALYSIS OF ALLOWANCE FOR LOAN LOSSES

An allowance for loan losses has been established to provide for those loans
that may not be repaid in their entirety. The allowance for loan losses is
maintained at a level considered by management to be adequate to provide for
potential loan losses. The allowance is increased by provisions charged to
earnings and is reduced by charge-offs, net of recoveries. The provision for
loan losses is based on past loan loss experience and management's evaluation of
the loan portfolio under current economic conditions. Loans are charged to the
allowance for loan losses when, and to the extent, they are deemed by management
to be uncollectible. The allowance for loan losses is composed of specific
reserves for impaired loans and general reserves for all other loans.

22
<PAGE>
The following table sets forth loans charged-off and recovered by type of
loan and an analysis of the allowance for loan losses for the indicated periods.

<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED
JUNE 30, FOR THE YEARS ENDED DECEMBER 31,
------------- ----------------------------------------------------------
1996 1995 1994 1993 1992 1991
------------- ---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Average total loans............................ $ 312,449 $ 307,197 $ 272,930 $ 249,627 $ 270,113 $ 285,895
------------- ---------- ---------- ---------- ---------- ----------
------------- ---------- ---------- ---------- ---------- ----------
Total loans at end of period................... $ 324,573 $ 312,160 $ 291,042 $ 267,517 $ 251,062 $ 279,511
------------- ---------- ---------- ---------- ---------- ----------
------------- ---------- ---------- ---------- ---------- ----------
Allowance at beginning of year................. $ 3,524 $ 3,995 $ 4,026 $ 4,484 $ 4,230 $ 7,083
Charge offs:
Commercial and industrial.................... 58 269 125 329 1,440 951
Residential real estate...................... 29 344 45 124 101 3
Home equity lines of credit.................. -- -- 43 180 -- 3
Commercial real estate....................... 108 200 28 309 403 858
Other consumer............................... 66 288 727 1,161 1,890 4,910
------------- ---------- ---------- ---------- ---------- ----------
Total charge-offs.......................... 261 1,101 968 2,103 3,834 6,725
------------- ---------- ---------- ---------- ---------- ----------
Recoveries:
Commercial and industrial.................... 2 73 263 87 143 466
Residential real estate...................... 1 18 39 5 -- --
Home equity lines of credit.................. -- -- 1 12 -- --
Commercial real estate....................... 490 7 2 33 5 10
Other consumer............................... 112 373 321 209 363 473
------------- ---------- ---------- ---------- ---------- ----------
Total recoveries........................... 605 471 626 346 511 949
------------- ---------- ---------- ---------- ---------- ----------
Net charge-offs (recoveries)................... (344) 630 342 1,757 3,323 5,776
------------- ---------- ---------- ---------- ---------- ----------
Provision for loan losses...................... 75 159 311 1,299 3,577 2,923
------------- ---------- ---------- ---------- ---------- ----------
Allowance at end of period..................... $ 3,943 $ 3,524 $ 3,995 $ 4,026 $ 4,484 $ 4,230
------------- ---------- ---------- ---------- ---------- ----------
------------- ---------- ---------- ---------- ---------- ----------
Net charge-offs (recoveries) to average total
loans......................................... (.11)% .21% .13% .70% 1.23% 2.02%
Allowance to total loans at end of period...... 1.21 1.13 1.37 1.51 1.79 1.51
Allowance to nonperforming loans............... 219.30 197.64 167.29 142.46 101.40 56.14
</TABLE>

The allowance for loan losses was $3.9 million as of June 30, 1996, $3.5
million as of December 31, 1995 and $4.0 million as of December 31, 1994. For
the six months ended June 30, 1996, net recoveries on loans previously
charged-off were $344,000, due primarily to payment from a former customer's
bankruptcy proceeding. Net charge-offs increased $288,000 to $630,000 or 0.21%
of average loans in 1995 from $342,000 or 0.13% of average loans in 1994.
Management considers the allowance for loan losses to be adequate to meet
potential losses in the loan portfolio as of June 30, 1996. See "-- Non-
Performing Loans."

23
<PAGE>
ALLOCATION OF ALLOWANCE FOR LOAN LOSS

The following table sets forth the Company's allocation of the allowance for
loan losses by types of loans as of the indicated dates.
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
------------------------ ---------------------------------------------------------------
1996 1995 1994 1993
------------------------ ------------------------ ------------------------ -----------
LOAN LOAN LOAN
CATEGORY TO CATEGORY TO CATEGORY TO
AMOUNT GROSS LOANS AMOUNT GROSS LOANS AMOUNT GROSS LOANS AMOUNT
----------- ----------- ----------- ----------- ----------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Allocated:
Commercial and industrial.......... $ 686 16.76% $ 702 16.10% $ 642 17.30% $ 469
Residential real estate............ 749 39.67 676 38.17 510 37.81 318
Home equity line of credit......... 131 8.95 129 9.98 164 11.08 135
Commercial real estate............. 634 22.69 652 23.77 588 22.26 636
Other consumer..................... 379 11.93 421 11.98 562 11.55 1,634
Unallocated:......................... 1,364 -- 944 -- 1,529 -- 834
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total allowance for loan
losses.......................... $ 3,943 100.00% $ 3,524 100.00% $ 3,995 100.00% $ 4,026
----------- ----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- ----------- -----------

1992 1991
------------------------ ------------------------
LOAN LOAN LOAN
CATEGORY TO CATEGORY TO CATEGORY TO
GROSS LOANS AMOUNT GROSS LOANS AMOUNT GROSS LOANS
----------- ----------- ----------- ----------- -----------

<S> <C> <C> <C> <C> <C>
Allocated:
Commercial and industrial.......... 19.12% $ 300 21.50% $ 1,297 20.88%
Residential real estate............ 29.97 451 20.21 101 18.59
Home equity line of credit......... 14.09 210 17.07 -- 17.28
Commercial real estate............. 21.22 494 21.63 398 19.40
Other consumer..................... 15.60 1,273 19.59 1,527 23.85
Unallocated:......................... -- 1,756 -- 907 --
----------- ----------- ----------- ----------- -----------
Total allowance for loan
losses.......................... 100.00% $ 4,484 100.00% $ 4,230 100.00%
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
</TABLE>

INVESTMENT SECURITIES

The Company manages its investment portfolio to provide both a source of
liquidity and earnings. To assist in the process, the Company utilizes a firm
specializing in portfolio management consultation with commercial banks in the
Midwest. The Company follows an investment policy which generally requires the
securities in its investment portfolio to be rated, at the date of purchase,
investment grade by a nationally recognized rating agency. In accordance with
the Company's investment policy, no derivative securities may be purchased,
other than collateralized mortgage obligations, without the prior approval of
the Board of Directors. As of June 30, 1996, the Company owned short-tranche
Fannie Mae and FHLMC collateralized mortgage obligations with an amortized cost
totaling $46.3 million, short-term U.S. Treasury and agency strips with an
amortized cost totaling $14.9 million and short-term structured notes with an
amortized cost totaling $4.5 million. As of June 30, 1996, the Company did not
hold any off-balance sheet derivative financial instruments such as futures,
forwards, swaps or option contracts. As of June 30, 1996, the Company held no
securities with a book value exceeding 10% of stockholders' equity of a single
issuer other than the U.S. Treasury or other U.S. government agencies.

Adjustable rate mortgage pools and collateralized mortgage obligations are
mortgage backed obligations of Fannie Mae and FHLMC. These obligations have
contractual maturities ranging from less than four years to 25 years and have an
anticipated average life to maturity ranging from less than one year to 5.1
years. All adjustable rate mortgage pools and collateralized mortgage
obligations contain a certain amount of risk related to the uncertainty of
prepayments of the underlying mortgages. Interest rate changes have a direct
impact upon prepayment rates. The Company uses computer simulation models to
test the average life and yield volatility of adjustable rate mortgage pools and
collateralized mortgage obligations under various interest rate assumptions to
monitor volatility. At June 30, 1996, the Company owned no high risk
collateralized mortgage obligations as defined by the Federal Financial
Institutions Examination Council's Supervisory Policy Statement on Securities
Activities. U. S. Treasury strips are direct obligations of the United States
government which have had the coupons removed. These securities are sold at a
discount to par similar to U.S. Treasury bills and pay no interest until
maturity. The market value fluctuation of these securities is greater than the
fluctuation on similar maturity full coupon U.S. Treasury securities because
these types of securities are more sensitive to changes in interest rates. U.S.
government agency strips held by the Company pay no interest until late 1996,
are callable at par beginning in late 1996 and, if not called, begin making
coupon interest payments ranging from 7.56% to 8.04% thereafter until maturity.
The market value fluctuation of these securities is greater than the fluctuation
on similar maturity full coupon U.S. government agency securities due to the
uncertainty of the redemption date. The interest rates on the structured notes
reprice based on formulas applied to various indices. The maturities on the
structured notes range from one to four years.

24
<PAGE>
Effective January 1, 1994, the Company adopted the provisions of Statement
of Financial Accounting Standards No. 115, "Accounting for Certain Investments
in Debt and Equity Securities" ("SFAS No. 115"). SFAS No. 115 requires that all
debt and equity securities be classified either as held-to-maturity,
available-for-sale or trading. Held-to-maturity securities are classified as
such only when the Company determines it has the ability and intent to hold
these securities to maturity. Held-to-maturity securities are carried at cost,
adjusted for amortization of premiums and accretion of discounts.
Available-for-sale securities and trading securities are carried at market
value. Net unrealized gains and losses on available-for-sale securities are
excluded from earnings and reported as a separate component of stockholders'
equity, net of tax. Unrealized gains and losses on trading securities are
included in earnings. The Company has not classified any securities as trading.
Gains or losses on the sale of investment securities are determined based on the
amortized cost of the specific securities sold.

The following tables set forth the composition of the Company's investment
portfolio by major category as of the indicated dates. The investment securities
portfolio as of June 30, 1996, December 31, 1995 and December 31, 1994 have been
categorized as either available-for-sale or held-to-maturity in accordance with
SFAS No. 115. Because SFAS No. 115 was adopted by the Company effective January
1, 1994, the investment securities portfolio as of December 31, 1993 has not
been categorized.

<TABLE>
<CAPTION>
JUNE 30, 1996
-------------------------------------------------------------------------------------------
AVAILABLE-FOR-SALE HELD-TO-MATURITY TOTAL
------------------------ ------------------------ ---------------------------------------
AMORTIZED ESTIMATED AMORTIZED ESTIMATED AMORTIZED ESTIMATED % OF
COST FAIR VALUE COST FAIR VALUE COST FAIR VALUE PORTFOLIO (1)
----------- ----------- ----------- ----------- ----------- ----------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury................ $ 46,657 $ 45,672 $ 2,176 $ 2,072 $ 48,833 $ 47,744 20.38%
U.S. Treasury strips......... 1,817 1,810 -- -- 1,817 1,810 .76
U.S. government agencies..... 55,601 54,480 -- -- 55,601 54,480 23.21
U.S. government agency
strips...................... 13,105 13,077 -- -- 13,105 13,077 5.47
Obligations of state and
political subdivisions...... 30,660 29,947 16,726 16,595 47,386 46,542 19.78
Corporate debt securities.... 19,962 19,059 -- -- 19,962 19,059 8.33
Adjustable rate mortgage
pools....................... 5,840 5,943 -- -- 5,840 5,943 2.44
Collateralized mortgage
obligations................. 31,104 30,581 15,201 14,888 46,305 45,469 19.33
Federal reserve stock and
other securities............ 714 695 10 10 724 705 .30
----------- ----------- ----------- ----------- ----------- ----------- -------------
Total.................... $ 205,460 $ 201,264 $ 34,113 $ 33,565 $ 239,573 $ 234,829 100.00%
----------- ----------- ----------- ----------- ----------- ----------- -------------
----------- ----------- ----------- ----------- ----------- ----------- -------------
</TABLE>

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

(1) Based on amortized cost.

25
<PAGE>

<TABLE>
<CAPTION>
DECEMBER 31, 1995
-------------------------------------------------------------------------------------------
AVAILABLE-FOR-SALE HELD-TO-MATURITY TOTAL
------------------------ ------------------------ ---------------------------------------
AMORTIZED ESTIMATED AMORTIZED ESTIMATED AMORTIZED ESTIMATED % OF
COST FAIR VALUE COST FAIR VALUE COST FAIR VALUE PORTFOLIO (1)
----------- ----------- ----------- ----------- ----------- ----------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury................ $ 69,576 $ 69,825 $ 2,196 $ 2,173 $ 71,772 $ 71,998 34.73%
U.S. Treasury strips......... 1,661 1,679 -- -- 1,661 1,679 .80
U.S. government agencies..... 49,452 49,759 -- -- 49,452 49,759 23.93
U.S. government agency
strips...................... 12,719 12,687 -- -- 12,719 12,687 6.15
Obligations of state and
political subdivisions...... 15,692 15,974 14,984 15,130 30,676 31,104 14.84
Corporate debt securities.... 17,556 17,539 -- -- 17,556 17,539 8.50
Adjustable rate mortgage
pools....................... 7,266 7,393 -- 20 7,266 7,413 3.51
Collateralized mortgage
obligations................. -- -- 15,449 15,301 15,449 15,301 7.48
Federal reserve stock and
other securities............ 107 107 15 15 122 122 .06
----------- ----------- ----------- ----------- ----------- ----------- -------------
Total.................... $ 174,029 $ 174,963 $ 32,644 $ 32,639 $ 206,673 $ 207,602 100.00%
----------- ----------- ----------- ----------- ----------- ----------- -------------
----------- ----------- ----------- ----------- ----------- ----------- -------------
</TABLE>

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

(1) Based on amortized cost.

<TABLE>
<CAPTION>
DECEMBER 31, 1994
-------------------------------------------------------------------------------------------
AVAILABLE-FOR-SALE HELD-TO-MATURITY TOTAL
------------------------ ------------------------ ---------------------------------------
AMORTIZED ESTIMATED AMORTIZED ESTIMATED AMORTIZED ESTIMATED % OF
COST FAIR VALUE COST FAIR VALUE COST FAIR VALUE PORTFOLIO (1)
----------- ----------- ----------- ----------- ----------- ----------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury................ $ 76,722 $ 73,192 $ 6,991 $ 6,417 $ 83,763 $ 79,609 37.80%
U.S. Treasury strips......... -- -- 1,557 1,499 1,557 1,499 .70
U.S. government agencies..... 39,707 38,337 9,523 8,718 49,230 47,055 22.21
U.S. government agency
strips...................... -- -- 11,979 11,383 11,979 11,383 5.41
Obligations of state and
political subdivisions...... -- -- 30,537 29,507 30,537 29,507 13.78
Corporate debt securities.... 17,653 14,762 -- -- 17,653 14,762 7.97
Adjustable rate mortgage
pools....................... -- -- 10,045 9,884 10,045 9,884 4.53
Collateralized mortgage
obligations................. -- -- 16,715 15,675 16,715 15,675 7.54
Federal reserve stock and
other securities............ 102 102 25 25 127 127 .06
----------- ----------- ----------- ----------- ----------- ----------- -------------
Total.................... $ 134,234 $ 126,393 $ 87,372 $ 83,108 $ 221,606 $ 209,501 100.00%
----------- ----------- ----------- ----------- ----------- ----------- -------------
----------- ----------- ----------- ----------- ----------- ----------- -------------
</TABLE>

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

(1) Based on amortized cost.

<TABLE>
<CAPTION>
DECEMBER 31, 1993
---------------------------------------
TOTAL
---------------------------------------
AMORTIZED ESTIMATED % OF
COST FAIR VALUE PORTFOLIO (1)
----------- ----------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
U.S. Treasury................................................................ $ 84,266 $ 86,034 40.48%
U.S. Treasury strips......................................................... 1,373 1,373 .66
U.S. government agencies..................................................... 49,495 50,268 23.77
U.S. government agency strips................................................ 11,284 11,649 5.42
Obligations of state and political subdivisions.............................. 24,231 25,391 11.64
Corporate debt securities ................................................... 17,742 16,748 8.52
Collateralized mortgage obligations.......................................... 19,651 19,533 9.44
Federal reserve stock and other securities................................... 137 137 .07
----------- ----------- -------------
Total.................................................................... $ 208,179 $ 211,133 100.00%
----------- ----------- -------------
----------- ----------- -------------
</TABLE>

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

(1) Based on amortized cost.

26
<PAGE>
The Company's total investment securities portfolio increased $32.9 million
as of June 30, 1996 from December 31, 1995, decreased $14.9 million as of
December 31, 1995 from December 31, 1994 and increased $13.4 million as of
December 31, 1994 from December 31, 1993. The increase as of June 30, 1996 is
primarily the result of the investment of the influx of deposits in the
Will-Cook and Oak Lawn branches resulting from promotional activities, as well
as the investment of $13.6 million from a reduction in the funds sold position.
The investments purchased were primarily collateralized mortgage obligations and
tax exempt obligations. The decline in the investment securities portfolio in
the year ended December 31, 1995 reflects the use of proceeds from maturing
securities to fund higher loan levels. The increase in the investment securities
portfolio in the year ended December 31, 1994 is primarily the result of the
investment of increased deposits.

INVESTMENT MATURITIES AND YIELDS

The following table sets forth the contractual maturities of investment
securities as of June 30, 1996, and the weighted average yields of such
securities on a tax-equivalent basis assuming a 34% tax rate.

<TABLE>
<CAPTION>
MATURING
------------------------------------------------------------------------------------------
AFTER ONE BUT WITHIN AFTER FIVE BUT WITHIN
WITHIN ONE YEAR
FIVE YEARS TEN YEARS AFTER TEN YEARS
--------------------- --------------------- --------------------- ---------------------
AMOUNT YIELD AMOUNT YIELD AMOUNT YIELD AMOUNT YIELD
--------- ---------- --------- ---------- --------- ---------- --------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Available-For-Sale Securities (1):
U.S. Treasury........................... $ 11,757 5.55% $ 33,915 5.58% $ -- --% $ -- --%
U.S. Treasury strips.................... 944 6.31 866 5.94 -- -- -- --
U.S. government agencies................ 8,046 6.16 40,717 5.96 5,717 6.12 -- --
U.S. government agency strips........... -- -- -- -- 13,077 6.09 -- --
Obligations of state and political
subdivisions (2)....................... 2,634 9.09 8,264 7.08 12,783 7.23 6,266 7.91
Corporate debt securities............... -- -- -- -- 1,015 7.26 18,044 7.59
Adjustable rate mortgage pools (3)...... -- -- 5,943 7.51 -- -- -- --
Collateralized mortgage obligations
(3).................................... -- -- 30,581 6.65 -- -- -- --
Federal reserve stock and other
securities............................. -- -- 695 6.00 -- -- -- --
--------- --------- --------- ---------
Total available-for-sale............ $ 23,381 $ 120,981 $ 32,592 $ 24,310
--------- --------- --------- ---------
--------- --------- --------- ---------
Weighted average yield (4).............. 6.16% 6.18% 6.58% 7.67%
--- --- --- ---
--- --- --- ---
Held-to-Maturity Securities (5):
U.S. Treasury........................... $ -- -- % $ -- -- % $ 2,176 5.68% $ -- -- %
U.S. government agencies................ -- -- -- -- -- -- -- --
Obligations of state and political
subdivisions (2)....................... 2,772 6.84 10,861 6.96 1,962 7.49 1,131 8.10
Corporate debt securities............... -- -- -- -- -- -- -- --
Adjustable rate mortgage pools (3)...... -- -- -- -- -- -- -- --
Collateralized mortgage obligations
(3).................................... 2,999 6.34 12,202 5.80 -- -- -- --
Federal reserve stock and other
securities............................. 10 5.50 -- -- -- -- -- --
--------- --------- --------- ---------
Total held-to-maturity.............. $ 5,781 $ 23,063 $ 4,138 $ 1,131
--------- --------- --------- ---------
--------- --------- --------- ---------
Weighted average yield (4).............. 6.58% 6.35% 6.54% 8.10%
--- --- --- ---
--- --- --- ---

TOTAL
---------------------
AMOUNT YIELD
--------- ----------

<S> <C> <C>
Available-For-Sale Securities (1):
U.S. Treasury........................... $ 45,672 5.57%
U.S. Treasury strips.................... 1,810 6.13
U.S. government agencies................ 54,480 6.00
U.S. government agency strips........... 13,077 6.09
Obligations of state and political
subdivisions (2)....................... 29,947 7.49
Corporate debt securities............... 19,059 7.57
Adjustable rate mortgage pools (3)...... 5,943 7.51
Collateralized mortgage obligations
(3).................................... 30,581 6.65
Federal reserve stock and other
securities............................. 695 6.00
---------
Total available-for-sale............ $ 201,264
---------
---------
Weighted average yield (4).............. 6.42%
---
---
Held-to-Maturity Securities (5):
U.S. Treasury........................... $ 2,176 5.68%
U.S. government agencies................ -- --
Obligations of state and political
subdivisions (2)....................... 16,726 7.08
Corporate debt securities............... -- --
Adjustable rate mortgage pools (3)...... -- --
Collateralized mortgage obligations
(3).................................... 15,201 5.86
Federal reserve stock and other
securities............................. 10 5.50
---------
Total held-to-maturity.............. $ 34,113
---------
---------
Weighted average yield (4).............. 6.45%
---
---
</TABLE>

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

(1) Based on estimated fair value.
(2) Rates on obligations of states and political subdivisions have been adjusted
to tax-equivalent yields using a 34% tax rate.
(3) Maturities on adjustable rate mortgage pools and collateralized mortgage
obligations are based on anticipated lives of the underlying mortgages, not
contractual maturities.
(4) The weighted average was computed using estimated fair value for securities
available-for-sale and amortized cost for securities held-to-maturity as set
forth in the table.
(5) Based on amortized cost.

27
<PAGE>
DEPOSITS

The Company has experienced growth in total deposits in recent years.
Average total deposits were $541.4 million for the six months ended June 30,
1996, $509.0 million for the year ended December 31, 1995 and $481.1 million for
the year ended December 31, 1994. These increases in deposits are the result of
increased marketing activity in 1995 and 1996 in connection with the opening of
the Will-Cook branch and a special promotion in 1996 in connection with the
renovation of the Oak Lawn branch, as well as normal growth in the Company's
core market area.

The following table sets forth the average amount of and the average rate
paid on deposits by category for the indicated periods.

<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED
JUNE 30, FOR THE YEARS ENDED DECEMBER 31,
----------------------------------- ------------------------------------------------------------
1996 1995 1994
----------------------------------- ----------------------------------- -----------------------
AVERAGE PERCENT OF AVERAGE PERCENT OF AVERAGE PERCENT OF
BALANCE DEPOSITS RATE BALANCE DEPOSITS RATE BALANCE DEPOSITS
--------- ------------ ---------- --------- ------------ ---------- --------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Non-interest bearing
demand.................. $ 85,894 15.86% -- % $ 88,009 17.29% -- % $ 91,474 19.01%
Interest bearing demand.. 112,377 20.76 2.18 108,487 21.31 2.52 104,784 21.78
Savings.................. 108,207 19.99 2.68 108,656 21.35 2.83 112,397 23.36
Time:
Certificates of
deposit, under
$100,000 (1).......... 182,227 33.66 5.50 156,589 30.76 5.26 141,620 29.44
Certificates of
deposit, over $100,000
(1)................... 36,972 6.83 5.70 28,613 5.62 5.55 15,899 3.30
Public funds........... 15,685 2.90 5.43 18,672 3.67 5.78 14,934 3.11
Total time........... 234,884 43.39 5.52 203,874 40.05 5.35 172,453 35.85
--------- ------------ --- --------- ------------ --- --------- ------------
Total.............. $ 541,362 100.00% 3.39% $ 509,026 100.00% 3.28% $ 481,108 100.00%
--------- ------------ --- --------- ------------ --- --------- ------------
--------- ------------ --- --------- ------------ --- --------- ------------

1993
-----------------------------------
AVERAGE PERCENT OF
RATE BALANCE DEPOSITS RATE
---------- --------- ------------ ----------

<S> <C> <C> <C> <C>
Non-interest bearing
demand.................. -- % $ 81,274 17.82% -- %
Interest bearing demand.. 2.40 105,441 23.11 2.27
Savings.................. 2.65 106,539 23.36 2.91
Time:
Certificates of
deposit, under
$100,000 (1).......... 4.02 143,495 31.46 4.00
Certificates of
deposit, over $100,000
(1)................... 4.22 7,750 1.70 3.70
Public funds........... 4.33 11,615 2.55 3.83
Total time........... 4.07 162,860 35.71 4.04
--- --------- ------------ ---
Total.............. 2.60% $ 456,114 100.00% 2.65%
--- --------- ------------ ---
--- --------- ------------ ---
</TABLE>

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

(1) Certificates of deposit exclusive of public funds.

The following table summarizes as of June 30, 1996 the maturity distribution
of deposits in amounts of $100,000 or more. These deposits have been made by
individuals, businesses and public and other not-for-profit entities, most of
which are located within the Company's market area.

<TABLE>
<CAPTION>
JUNE 30, 1996
-------------
(IN
THOUSANDS)
<S> <C>
Three months or less........................................................... $ 18,920
Over three months through six months........................................... 16,279
Over six months through twelve months.......................................... 15,227
Over twelve months............................................................. 6,570
-------------
Total...................................................................... $ 56,996
-------------
-------------
</TABLE>

28
<PAGE>
SHORT-TERM BORROWINGS

The Company uses short-term borrowings on a limited basis. These borrowings
include overnight funds purchased and securities sold under agreements to
repurchase. The following table sets forth categories of short-term borrowings
of the Company as of the indicated dates or for the indicated periods.

<TABLE>
<CAPTION>
AT OR FOR
THE SIX
MONTHS
ENDED AT OR FOR THE YEARS ENDED
JUNE 30, DECEMBER 31,
--------- -------------------------------
1996 1995 1994 1993
--------- --------- --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Funds Purchased and Securities
Sold Under Repurchase Agreements:
Balance at end of period......................................... $ 5,770 $ 6,292 $ 9,614 $ 8,646
Weighted average interest rate at end of period (1).............. 4.84% 5.20% 4.77% 4.42%
Maximum amount outstanding (2)................................... $ 10,578 $ 31,400 $ 23,402 $ 35,071
Average amount outstanding....................................... 5,113 7,211 5,680 9,547
Weighted average interest rate during period (1)................. 5.57% 5.26% 4.07% 3.67%
</TABLE>

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

(1) Interim period annualized.

(2) Based on amount outstanding at month-end during each period.

SHORT-TERM BANK BORROWINGS

The Company's short-term bank borrowings at December 31, 1995 consisted of a
demand note in the principal amount of $11.0 million payable to the Company's
principal correspondent bank. The Company incurred the indebtedness to fund the
repurchase of 881,340 shares of Common Stock from the estate of its late
chairman in December 1995 for $11.5 million. The indebtedness was reduced to
$9.0 million as of June 30, 1996. The note is due on demand, requires quarterly
interest payments at a rate pegged to LIBOR (generally less than prime), and is
collateralized by the common stock of the Banks. The Company intends to repay
this indebtedness with the proceeds from this offering. See "Use of Proceeds."

The following table sets forth categories of short-term bank borrowings of
the Company as of the indicated dates or for the indicated periods.

<TABLE>
<CAPTION>
AT OR FOR
THE SIX
MONTHS
ENDED AT OR FOR THE YEARS ENDED
JUNE 30, DECEMBER 31,
--------- -------------------------------
1996 1995 1994 1993
--------- --------- --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Short-Term Bank Borrowings:
Balance at end of period......................................... $ 9,000 $ 11,000 $ 1,800 $ 4,700
Weighted average interest rate at end of period (1).............. 7.49% 8.20% 8.50% 5.50%
Maximum amount outstanding (2)................................... $ 11,000 $ 11,000 $ 4,700 $ 7,550
Average amount outstanding....................................... 9,678 781 2,971 6,000
Weighted average interest rate during period (1)................. 7.65% 10.12% 6.93% 6.28%
</TABLE>

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

(1) Interim period annualized.

(2) Based on amount outstanding at month-end during each period.

CAPITAL RESOURCES

The Company monitors compliance with bank and bank-holding company
regulatory capital requirements, focusing primarily on risk-based capital
guidelines. Under the risk-based capital

29
<PAGE>

method of capital measurement, the ratio computed is dependent upon the amount
and composition of assets recorded on the balance sheet, and the amount and
composition of off-balance sheet items, in addition to the level of capital.
Included in the risk-based capital method are two measures of capital adequacy,
Tier 1 or core capital, and Total capital, which consists of Tier 1 plus Tier 2
capital. See "Supervision and Regulation -- Regulation of Bank Holding Companies
and Their Non-Bank Subsidiaries -- Capital Requirements" for definitions of Tier
1 and Tier 2 capital.

The following tables set forth the Company's capital ratios as of the
indicated dates.

RISK-BASED CAPITAL RATIOS

<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
---------------------- ----------------------------------------------------------------------
1996 1995 1994 1993
---------------------- ---------------------- ---------------------- ----------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Tier 1 capital...................... $ 42,001 11.50% $ 39,442 12.25% $ 44,938 14.78% $ 38,867 13.15%
Tier 1 capital minimum requirement
(1)................................ 14,595 4.00 12,884 4.00 12,165 4.00 11,822 4.00
---------- ----- ---------- ----- ---------- ----- ---------- -----
Excess.............................. $ 27,406 7.50% $ 26,558 8.25% $ 32,773 10.78% $ 27,045 9.15%
---------- ----- ---------- ----- ---------- ----- ---------- -----
---------- ----- ---------- ----- ---------- ----- ---------- -----
Total capital....................... $ 45,945 12.58% $ 42,966 13.34% $ 48,933 16.09% $ 42,893 14.51%
Total capital minimum requirement
(1)................................ 29,190 8.00 25,768 8.00 24,330 8.00 23,644 8.00
---------- ----- ---------- ----- ---------- ----- ---------- -----
Excess.............................. $ 16,755 4.58% $ 17,198 5.34% $ 24,603 8.09% $ 19,249 6.51%
---------- ----- ---------- ----- ---------- ----- ---------- -----
---------- ----- ---------- ----- ---------- ----- ---------- -----
Total risk adjusted assets.......... $ 364,870 $ 322,097 $ 304,127 $ 295,545
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>

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

(1) Based on risk-based capital guidelines of the Federal Reserve Bank, a bank
holding company is required to maintain a Tier 1 capital to risk-adjusted
assets ratio of 4% and a total capital to risk-adjusted assets ratio of 8%.
See "Supervision and Regulation -- Regulation of Banks -- Capital
Requirements."

LEVERAGE RATIOS

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

(1) The leverage ratio is defined as the ratio of Tier 1 capital to average
total assets. Based on Federal Reserve Bank guidelines, a bank holding
company generally is required to maintain a leverage ratio of 3%. See
"Supervision and Regulation -- Regulation of Banks -- Capital Requirements."

LIQUIDITY

The Company manages its liquidity position with the objective of maintaining
sufficient funds to respond to the needs of depositors and borrowers and to take
advantage of earnings enhancement opportunities. In addition to the normal
inflow of funds from core-deposit growth, together with

30
<PAGE>
repayments and maturities of loans and investments, the Company utilizes other
short-term funding sources such as securities sold under agreements to
repurchase, overnight funds purchased from correspondent banks and the
acceptance of short-term deposits from public entities.

The Company monitors and manages its liquidity position on several bases,
which vary depending upon the time period. As the time period is expanded, other
data is factored in, including estimated loan funding requirements, estimated
loan payoffs, investment portfolio maturities or calls, and anticipated
depository buildups or runoffs.

The Company classifies the majority of its investment securities as
available-for-sale, thereby maintaining significant liquidity. The Company's
liquidity position is further enhanced by structuring the majority of its loan
portfolio interest payments as monthly, and also by the significant
representation of retail credit and residential mortgage loans in the Company's
loan portfolio, resulting in a steady stream of pre-payments. In managing its
investment portfolio, the Company provides for staggered maturities so that cash
flows are provided as such investments mature.

The Company's cash flows are composed of three classifications: cash flows
from operating activities, cash flows from investing activities, and cash flows
from financing activities. Net cash provided by operating activities, consisting
primarily of earnings, was $4.5 million for the six months ended June 30, 1996,
$4.5 million for the year ended December 31, 1995 and $19.1 million for the year
ended December 31, 1994. Net cash used in operating activities for the six
months ended June 30, 1995 was $441,000. A significant component in the
fluctuation of net cash provided by or used in operating activities is the
timing of the transfer of loans held for sale to permanent investors. Net cash
used in investing activities, consisting primarily of loan and investment
funding, was $48.6 million and $7.3 million for the six months ended June 30,
1996 and 1995, respectively, and $3.6 million and $51.2 million for the years
ended December 31, 1995 and 1994, respectively. Net cash provided by financing
activities, consisting principally of deposit growth, was $24.5 million for the
six months ended June 30, 1996 and $16.7 million and $42.9 million for the years
ended December 31, 1995 and 1994, respectively. Net cash used in financing
activities for the six months ended June 30, 1995 was primarily due to the net
decrease in short-term borrowings made possible by the net increase in deposits.
During the year ended December 31, 1995, the Company borrowed $11.0 million from
the Company's principal correspondent bank to finance the repurchase of 881,340
shares of Common Stock from the estate of its late chairman for $11.5 million
pursuant to an agreement dated July 3, 1995, which gave the Company the right to
purchase the shares following his death.

ASSET/LIABILITY MANAGEMENT

A principal function of asset/liability management is to coordinate the
levels of interest-sensitive assets and liabilities to minimize net interest
income fluctuations in times of fluctuating market interest rates.
Interest-sensitive assets and liabilities are those that are subject to
repricing in the near term, including both variable-rate instruments and those
fixed-rate instruments which are approaching maturity. Changes in net yield on
interest-sensitive assets arise when interest rates on those assets (e.g. loans
and investment securities) change in a different time period from that of
interest rates on liabilities (e.g. time deposits). Changes in net yield on
interest-sensitive assets also arise from changes in the mix and volumes of
earning assets and interest-bearing liabilities.

The Company's strategy with respect to asset/liability management is to
maximize net interest income while limiting exposure to risks associated with
volatile interest rates. This strategy is implemented by the Company's ongoing
analysis and management of its interest rate risk, utilizing duration modeling
applied to the actual assets and liabilities comprising the Company's statement
of condition. The model uses cash flows and repricing information from each
individual loan and certificate of deposit, plus repricing assumptions on
products without specific repricing dates (e.g. savings and interest-bearing
demand deposits) to calculate the durations of the Company's assets and
liabilities. The model also projects the effect on the Company's earnings and
theoretical value for a change in interest rates.

31
<PAGE>
The following table sets forth the interest rate sensitivity of the
Company's assets and liabilities as of June 30, 1996, and sets forth the
repricing dates of the Company's interest-earning assets and interest-bearing
liabilities as of that date, as well as the Company's interest rate sensitivity
gap percentages for the periods presented. The table is based upon assumptions
as to when assets and liabilities will reprice in a changing interest rate
environment, and since such assumptions can be no more than estimates, certain
assets and liabilities indicated as maturing or otherwise repricing within a
stated period may, in fact, mature or reprice at different times and at
different volumes than those estimated. Also, the renewal or repricing of
certain assets and liabilities can be discretionary and subject to competitive
and other pressures. Therefore, the following table does not and cannot
necessarily indicate the actual future impact of general interest rate movements
on the Company's net interest income.

<TABLE>
<CAPTION>
4-12 1-5 OVER 5
0-3 MONTHS MONTHS YEARS YEARS TOTAL
----------- ------------ ----------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Interest Earning Assets:
Funds sold.................................... $ 6,475 $ -- $ -- $ -- $ 6,475
Investment securities......................... 5,014 24,148 144,044 62,171 235,377
----------- ------------ ----------- ----------- -----------
Total loans................................. 86,500 50,010 171,028 17,035 324,573
----------- ------------ ----------- ----------- -----------
Total earning assets...................... $ 97,989 $ 74,158 $ 315,072 $ 79,206 $ 566,425
----------- ------------ ----------- ----------- -----------
----------- ------------ ----------- ----------- -----------
Interest Bearing Liabilities:
Interest bearing demand deposits.............. $ -- $ 16,168 $ 78,959 $ 15,698 $ 110,825
Savings deposits.............................. -- -- 86,544 21,636 108,180
Time deposits................................. 71,101 146,323 32,251 200 249,875
----------- ------------ ----------- ----------- -----------
Total interest bearing deposits........... 71,101 162,491 197,754 37,534 468,880
----------- ------------ ----------- ----------- -----------
Short-term borrowings:
Securities sold under agreements to
repurchase, funds purchased, and treasury tax
deposits..................................... 5,770 -- -- -- 5,770
Short-term bank borrowings.................... 9,000 -- -- -- 9,000
----------- ------------ ----------- ----------- -----------
Total borrowings.......................... 14,770 -- -- -- 14,770
----------- ------------ ----------- ----------- -----------
Total interest bearing liabilities.............. 85,871 162,491 197,754 37,534 483,650
----------- ------------ ----------- ----------- -----------
Interest sensitivity gap........................ $ 12,118 $ (88,333) $ 117,318 $ 41,672 $ 82,775
----------- ------------ ----------- ----------- -----------
----------- ------------ ----------- ----------- -----------
Cumulative gap.................................. $ 12,118 $ (76,215) $ 41,103 $ 82,775 $ 82,775
Interest sensitivity gap to total assets........ 1.97% (14.37)% 19.09% 6.78% 13.47%
Cumulative sensitivity gap to total assets...... 1.97 (12.40) 6.69 13.47 13.47
</TABLE>

Mortgage backed securities, including adjustable rate mortgage pools and
collateralized mortgage obligations, are included in the above table based on
their estimated weighted average lives obtained from outside analytical sources.
Loans are included in the above table based on contractual maturity or
contractual repricing dates. Interest bearing demand and savings deposits are
included in the above table based on the proposed policy statement issued by
bank regulators on August 4, 1995. The table uses the maximum maturity
distribution allowed, which is consistent with the Company's actual historical
experience.

The Company uses a duration model for its internal asset/liability
management. This model computes the duration of the Company's rate-sensitive
assets and liabilities, a theoretical market value of the Company, and the
effects of rate changes on the Company's earnings and market value. The results
of the model indicate that the Company is moderately liability sensitive. The
rate shock

32
<PAGE>
analysis provided by the model shows that the effect of an immediate 200 basis
point increase in rates would be to reduce the Company's net interest income for
the next 12 months by less than $1.5 million.

EFFECTS OF INFLATION

Inflation can have a significant effect on the operating results of all
industries. However, management believes that inflationary factors are not as
critical to the banking industry as they are to other industries, due to the
high concentration of relatively short-duration monetary assets in the banking
industry. Inflation does, however, have some impact on the Company's growth,
earnings and total assets and on its need to closely monitor its equity capital
levels.

Interest rates are significantly affected by inflation, but it is difficult
to assess the impact, since neither the timing nor the magnitude of the changes
in the various inflation indices coincides with changes in interest rates.
Inflation does impact the economic value of longer-term interest-bearing assets
and liabilities, but the Company attempts to limit its long-term assets and
liabilities, as indicated in the tables set forth under "-- Financial Condition"
and "-- Asset/Liability Management."

IMPACT OF NEW ACCOUNTING STANDARDS

Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of"
("SFAS No. 121"), requires that long-lived assets and certain identifiable
intangibles that are used in operations be reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of assets
might not be recoverable. The adoption of this standard on January 1, 1996 had
no material impact on the Company's consolidated financial statements as of and
for the period ended June 30, 1996. Management believes the adoption of SFAS No.
121 will not have a material effect on the Company's 1996 financial condition or
results of operations.

Statement of Financial Accounting Standards No. 122, "Accounting for
Mortgage Servicing Rights" ("SFAS No. 122"), was adopted by the Company as of
January 1, 1996. As a result of applying SFAS No. 122, the value of retained
servicing on loans sold subsequent to January 1, 1996 has been capitalized and
amortized over the expected life of the loans. The adoption of this standard on
January 1, 1996 had no material impact on the Company's consolidated financial
statements as of and for the period ended June 30, 1996. The Company expects
that the adoption of SFAS No. 122 will not have a material effect on the
reported earnings of the Company in 1996.

Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation" ("SFAS No. 123"), requires entities to disclose the
fair value of their employees' stock options, but permits entities to continue
to account for employee stock options under APB 25, "Accounting for Stock Issued
to Employees." The Company has determined that it will continue to use the
method prescribed by APB 25, which recognizes compensation to the extent of the
difference between the estimated market value and the exercise price at the
grant date. The only effect of the Company's adoption of SFAS No. 123 as of
January 1, 1996, will be new disclosure requirements in its 1996 consolidated
financial statements.

33
<PAGE>
BUSINESS

THE COMPANY

The Company is a community-based financial services holding company
headquartered in Chicago, Illinois. Through its subsidiaries, the Company
provides a full range of banking services and also provides personal and
corporate trust services. The Company's principal operating subsidiaries are the
Banks and Beverly Trust. The Banks are chartered as Illinois state banks, with
the exception of Wilmington, which was federally chartered in 1863 and is the
second oldest active national bank in Illinois.

The Banks are community-oriented, full-service commercial banks, providing a
full range of banking services to individuals, small-to-medium-sized businesses,
and not-for-profit organizations. The Banks operate out of 12 full-service
locations in the south and southwest parts of the Chicago metropolitan area, a
business development office located in downtown Chicago and a mortgage
origination office located in Naperville, Illinois. Through Wilmington, the
Company also operates a full-service insurance agency and a residential mortgage
brokerage business and offers a broad range of annuities and mutual funds
through a relationship with a securities firm. In 1996, Wilmington formed a
joint venture, currently in its initial stages, with a prominent realtor for the
purpose of increasing its mortgage origination business. Beverly Trust provides
a wide array of trust services for individuals and corporations. As of June 30,
1996, Beverly Trust managed $277.1 million in assets, primarily in the areas of
personal living trusts and corporate employee benefit plans, and administered
more than 3,000 land trusts. The strategy of the Company is to continue to
increase its core banking business and to further develop its mortgage, trust,
securities sales and insurance activities in order to provide an array of
household financial services encompassing banking and other investment products.

The Company focuses on establishing and maintaining long-term relationships
with customers and is committed to serving the financial services needs of its
community. In particular, the Company has and will continue to emphasize its
relationship with individuals and small-to-medium-sized businesses. The
Company's policy is to respond to all creditworthy segments of its market.
Management believes that doing so is basic to good business practice and to the
Company's long-term vitality. The Company makes an active effort to determine
the credit needs of the community, including those of low- and moderate-income
areas and individuals, and to evaluate the products it offers and the design of
those products to determine whether the Company's responsiveness to the
community can be improved. The markets served by the Company provide a mix of
real estate, commercial and consumer lending opportunities, while also providing
a stable core deposit base.

HISTORY

The Company was formed in the late 1960's as a one-bank holding company,
with its principal asset being Beverly Bank. Beverly Bank has served the Beverly
community on Chicago's south side since 1923, providing individuals and
businesses with a variety of deposit and loan products in a traditional banking
environment. Beverly Bank and the Company were on the leading edge of the
banking industry in data processing and marketing during the late 1960's and
early 1970's, and the Company provided data processing, marketing, investment
and other services on a fee basis for several years to approximately twelve
community bank holding companies in the Chicago metropolitan area. In the
mid-1970's, the affiliation of the Beverly-serviced bank holding companies
ended, and the Company's activities and influence diminished accordingly. Over
the late 1970's and the 1980's,

34
<PAGE>
Beverly Bank opened three branches, in Oak Lawn, in Orland Hills and at 112th
Street and Western Avenue in Chicago, and continued to provide traditional
banking services to an increasingly diverse customer and market base.

In the mid to late 1980's, the Company acquired the Matteson-Richton Bank
and renamed it Beverly Bank Matteson, acquired Wilmington, and acquired an
inactive bank charter which it used to organize Beverly Bank Lockport. During
that period, the Company also separated its longstanding trust business from the
banking business by creating Beverly Trust in 1987.

Although the acquisitions of the late 1980's increased the size of the
organization, the Company experienced weakened internal controls and a number of
poor quality loans were made. The Company also incurred losses in its credit
card business and a significant charge-off for loans to a single borrower.

As a result of these problems, major changes were made in the management of
the Company. The Board of Directors was reconstituted and new management,
including the Company's current Chief Executive Officer and Chief Financial
Officer, was hired. During the next several years, this new management team
strengthened internal controls, identified and resolved problems within the
Company and took steps to improve the Company's asset quality. See "Management's
Discussion and Analysis of Results of Operations and Financial Condition --
Financial Condition -- Non-Performing Loans" and "-- Analysis of Allowance for
Loan Losses."

Because of the problems the Company experienced, bank regulatory agencies
imposed restrictions on the Company and its subsidiaries. Between June 1990 and
January 1993, the Federal Reserve Board ("FRB") did not permit the Company to
pay dividends on its stock without the FRB's prior consent or notification. In
January 1993, because of the Company's improved financial condition, the FRB
informed the Company that it could resume paying dividends without restriction.
Additionally, in February 1991, Memoranda of Understanding were issued by the
FDIC for Beverly Bank and Beverly Bank Matteson, which prohibited these banks
from paying dividends without prior FDIC approval and which required these banks
to lessen their respective risk positions, increase capital, revise loan,
liquidity and other operating policies, improve internal controls and manage
growth within specified limitations. Because of operational improvements, the
Memoranda of Understanding were terminated in March 1993.

STRATEGY

Management believes the key to its community banking strategy is having high
level officers of the Company direct business development in each of its local
geographic markets, presenting the Company as highly autonomous within those
markets, while at the same time managing all of the markets through a
centralized control and delivery system. Management believes that this strategy
differentiates the Company from its competition and will result in increased
competitiveness of the Company.

Following the planned consolidation of the Banks by year-end 1996, the
Company intends to fully retain the separate market autonomy it has established
through its existing organization, but will under the new structure be able to
take advantage of the economies of a consolidated charter. This reorganization,
combined with a consultant-assisted program of identifying other efficiencies
throughout the organization, is intended to enhance the Company's operating
performance.

35
<PAGE>
The Company's competition includes other commercial banks, savings banks,
savings and loan associations, mutual funds, money market funds, finance
companies, credit unions, mortgage companies, private issuers of debt
obligations and suppliers of other investment alternatives, such as securities
firms. Competition is intense and increasing. The Company attempts to
aggressively address these competitive challenges by creating market
differentiation and by maintaining a relatively autonomous presence within its
markets. The Company competes for talented people by offering competitive levels
of compensation, and by augmenting compensation with stock options pursuant to
its stock option plan. Attracting and retaining high quality employees is
important in enabling the Company to compete effectively for market share with
both the Company's large and small competitors.

The Company serves in excess of 35,000 customers with more than 90,000
accounts. Additional business from existing customers is a key element of the
Company's strategy, since the Company believes that it holds only a portion of
its customers' total bankable resources. With more than 80% of the Company's
economic activity emanating from roughly 20% of its customer base, the Company
intends to focus marketing attention on this segment.

SERVICES

LENDING ACTIVITIES

The Company aggressively seeks quality loan relationships. The Company's
loan portfolio consists of real estate (including residential and commercial),
commercial and industrial, home equity lines of credit and consumer loans. The
Company's management emphasizes sound credit analysis and loan documentation.
Management also seeks to avoid undue concentrations of loans to a single
industry or based on a single class of collateral. The Company has concentrated
its efforts on building its lending business in the following areas:

(i) COMMERCIAL AND INDUSTRIAL LOANS. These loans are made to
small-to-medium-sized businesses that are sole proprietorships,
partnerships, and corporations. Generally, these loans are secured with
collateral including accounts receivable, inventory and equipment, and
generally require personal guarantees of the principals.

(ii) COMMERCIAL REAL ESTATE LOANS. These are construction and
development loans for acquisition, development, and construction of real
estate which are secured by the real estate involved, and other loans
secured by farmland, commercial real estate, multi-family residential
properties, and other non-farm, nonresidential properties. Loans retained by
the Company for its portfolio are short-term balloon loans and adjustable
rate mortgages with initial fixed terms of one to five years.

(iii) RESIDENTIAL REAL ESTATE LOANS. These are loans made to finance
residential units that will house from one to four families. While the
Company originates both fixed and adjustable rate residential real estate
loans, virtually all fixed-rate loans originated pursuant to Fannie Mae and
FHLMC guidelines are sold in the secondary market with servicing retained by
the Company. In the normal course of business, the Company retains
one-to-five year adjustable rate loans. See "Management's Discussion and
Analysis of Results of Operations and Financial Condition -- Financial
Condition."

(iv) HOME EQUITY LINES OF CREDIT. These lines of credit are secured by
the borrower's home and can be drawn on at the discretion of the borrower.
These lines of credit are generally at variable interest rates. When made,
home equity lines, combined with the outstanding loan balance of prior
mortgage loans, generally do not exceed 80% of the appraised value of the
underlying real estate collateral.

(v) OTHER CONSUMER LOANS. Most of these loans are collateralized loans
to individuals for various personal reasons such as automobile financing and
home improvements.

36
<PAGE>
Lending officers are assigned various levels of loan approval authority
based upon their respective levels of experience and expertise. Loan approval is
also subject to the Company's formal loan policy, as established by each Bank's
board of directors, and to concurrence of a higher-ranking officer (or the
Bank's board of directors or a committee of the board) in addition to the
recommendation of the lending officer. This system is meant to assure that
commercial credit is subjected to the independent objective review of at least
two lending officers and is believed to be a key element of the Company's low
level of loan losses.

Management believes that the effectiveness of the Company's loan
administration is evidenced in its low delinquency rate and its low loss
experience in recent periods. See "Management's Discussion and Analysis of
Results of Operations and Financial Condition -- Financial Condition -- Analysis
of Allowance for Loan Losses."

TRUST ACTIVITIES

Beverly Trust provides a wide array of trust services for individuals and
corporations. As of June 30, 1996, Beverly Trust managed eighteen funds with an
aggregate of $277.1 million in assets, primarily in the areas of personal living
trusts and corporate employee benefit plans. Beverly Trust also administers more
than 3,000 land trusts. Recent PIPER reports cited Beverly Trust's fixed-income
funds as among the most consistently high-performing funds among all such funds
covered by the PIPER report in each of the past one, five and ten-year periods.
The PIPER report is an investment performance report published by Crain
Communications, Inc., which records the performance of over 500 financial
managers.

OTHER ACTIVITIES

Through Wilmington, the Company operates a full-service insurance agency and
offers investment securities, including a broad range of annuities and mutual
funds, through a relationship with a securities firm. Wilmington also provides
residential mortgage brokerage services. In 1996, Wilmington formed a joint
venture, currently in its initial stages, with a prominent realtor for the
purpose of increasing its mortgage origination activities. The Company also
services residential real estate loans originated through its mortgage
activities. The servicing portfolio as of June 30, 1996 totaled $99.1 million of
loans serviced for Fannie Mae, FHLMC and the Illinois Housing Development
Authority. The Company believes these services are an important element in its
growth strategy.

MARKET

The Company considers its primary market areas to be those areas immediately
surrounding its offices. The Banks operate out of 12 full-service locations in
the south and southwest parts of the Chicago metropolitan area, a business
development office located in downtown Chicago and a mortgage origination office
located in Naperville, Illinois. Accordingly, the Company's business extends
throughout the Chicago metropolitan area, but is highly concentrated in the
areas in which the Company's offices are located. The communities in which the
Company's offices are located have a broad spectrum of demographic
characteristics, including a number of densely populated areas as well as rural
areas; some extremely high-income areas, as well as many middle-income areas and
some low to moderate income areas; and encompass significant diversity in
racial, ethnic and other characteristics.

According to the 1990 census, the Chicago metropolitan area is the third
largest metropolitan area in the United States with a population of
approximately 7.1 million. With approximately 600,000 manufacturing jobs, 1.1
million service jobs, 1.1 million jobs in retail/wholesale trade, transportation
and public utilities, and 300,000 jobs in finance, insurance and real estate,
the Chicago metropolitan area followed only the New York and Los Angeles
metropolitan areas in total non-agricultural wage and salary employment.

37
<PAGE>
COMPETITION

The Company competes in the financial services industry through the Banks
and Beverly Trust. The financial services business is highly competitive. The
Company encounters strong direct competition for deposits, loans and other
financial services. The Company's principal competitors include other commercial
banks, savings banks, savings and loan associations, mutual funds, money market
funds, finance companies, credit unions, mortgage companies, private issuers of
debt obligations and suppliers of other investment alternatives, such as
securities firms. In addition, in recent years, several major multi-bank holding
companies have entered or expanded in the Chicago metropolitan market.
Generally, these financial institutions are significantly larger than the
Company and have access to greater capital and other resources. Many of the
Company's non-bank competitors are not subject to the same degree of regulation
as that imposed on bank holding companies, federally insured banks and national
or Illinois chartered banks. As a result, such non-bank competitors have
advantages over the Company in providing certain services. The Company competes
for deposits principally by offering depositors a variety of deposit programs,
convenient office locations, hours and other services, and competes for loan
originations primarily through the interest rates and loan fees it charges, the
efficiency and quality of services it provides to borrowers and the variety of
its loan products.

PROPERTIES

The principal offices of both the Company and Beverly Bank are located at
1357 West 103rd Street, Chicago, Illinois. This two story building is owned by
the Company and comprises approximately 40,012 square feet.

Beverly Bank also maintains five full-service banking facilities in Chicago,
Blue Island, Orland Hills, Orland Park (Will-Cook) and Oak Lawn, Illinois and a
business development office in Chicago, Illinois. Beverly Bank occupies a total
of 42,359 square feet at these locations. All of these facilities are owned by
the Company, except the Blue Island and Orland Park banking facilities and the
Chicago business development office, which are leased.

Beverly Bank Matteson is located at 4350 West Lincoln Highway, Matteson,
Illinois. This facility is owned by the Company and comprises approximately
15,684 square feet. Beverly Bank Matteson also maintains two full-service
banking facilities in Richton Park and Homewood, Illinois. These two facilities,
totaling 22,400 square feet, are leased.

Beverly Bank Lockport is located at 1103 East 9th Street, Lockport,
Illinois. This facility is owned by the Company and comprises approximately
4,420 square feet.

Wilmington maintains its principal office at 417 South Water Street,
Wilmington, Illinois and also occupies a full-service banking facility in
Braidwood, Illinois and a mortgage origination office in Naperville, Illinois.
Wilmington occupies a total of 17,700 square feet at these locations. All of
these facilities are owned by the Company, except the Naperville facility, which
is leased.

Beverly Trust is located at 10312 South Cicero Avenue, Oak Lawn, Illinois.
This facility is owned by the Company and comprises approximately 6,595 square
feet. This facility also houses the Oak Lawn branch of Beverly Bank.

LEGAL PROCEEDINGS

The Company and its subsidiaries are from time to time parties to various
legal actions arising in the normal course of business. Management believes that
there is no proceeding threatened or pending against the Company or any of its
subsidiaries which, if determined adversely, would have a material adverse
effect on the financial condition or results of operations of the Company.

EMPLOYEES

As of June 30, 1996, the Company had 263 full-time employees and 88
part-time employees. Management considers its relationship with its employees to
be good.

38
<PAGE>
MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

The directors and executive officers of the Company are as follows:

<TABLE>
<CAPTION>
NAME POSITION AGE
- -------------------------------- -------------------------------------------------------------------------- ---
<S> <C> <C>
Anthony R. Pasquinelli Chairman of the Board and Director 62
John D. Van Winkle President, Chief Executive Officer and Director 50
Christopher M. Cronin Director 47
Richard I. Polanek Director 64
William C. Waddell Director 53
Brent E. Frank Executive Vice President, Chief Lending Officer 36
James W. Martin, Jr. Executive Vice President, Manager of Consumer Sales and President of First 56
National Bank of Wilmington
Charles E. Ofenloch Executive Vice President, Manager of Commercial Sales and President of 54
Beverly Bank Matteson
John T. O'Neill Executive Vice President, Chief Financial Officer 47
Bruce G. Park Executive Vice President, Chief Operations Officer 59
Ronald F. Stajkowski Executive Vice President and Manager of Beverly Trust 56
</TABLE>

Mr. Pasquinelli has been Chairman of the Board of the Company since November
1995 and a Director of the Company since 1985. Mr. Pasquinelli has been
Executive Vice President and Secretary of Pasquinelli Construction Co., a
Homewood, Illinois construction company, since 1962. He currently serves on the
board of directors of each of the Banks and Beverly Trust.

Mr. Van Winkle has been President and Chief Executive Officer and a Director
of the Company since August 1989, when he joined the Company. He has also served
on the board of directors of each of the Banks and Beverly Trust since 1989.
Prior to joining the Company, from 1976, Mr. Van Winkle held various management
positions at a publicly-held community bank located in Chicago, Illinois.

Mr. Cronin has been a Director of Beverly Bank since 1985; he was a Director
of the Company from 1986 to 1990 and again became a Director of the Company in
1995. Mr. Cronin has been President of Knickerbocker Roofing and Paving Co., a
Harvey, Illinois roofing and paving company, since 1986. He currently serves on
the board of directors of each of the Banks and Beverly Trust.

Mr. Polanek has been a Director of the Company since 1989. Mr. Polanek is
presently retired. Prior to 1993, Mr. Polanek was Vice President, Finance, and
Chief Financial Officer of Interlake Corporation, a metals and materials
handling company, for 31 years. He currently serves on the board of directors of
each of the Banks and Beverly Trust and also serves as Chairman of the Audit
Committee.

Mr. Waddell has been a Director of the Company since 1989. Mr. Waddell has
been First Vice President of Smith Barney Inc., an investment banking firm, and
predecessor firms since 1989, and he currently serves on the board of directors
of Beverly Bank, Beverly Bank Matteson and Beverly Trust.

Mr. Frank has been Executive Vice President, Chief Lending Officer of the
Company since 1995. From 1990 to 1995, he served as Senior Vice President,
Lending, of Beverly Bank Matteson. Mr. Frank joined the Company in 1990.

Mr. Martin has been Executive Vice President, Manager of Consumer Sales of
the Company since January 1996. Mr. Martin has also been President of Wilmington
since 1990 and a Director of Wilmington since 1963. He has served in various
capacities since joining Wilmington in 1967.

Mr. Ofenloch has been Executive Vice President, Manager of Commercial Sales
of the Company since January 1996. Mr. Ofenloch has also been President and a
Director of Beverly Bank Matteson since joining the Company in 1991.

39
<PAGE>
Mr. O'Neill has been Executive Vice President, Chief Financial Officer of
the Company since joining the Company in 1990.

Mr. Park has been Executive Vice President, Chief Operations Officer of the
Company since 1991. From 1964 to 1991, he served in various capacities at
Wilmington. Mr. Park joined the Company in 1964.

Mr. Stajkowski has been Executive Vice President of the Company since 1991.
He has served as Manager of Beverly Trust since 1980, and has served in various
capacities since joining the Company in 1964.

All directors of the Company hold office until the next annual meeting of
stockholders and until their successors have been elected and qualified.
Officers of the Company serve at the discretion of the Board of Directors of the
Company.

The Board of Directors has an Audit Committee consisting of all Directors
who are not employees of the Company ("Outside Directors"). The Audit Committee
recommends to the Board of Directors the appointment of the independent auditors
for the following year. The Audit Committee also reviews the scope of the annual
audit of the financial statements of the Company and the auditor's report
thereon and the auditor's comments relative to the adequacy of the Company's
system of internal controls and accounting systems.

EXECUTIVE COMPENSATION

The following table sets forth certain information regarding compensation
paid or accrued by the Company for services rendered in all capacities with
respect to the Company's fiscal year ended December 31, 1995 to the Chief
Executive Officer and each of the four other most highly compensated executive
officers of the Company.

<TABLE>
<CAPTION>
ANNUAL COMPENSATION
------------------------ ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) COMPENSATION($)(1)
- ----------------------------------------------------------- --------- ----------- ----------- -------------------
<S> <C> <C> <C> <C>
John D. Van Winkle, 1995 $ 175,000 $ 150,000 $ 7,370
President and Chief Executive Officer.....................
James W. Martin, Jr., 1995 110,000 75,000 6,861
Executive Vice President, Manager of Consumer Sales.......
Charles E. Ofenloch, 1995 150,000 85,000 7,175
Executive Vice President, Manager of Commercial Sales.....
Bruce G. Park, 1995 93,500 25,000 5,338
Executive Vice President, Chief Operations Officer........
Ronald F. Stajkowski, 1995 90,000 45,000 6,177
Executive Vice President..................................
</TABLE>

- ------------------------
(1) Consists of matching contributions made by the Company pursuant to the
Company's Employees Retirement and Savings Plan and life insurance premiums
paid by the Company on behalf of each executive officer. For 1995, life
insurance premiums in the following amounts were paid by the Company: Mr.
Van Winkle, $1,370; Mr. Martin, $861; Mr. Ofenloch, $1,175; Mr. Park, $732;
and Mr. Stajkowski, $705.

EMPLOYEE STOCK OPTIONS

None of the executive officers of the Company named in the Executive
Compensation Table were granted or exercised any options to purchase shares of
Common Stock during 1995. The following

40
<PAGE>
table sets forth certain information regarding the number and value of
unexercised options to purchase shares of Common Stock held at December 31, 1995
by the executive officers of the Company named in the Executive Compensation
Table.

<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN- THE-MONEY OPTIONS
DECEMBER 31, 1995 AT DECEMBER 31, 1995(1)
----------------------- -----------------------
NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- --------------------------------------------------------------- ----------------------- -----------------------
<S> <C> <C>
John D. Van Winkle............................................. 8,269/33,075 $ 23,897/$95,587
James W. Martin, Jr............................................ 5,513/22,050 15,931/63,725
Charles E. Ofenloch............................................ 6,615/26,460 19,117/76,469
Bruce G. Park.................................................. 4,410/17,640 12,745/50,980
Ronald F. Stajkowski........................................... 4,410/17,640 12,745/50,980
</TABLE>

- ------------------------
(1) Value of unexercised in-the-money options is equal to the difference between
the bid price per share of Common Stock at December 31, 1995 and the option
exercise price per share multiplied by the number of shares subject to
options.

DIRECTORS' COMPENSATION

Directors who are employees of the Company do not receive any compensation
for serving as directors of the Company. Outside Directors receive an annual
retainer of $13,600, plus an attendance fee for each Outside Director of $600
per regular meeting and $500 per committee meeting. Outside Directors receive
their annual retainer in the form of shares of Common Stock valued at 95% of the
current bid price of the Common Stock on the date of issuance. The Chairman of
the Board receives an annual retainer of $84,000 which is also paid in the form
of shares of Common Stock valued at 95% of the current bid price of the Common
Stock on the date of issuance. Additionally, all non-employee directors are
reimbursed for expenses incurred in attending board meetings.

CERTAIN TRANSACTIONS

Some of the directors, executive officers and affiliates of the Company are,
and have been during the preceding three fiscal years, customers of the Banks,
and some of the directors, executive officers and affiliates of the Company are
direct or indirect owners of 10% or more of the stock of corporations which are,
or have been in the past, customers of the Banks. As such customers, they have
had transactions in the ordinary course of business of the Banks, including
borrowings, all of which transactions are or were on substantially the same
terms (including interest rates and collateral on loans) as those prevailing at
the time for comparable transactions with nonaffiliated persons. In the opinion
of management of the Company, none of the transactions involved more than the
normal risk of collectibility or presented any other unfavorable features. As of
June 30, 1996 the Banks had $3,480,593 in loans outstanding to the directors,
executive officers and affiliates of the Company, which amount represented 8.6%
of total stockholders' equity as of that date. In addition, as of June 30, 1996,
the Banks had $3,328,407 in loans outstanding to directors and officers of the
Banks who are not also directors or executive officers of the Company.

The Company purchases architectural services from Archideas, Inc., a
corporation in which Joseph A. Pasquinelli is a 20% principal. Under the terms
of the agreements between the Company and Archideas, Inc., the Company paid
Archideas, Inc. $5,606 in 1994, $57,561 in 1995 and $35,796 through July 31,
1996. Joseph A. Pasquinelli is the son of Anthony R. Pasquinelli and the nephew
of Bruno A. Pasquinelli.

The Company leases its Orland Park (Will-Cook) facility from a partnership
in which Anthony R. Pasquinelli and Bruno A. Pasquinelli each have a 14.1%
partnership interest. Under the terms of the lease, which is a triple net lease
that expires in 2016, the Company currently pays annual rent of $100,700, which
increases annually as set forth in the lease.

41
<PAGE>
The Company leases its Homewood facility from a partnership in which Anthony
R. Pasquinelli and Bruno A. Pasquinelli have an indirect, minority partnership
interest. Under the terms of the leases, which expire in 2008, the Company
currently pays an aggregate annual rent of $101,400, subject to three percent
annual increases as provided in the leases.

During 1996, the Company has purchased approximately $1,000,000 of
investment securities through Smith Barney Inc. William C. Waddell, a First Vice
President of Smith Barney Inc., has received aggregate commissions of less than
$9,000 in connection with these transactions.

John D. Van Winkle received a loan from the Company in 1994 of $224,640, of
which $214,640 was outstanding as of July 31, 1996. The loan is payable in
annual principal installments of $10,000 and bears interest at the prime rate.

The following executive officers of the Company delivered full recourse
promissory notes to the Company as consideration for shares of Common Stock:

John D. Van Winkle purchased 50,000 shares of Common Stock in 1989 and
delivered a note in the principal amount of $436,000, of which $436,000 was
outstanding as of July 31, 1996. The note is payable on demand and bears
interest at a rate which equals the dividend rate on the Common Stock.

Charles E. Ofenloch purchased 50,000 shares of Common Stock in 1994 and
delivered a note in the principal amount of $474,500, of which $474,500 was
outstanding as of July 31, 1996. The note is payable on demand and bears
interest at the prime rate.

Ronald F. Stajkowski purchased 1,000 shares of Common Stock in 1987 and
delivered a note in the principal amount of $65,000, which was fully repaid in
1995.

42
<PAGE>
PRINCIPAL STOCKHOLDERS

The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of July 31, 1996, and as adjusted to
reflect the sale of the Common Stock offered hereby, by (i) each person who is
known by the Company to own beneficially more than 5% of the Company's
outstanding Common Stock, (ii) each of the Company's directors, (iii) each of
the executive officers of the Company named in the Executive Compensation Table
and (iv) all directors and executive officers of the Company as a group.

<TABLE>
<CAPTION>
PERCENTAGE OF
NUMBER OF OUTSTANDING SHARES (1)
SHARES ------------------------
BENEFICIALLY PRIOR TO AFTER
NAME OWNED (1) OFFERING OFFERING
- --------------------------------------------------------------------------------- ----------- ----------- -----------
<S> <C> <C> <C>
Heartland Advisors Inc. (2)...................................................... 302,625 7.6% 6.1%
Anthony R. Pasquinelli (3)(13)................................................... 288,932 7.3 5.8
Bruno A. Pasquinelli (4)......................................................... 272,337 6.8 5.5
John D. Van Winkle (5)(13)(14)................................................... 95,480 2.4 1.9
Christopher M. Cronin (6)(13).................................................... 8,661 * *
Richard I. Polanek (7)(13)....................................................... 75,405 1.9 1.5
William C. Waddell (8)(13)....................................................... 64,263 1.6 1.3
James W. Martin, Jr. (9)(13)..................................................... 27,929 * *
Charles E. Ofenloch (10)(13)..................................................... 91,792 2.3 1.8
Bruce G. Park (11)(13)(14)....................................................... 26,714 * *
Ronald F. Stajkowski (12)(13).................................................... 108,210 2.7 2.1
All directors and executive officers as a group (11 persons) (13)................ 823,418 20.2 16.2
</TABLE>

- ------------------------
*Less than one percent.

(1) Calculated pursuant to Rule 13d-3(d) of the Securities Exchange Act of 1934,
as amended. Unless otherwise stated below, each such person has sole voting
and investment power with respect to all such shares. Under Rule 13d-3(d),
shares not outstanding which are subject to options, warrants, rights or
conversion privileges exercisable within 60 days are deemed outstanding for
the purpose of calculating the number and percentage owned by such person,
but are not deemed outstanding for the purpose of calculating the percentage
owned by each other person listed.

(2) Number of shares reported by Heartland Advisors Inc. as of March 31, 1996 in
its most recent Schedule 13F filed with the Securities and Exchange
Commission. Includes 250,125 shares as to which Heartland Advisors Inc. has
sole voting power and 52,500 shares as to which Heartland Advisors Inc. has
sole dispositive power. The business address of Heartland Advisors Inc. is
790 N. Milwaukee Street, Milwaukee, Wisconsin 53202.

(3) Includes 11,828 shares held in trust for Anthony R. Pasquinelli's benefit.
Anthony R. Pasquinelli's business address is 905 W. 175th Street, Homewood,
Illinois 60430.

(4) Includes 11,801 shares held in trust for Bruno A. Pasquinelli's benefit.
Bruno A. Pasquinelli's business address is 905 W. 175th Street, Homewood,
Illinois 60430.

(5) Includes 64,280 shares beneficially owned by Mr. Van Winkle and his wife and
12 shares beneficially owned by Mr. Van Winkle's daughters.

(6) Includes 3,030 shares in the Knickerbocker Roofing Pension Plan.

(7) Includes 59,680 shares held in trust for Mr. Polanek's benefit and 2,865
shares beneficially owned by Mr. Polanek's wife.

(8) Includes 4,729 shares beneficially owned by Mr. Waddell's wife.

(9) Includes 16,904 shares held in trust for Mr. Martin's benefit.

43
<PAGE>
(10) Includes 11,312 shares beneficially owned by Mr. Ofenloch and his wife.

(11) Includes 10,330 shares held in trust for Mr. Park's benefit.

(12) Includes 99,390 shares beneficially owned by Mr. Stajkowski and his wife.

(13) Includes shares of Common Stock that could be acquired through the exercise
of stock options as follows: Mr. A. Pasquinelli, 6,615 shares; Mr. Van
Winkle, 16,538 shares; Mr. Cronin, 1,103 shares; Mr. Polanek, 6,615 shares;
Mr. Waddell, 6,615 shares; Mr. Martin, 11,026 shares; Mr. Ofenloch, 13,230
shares; Mr. Park, 8,820 shares; Mr. Stajkowski, 8,820 shares; and all
directors and executive officers as a group, 94,711 shares.

(14) Excludes 9,146 shares of Common Stock held by the Company's Employees
Retirement and Savings Plan (the "Plan"). Messrs. Van Winkle and Park and
three other persons are members of the administration committee of the Plan.
As such, they are entitled to vote the shares of Common Stock held by the
Plan and therefore may be deemed to beneficially own such shares.

SUPERVISION AND REGULATION

GENERAL

Financial institutions and their holding companies are extensively regulated
under federal and state laws. As a result, the business, financial condition and
prospects of the Company and the Banks can be materially affected not only by
management decisions and general economic conditions, but also by applicable
statutes and regulations and other regulatory pronouncements and policies
promulgated by regulatory agencies with jurisdiction over the Company and the
Banks, such as the Board of Governors of the Federal Reserve System ("FRB"), the
Office of the Comptroller of the Currency ("OCC"), the Federal Deposit Insurance
Corporation ("FDIC") and the Office of the Illinois Commissioner of Banks and
Real Estate (the "Commissioner"). The effect of such statutes, regulations and
other pronouncements and policies can be significant, cannot be predicted with a
high degree of certainty and can change over time. Furthermore, such statutes,
regulations and other pronouncements and policies are intended to protect
depositors and the FDIC's deposit insurance funds, not to protect stockholders.

Bank holding companies and banks are subject to enforcement actions by their
regulators for regulatory violations. In addition to compliance with statutory
and regulatory limitations and requirements concerning financial and operating
matters, regulated financial institutions such as the Company and the Banks must
file periodic and other reports and information with their regulators and are
subject to examination by each of their regulators.

The statutory requirements applicable to and regulatory supervision of bank
holding companies and banks have increased significantly and have undergone
substantial change in recent years. To a great extent, these changes are
embodied in the Financial Institutions Reform, Recovery and Enforcement Act
("FIRREA"), enacted in August 1989, the Federal Deposit Insurance Corporation
Improvement Act of 1991 ("FDICIA"), enacted in December 1991, and the
regulations promulgated under FIRREA and FDICIA. Many of the regulations
promulgated pursuant to FDICIA have only recently been finalized and their
impact on the business, financial condition and prospects of the Company and the
Banks cannot be predicted with certainty.

Currently, various initiatives have been proposed that could result in a
wide-ranging restructuring of the bank regulatory system in the United States.
These include (i) the merger or other combination of the financial institution
regulators, including the FRB, the OCC and the FDIC, (ii) the combination of the
OCC and FDIC, with the FRB remaining independent, and (iii) the creation of a
new federal banking agency to provide comprehensive supervision of financial
institutions. There can be no certainty as to the effect, if any, that such
restructuring would have on the regulation of the Company or the Banks.

44
<PAGE>
The following discussion and other references to and descriptions of the
regulation of financial institutions contained herein constitute brief summaries
thereof. This discussion is not intended to constitute and does not purport to
be a complete statement of all legal restrictions and requirements applicable to
the Company and the Banks and all such descriptions are qualified in their
entirety by reference to applicable statutes, regulations and other regulatory
pronouncements.

REGULATION OF BANK HOLDING COMPANIES AND THEIR NON-BANK SUBSIDIARIES

The Company is a registered bank holding company within the meaning of the
Bank Holding Company Act of 1956, as amended ("BHCA"). As such, the Company is
subject to regulation, supervision and examination by the FRB. The Company is
also subject to the limitations and requirements of the Illinois Bank Holding
Company Act ("IBHCA"). These limitations and requirements, however, are no more
restrictive in most instances than those imposed by the BHCA and the FRB. The
business and affairs of the Company are regulated in a variety of ways,
including limitations on acquiring control of other banks and bank holding
companies, limitations on activities and investments, limitations on interstate
acquisitions, regulatory capital requirements and limitations on payment of
dividends. In addition, it is the FRB's policy that a bank holding company is
expected to act as a source of financial strength to banks that it owns or
controls and, as a result, the FRB could require the Company to commit resources
to support the Banks in circumstances in which the Company might not do so
absent the FRB's policy. The Company's most recent regulatory examination was
conducted by the FRB as of March 31, 1996.

ACQUISITION OF BANKS AND BANK HOLDING COMPANIES

The BHCA generally prohibits a bank holding company from (i) acquiring,
directly or indirectly, more than 5% of the outstanding shares of any class of
voting securities of a bank or bank holding company, (ii) acquiring control of a
bank or another bank holding company, (iii) acquiring all or substantially all
the assets of a bank, or (iv) merging or consolidating with another bank holding
company, without first obtaining FRB approval. In considering an application
with respect to any such transaction, the FRB is required to consider a variety
of factors, including the potential anti-competitive effects of the transaction,
the financial condition and future prospects of the combining and resulting
institutions, the managerial resources of the resulting institution, the
convenience and needs of the communities the combined organization would serve,
the record of performance of each combining organization under the Community
Reinvestment Act ("CRA"), and the prospective availability to the FRB of
information appropriate to determine ongoing regulatory compliance with
applicable banking laws.

In addition, the federal Change in Bank Control Act imposes limitations on
the ability of one or more individuals or other entities to acquire control of
the Company or the Banks. Further, the Illinois Banking Act ("IBA") also
regulates the acquisition of control of Illinois-chartered banks.

Banking laws and regulations, including the Federal Reserve Act, generally
impose certain limitations on extensions of credit and other transactions by and
between banks and other banks and non-bank companies in the same holding company
system. See "--Regulation of Banks -- Insider and Affiliate Transactions." A
bank holding company and its subsidiaries also are prohibited from engaging in
certain tie-in arrangements in connection with any extension of credit, lease or
sale of property or furnishing of services.

The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 (the
"Interstate Act"), which became effective in September 1995, has eliminated many
of the historical barriers to the acquisition of banks by out-of-state bank
holding companies. The Interstate Act facilitates the interstate expansion and
consolidation of banking organizations by permitting: (i) bank holding companies
that are adequately capitalized and managed to acquire banks located in states
outside their home states regardless of whether such acquisitions are authorized
under the law of the host state; (ii) the interstate merger of banks after June
1, 1997, subject to the right of individual states either to pass legislation
providing for earlier effectiveness of such mergers or to "opt out" of this
authority prior to such date; (iii) banks to establish new branches on an
interstate basis provided that such action is

45
<PAGE>
specifically authorized by the law of the host state; (iv) foreign banks to
establish, with approval of the appropriate regulators in the United States,
branches outside their home states to the same extent that national or state
banks located in such state would be authorized to do so; and (v) banks to
receive deposits, renew time deposits, close loans, service loans and receive
payments on loans and other obligations as agent for any bank or thrift
affiliate, whether the affiliate is located in the same or different state.

The IBHCA permits Illinois bank holding companies to acquire control of
banks in any state and permits bank holding companies whose principal place of
business is in another state to acquire control of Illinois banks or bank
holding companies upon satisfactory application to the Commissioner. In
reviewing any such application, the Commissioner will review, among other
things, compliance by the applicant banks with the requirements of the CRA, and
other information designed to determine such banks' abilities to meet community
credit needs.

PERMISSIBLE NON-BANKING ACTIVITIES

The BHCA generally prohibits a bank holding company from engaging in
activities or acquiring or controlling, directly or indirectly, voting
securities or assets of any company engaged in any activity other than banking,
managing or controlling banks or another activity that the FRB has determined,
by regulation or otherwise, to be so closely related to banking or managing or
controlling banks as to be a proper incident thereto. Subject to certain
exceptions, before making any such acquisition or engaging in any such activity,
a bank holding company must obtain the prior approval of the FRB as provided in
applicable regulations.

In evaluating such applications, the FRB will consider, among other relevant
factors, whether permitting the bank holding company to engage in the activity
in question can reasonably be expected to produce benefits to the public (such
as increased convenience, competition or efficiency) that outweigh any possible
adverse effects (such as undue concentration of resources, decreased or unfair
competition, conflicts of interest or safety and soundness concerns). Those
activities that the FRB has determined by regulation to be closely related to
banking include: (i) making, acquiring and servicing loans such as would be made
by mortgage companies (for the company's account or the account of others); (ii)
trust company functions; (iii) certain investment advisory services; (iv)
certain security brokerage services; and (v) certain insurance agency
activities.

Notwithstanding applicable restrictions on both the acquisition of control
of banks and companies engaged in permissible non-banking activities, a bank
holding company may acquire, without the prior approval of the FRB, 5% or less
of the outstanding shares of any class of voting securities of a company,
assuming the investment does not otherwise result in control of such company.
The BHCA prohibits bank holding companies, with certain exceptions, from
acquiring direct or indirect ownership of more than five percent of the voting
securities of any company that is not a bank or does not engage in specifically
permitted activities such as those described in the preceding paragraph.

As mentioned above, trust company activities are among those determined by
the FRB to be closely related to banking. Beverly Trust is an Illinois-chartered
trust company with a Certificate of Authority to perform trust functions from
the Commissioner. Beverly Trust is subject to regulation and examination by the
Commissioner and, as a direct subsidiary of the Company, by the FRB.

CAPITAL REQUIREMENTS

Regulatory capital requirements applicable to all regulated financial
institutions, including bank holding companies and banks, have increased
significantly in recent years and further increases are possible in future
periods. The FRB has adopted risk-based capital standards for bank holding
companies. The articulated objectives of Congress and the FRB in establishing a
risk-based method of measuring capital adequacy are (i) to make regulatory
capital requirements applicable to bank holding companies more sensitive to
differences in risk profiles among bank holding companies, (ii) to factor
off-balance sheet liabilities into the assessment of capital adequacy, (iii) to
reduce disincentives for bank holding companies to hold liquid, low risk assets
and (iv) to achieve greater consistency in the

46
<PAGE>
evaluation of capital adequacy of major banking organizations throughout the
world by conforming to the framework developed jointly by supervisory
authorities from countries that are parties to the so-called "Basle Accord"
adopted by such supervisory authorities in July 1988.

The FRB requires bank holding companies to maintain a minimum ratio of
qualifying total capital to risk-weighted assets. Banking organizations,
however, generally are expected to operate well above the minimum risk-based
ratios. Risk-weighted assets include a "credit equivalent amount" of off balance
sheet items, determined in accordance with conversion formulae set forth in the
FRB's regulations. Each asset and off balance sheet item, after certain
adjustments, is assigned to one of four risk-weighting categories, 0%, 20%, 50%
or 100%, and the risk-adjusted values then are added together to determine
risk-weighted assets.

A bank holding company must meet two risk-based capital standards, a "core"
or "Tier 1" capital requirement and a total capital requirement. The current
regulations require that a bank holding company maintain Tier 1 capital equal to
4% of risk-weighted assets and qualifying total capital equal to 8% of
risk-weighted assets. Tier 1 capital must represent at least 50% of total
capital and may consist of those items defined in applicable regulations as core
capital elements. Core capital elements include common stockholders' equity;
qualifying noncumulative, perpetual preferred stock; qualifying (i.e., up to 25%
of total Tier 1 capital) cumulative perpetual preferred stock; and minority
interests in the equity accounts of consolidated subsidiaries. Core capital
excludes goodwill, deferred tax assets and other intangible assets required to
be deducted in accordance with applicable regulations.

Total capital represents the sum of Tier 1 capital plus "Tier 2" capital,
less certain deductions. Tier 2 or "supplementary" capital consists of:
allowances for loan and lease losses; perpetual preferred stock (to the extent
not included in Tier 1 capital); hybrid capital instruments; perpetual debt;
mandatory convertible debt securities; term subordinated debt; and intermediate
term preferred stock, in each case subject to applicable regulatory limitations.
The maximum amount of Tier 2 capital that may be included in an organization's
qualifying total capital cannot exceed 100% of Tier 1 capital. In determining
total capital, a bank holding company must deduct from the sum of Tier 1 and
Tier 2 capital: its investments in unconsolidated subsidiaries; reciprocal
holdings of certain securities of banking organizations; and other deductions
required by regulation or determined on a case-by-case basis by the appropriate
supervisory authority.

Another capital measure, the Tier 1 leverage ratio, is defined as Tier 1
capital divided by average total assets (net of allowance for loan and lease
losses, goodwill, and other intangible assets). The minimum leverage ratio is 3%
for banking organizations that do not anticipate significant growth and that
have well-diversified risk (including no undue interest rate risk), excellent
asset quality, high liquidity and good earnings. Other banking organizations are
expected to have ratios of at least 4%-5%, depending upon their particular
condition and growth plans. Higher capital ratios could be required if warranted
by the particular circumstances or risk profile of a given banking organization.
The FRB has not advised the Company of any specific minimum Tier 1 leverage
ratio applicable to it.

As of June 30, 1996, the Company had Tier 1 and total risk-based capital
ratios of 11.50% and 12.58%, respectively, and had a Tier 1 leverage ratio of
6.97%.

The failure of a bank holding company to meet its required capital ratios
may result in supervisory action, as well as inability to obtain approval of any
regulatory applications and, potentially, increased frequency of examination.
The nature and intensity of the supervisory action will depend upon the level of
noncompliance. Under the IBHCA, no bank holding company may acquire control of a
bank if, at the time it applies for approval or at the time the transaction is
consummated, its ratio of total capital to total assets, as determined in
accordance with then applicable FRB regulations, is or will be less than 7%.

Risk-based capital ratios focus principally on broad categories of credit
risk and do not incorporate factors that can affect the Company's financial
condition, such as overall interest rate risk exposure, liquidity, funding and
market risks, the quality and level of earnings, investment or loan

47
<PAGE>
portfolio concentrations, the quality of loans and investments, the
effectiveness of loan and investment policies and management's ability to
monitor and control financial and operating risks. For this reason, the overall
financial health of the Company and the Banks and the assessment of the Company
and the Banks by various regulatory agencies may differ from conclusions that
might be drawn solely from the level of the Company or the Banks' risk-based
capital ratios.

DIVIDENDS

The FRB has issued a policy statement on the payment of cash dividends by
bank holding companies. In the policy statement, the FRB expressed its view that
a bank holding company should not pay cash dividends unless net income over the
past year was sufficient to fully fund the dividends and the prospective rate of
earnings retention appears consistent with capital needs, asset quality and
overall financial condition. Further, the FRB stated that it believes it is
inappropriate for a banking organization that is experiencing serious financial
problems or that has inadequate capital to borrow in order to fund dividends.
The FRB also may impose limitations on the payment of dividends as a condition
to its approval of certain applications, including applications for approval of
mergers and acquisitions. Between June 1990 and January 1993, the FRB did not
permit the Company to pay dividends on its stock without the FRB's prior consent
or notification. In January 1993, because of the Company's improved financial
condition, the FRB informed the Company that it could resume paying dividends
without restriction.

REGULATION OF BANKS

Beverly Bank, Beverly Bank Matteson and Beverly Bank Lockport are Illinois
banking corporations (sometimes collectively referred to herein as the "Illinois
Banks") organized under the IBA. Wilmington is a national banking association
organized under the National Bank Act. As Illinois banks, Beverly Bank, Beverly
Bank Matteson and Beverly Bank Lockport are subject to regulation, supervision
and examination by the Commissioner, and Wilmington is subject to regulation,
supervision and examination by the OCC. Beverly Bank Lockport is a member of the
Federal Reserve System and, therefore, is also subject to regulation,
supervision and examination by the FRB. The deposit accounts of the Banks are
insured up to applicable limits by the FDIC's Bank Insurance Fund ("BIF"). Thus,
the Banks also are subject to regulation, supervision and examination by the
FDIC. In certain instances, the statutes administered by and regulations
promulgated by certain of these agencies are more stringent than those of other
agencies with jurisdiction. In these instances, the Banks must comply with the
more stringent restrictions, prohibitions or requirements. Beverly Bank's most
recent regulatory examinations were conducted by the Commissioner as of July 31,
1995 and by the FDIC as of June 30, 1994. Beverly Bank Matteson's most recent
regulatory examinations were conducted by the FDIC as of December 31, 1994 and
by the Commissioner as of March 31, 1994. Beverly Bank Lockport's most recent
regulatory examinations were conducted by the Commissioner as of April 14, 1994
and by the FRB as of March 12, 1993. Wilmington's most recent regulatory
examination was conducted by the OCC as of October 3, 1995.

The business and affairs of the Banks are regulated in a variety of ways.
Regulations apply to, among other things, insurance of deposit accounts, the
Banks' capital ratios, payment of dividends, liquidity requirements, the nature
and amount of the investments that the Banks may make, transactions with
affiliates, community and consumer lending laws, internal policies and controls,
reporting by and examination of the Banks and changes in control of the Banks.

DEPOSIT INSURANCE

As FDIC-insured institutions, the Banks are required to pay deposit
insurance premiums to the FDIC. FDICIA authorized the FDIC to implement a
risk-based deposit insurance assessment system. Pursuant to this requirement,
the FDIC has adopted a risk-based assessment system, under which each insured
depository institution is placed into one of nine categories and assessed
insurance premiums accordingly. Beginning with the first semi-annual assessment
period of 1996, these premiums range from 0% to .27% of deposits included in an
institution's "assessment base," depending

48
<PAGE>
upon its level of capital and evaluation of other supervisory factors, and
subject to an annual minimum payment of $2,000. A bank's assessment base
generally includes all of its demand, time and savings deposits, regardless of
whether they are FDIC insured.

Institutions classified as "well-capitalized" (see "--Regulation of Banks --
Capital Requirements") and part of a supervisory subgroup of financially sound
institutions with a few minor weaknesses would pay the lowest premium while
institutions that are "undercapitalized" (see "-- Regulation of Banks -- Capital
Requirements") and considered of substantial supervisory concern would pay the
highest premium. Risk classification of all insured institutions is made by the
FDIC for each semi-annual assessment period. In the first semi-annual assessment
period of 1995, the Banks were assessed at the rate of .23% of deposits and in
the second semi-annual period were assessed at the rate of .04% of deposits,
which were the rates for "well-capitalized" and financially sound institutions.

The FDIC may terminate the deposit insurance of any insured depository
institution if the FDIC determines, after a hearing, that the institution has
engaged or is engaging in unsafe or unsound banking practices, is in a condition
that is unsafe or unsound for the continuation of operations or otherwise has
violated any applicable law, regulation or order, or any condition imposed in
writing by or in a written agreement with the FDIC. The FDIC also may suspend
deposit insurance temporarily during the pendency of a proceeding to terminate
insurance if the institution has no tangible capital. Management of the Company
is not aware of any activity or condition that could result in termination of
the deposit insurance of the Banks.

Legislation also is being considered by Congress that would result in the
merger of the Bank Insurance Fund and the Savings Association Insurance Fund
("SAIF"). This legislation could result in banks sharing in the payments for
Financing Corp. ("FICO") bonds, which were issued in connection with the savings
and loan crisis. FICO bonds currently are supported through the payment of SAIF
assessments by savings institutions, and thus adoption of this legislation could
result in higher BIF premium payments by banks.

CAPITAL REQUIREMENTS

The FRB regulations establish the same three minimum capital standards for
insured state member banks as are in place for bank holding companies. The OCC
and FDIC regulations also establish the same minimum Tier 1 and risk-based
capital ratios and Tier 1 leverage ratios for national banks and state nonmember
banks. Under the FRB, OCC and FDIC regulations, the Banks' capital ratios are
computed in a manner substantially similar to the manner in which bank holding
company capital ratios are determined. See "--Regulation of Bank Holding
Companies and Their Non-Bank Subsidiaries -- Capital Requirements." These
capital requirements are minimum requirements and higher levels of capital will
be required if warranted by the particular circumstances or risk profile of an
individual bank.

FDICIA provides the federal banking regulators with broad power to take
"prompt corrective action" to resolve the problems of undercapitalized
institutions. The extent of the regulators' powers depends on whether the
institution in question is "well capitalized," "adequately capitalized,"
"undercapitalized," "significantly undercapitalized" or "critically
undercapitalized." Under regulations adopted by the federal banking regulators,
a bank would be considered "well capitalized" if it (i) has a total risk-based
capital ratio of 10% or greater, (ii) has a Tier 1 risk-based capital ratio of
6% or greater, (iii) has a leverage ratio of 5% or greater and (iv) is not
subject to any order or written directive to meet and maintain a specific
capital level. An "adequately capitalized" bank is defined under the regulations
as one that (i) has a total risk-based capital ratio of 8% or greater, (ii) has
a Tier 1 risk-based capital ratio of 4% or greater, (iii) has a leverage ratio
of 4% or greater (or 3% or greater in the case of a bank with the highest
composite regulatory examination rating that is not experiencing or anticipating
significant growth) and (iv) does not meet the definition of a well capitalized
bank. A bank would be considered (A) "undercapitalized" if it has (i) a total
risk-based capital ratio of less than 8%, (ii) a Tier 1 risk-based capital ratio
of less than 4% or (iii) a leverage ratio of less than 4% (or 3% in the case of
a bank with the highest composite regulatory examination rating that is not
experiencing or

49
<PAGE>
anticipating significant growth); (B) "significantly undercapitalized" if the
bank has (i) a total risk-based capital ratio of less than 6%, (ii) a Tier 1
risk-based capital ratio of less than 3% or (iii) a leverage ratio of less than
3%; and (C) "critically undercapitalized" if the bank has a ratio of tangible
equity to total assets of equal to or less than 2%. The regulations would permit
the appropriate federal banking regulator to downgrade a bank to the next lower
category if the regulator determines (i) after notice and opportunity for
hearing or response, that the bank is in an unsafe or unsound condition or (ii)
that the bank has received (and not corrected) a less-than-satisfactory rating
for any of the categories of asset quality, management, earnings or liquidity in
its most recent exam.

As of June 30, 1996, Beverly Bank qualified as "well-capitalized," with a
total risk-based capital ratio of 14.28%; a Tier 1 risk-based capital ratio of
13.04% and a leverage ratio of 7.49%. As of June 30, 1996, Beverly Bank Matteson
qualified as "well-capitalized," with a total risk-based capital ratio of
13.28%; a Tier 1 risk-based capital ratio of 12.44% and a leverage ratio of
7.53%. As of June 30, 1996, Beverly Bank Lockport qualified as
"well-capitalized," with a total risk-based capital ratio of 12.85%; a Tier 1
risk-based capital ratio of 11.81% and a leverage ratio of 6.89%. As of June 30,
1996, Wilmington qualified as "well-capitalized," with a total risk-based
capital ratio of 13.67%; a Tier 1 risk-based capital ratio of 12.66% and a
leverage ratio of 7.57%.

Depending upon the capital category to which an institution is assigned, the
regulators' corrective powers, many of which are mandatory in certain
circumstances, include: prohibition on capital distributions; prohibition on
payment of management fees to controlling persons; requiring the submission of a
capital restoration plan; placing limits on asset growth; limiting acquisitions,
branching or new lines of business; requiring the institution to issue
additional capital stock (including additional voting stock) or to be acquired;
restricting transactions with affiliates; restricting the interest rates that
the institution may pay on deposits; ordering a new election of directors of the
institution; requiring that senior executive officers or directors be dismissed;
prohibiting the institution from accepting deposits from correspondent banks;
prohibiting the institution's bank holding company from making any capital
distributions; requiring the institution to divest certain subsidiaries;
prohibiting the payment of principal or interest on subordinated debt; and,
ultimately, appointing a receiver for the institution.

DIVIDENDS

Under the IBA, each of the Illinois Banks is permitted to declare and pay
dividends in amounts up to the amount of its accumulated net profits, provided
that it shall retain in its surplus at least one-tenth of its net profits since
the date of the declaration of its most recent previous dividend until said
additions to surplus, in the aggregate, equal at least the paid-in capital of
the Bank. In no event may any Illinois Bank, while it continues its banking
business, pay dividends in excess of its net profits then on hand (after
deductions for losses and bad debts).

The FRB permits a state member bank such as Beverly Bank Lockport to pay
dividends, while it continues its banking operations, in an amount not greater
than its net profits then on hand, after deducting therefrom its losses and bad
debts. No state member bank may pay as a dividend a portion of its paid-in
capital and no state member bank may pay dividends if its accumulated losses
equal or exceed its undivided profits then on hand. The FRB policy statement
described above (see "-- Regulation of Bank Holding Companies and Their Non-Bank
Subsidiaries -- Dividends") also applies to the payment of dividends by state
member banks. Accordingly, it is the FRB's view that a state member bank
experiencing earnings weaknesses should not pay cash dividends exceeding current
net income or that only can be funded in ways that weaken such bank's financial
health, such as by borrowing.

The payment of dividends by Wilmington is regulated by the OCC under the
National Bank Act. Pursuant to the National Bank Act, all dividends must be paid
out of the undivided profits of the bank. The National Bank Act further
restricts the payment of dividends by prohibiting a national bank from declaring
a dividend on its shares of common stock until its surplus fund equals the
amount of capital stock or, if the surplus fund does not equal the amount of
capital stock, until not less than one-tenth of

50
<PAGE>
a bank's net income for the preceding half year in the case of quarterly or
semi-annual dividends, or the preceding two half-year periods in the case of
annual dividends, are transferred to the surplus fund. The approval of the OCC
is required prior to the payment of a dividend if the total of all dividends
declared by a national bank in any calendar year would exceed the total of its
net income for that year combined with its retained net income for the two
preceding years, less any required transfers to surplus or a fund for the
retirement of any preferred stock.

Under FDICIA, none of the Banks may pay a dividend if, after paying the
dividend, such Bank would be undercapitalized.

At June 30, 1996, the amount of retained earnings of the Banks available for
dividends, while maintaining the Banks in a well-capitalized status, totaled
approximately $14,000,000.

INSIDER AND AFFILIATE TRANSACTIONS

Each of the Banks is subject to certain restrictions on "covered
transactions" between and among the Banks, the Company and other affiliates.
"Covered transactions" are defined by the Federal Reserve Act to include a loan
or extension of credit to an affiliate, a purchase of securities issued by an
affiliate, a purchase of assets from the affiliate (unless otherwise exempted by
the FRB), the acceptance of securities issued by an affiliate as collateral for
a loan and the issuance of a guarantee, acceptance, or letter of credit for the
benefit of an affiliate. The covered transactions that an insured bank and its
subsidiaries are permitted to engage in with their nonbank affiliates are
limited to the following amounts: (i) in the case of any one such affiliate, the
aggregate amount of "covered transactions" of the insured bank and its
subsidiaries cannot exceed 10% of the capital stock and the surplus of the
insured bank; and (ii) in the case of all affiliates, the aggregate amount of
"covered transactions" of the insured bank and its subsidiaries cannot exceed
20% of the capital stock and surplus of the insured bank. Loans and other
extensions of credit by insured banks and their affiliates must, in general,
also be collateralized at required minimum levels. In addition, covered
transactions, as well as certain other transactions between or among an insured
bank and its affiliates, must be on terms that are substantially the same as
those prevailing for comparable transactions with nonaffiliated entities.

Certain limitations and reporting requirements also are placed on extensions
of credit by the Banks to principal stockholders of the Company, and to
directors and certain executive officers of the Company, its non-bank
subsidiaries and the Banks and to "related interests" of such principal
stockholders, directors and officers. Extensions of credit (i) must be made on
substantially the same terms, including interest rates and collateral as, and
following credit underwriting procedures that are not less stringent than, those
prevailing at the time for comparable transactions with persons not covered
above and who are not employees, and (ii) must not involve more than the normal
risk of repayment or present other unfavorable features. In addition, any
director or officer of the Company or the Banks or principal stockholder of the
Company may be limited in his or her ability to obtain credit from banks with
which the Banks maintain a correspondent relationship.

COMMUNITY INVESTMENT AND CONSUMER PROTECTION LAWS

In connection with its lending activities, each of the Banks is subject to a
variety of federal laws designed to protect borrowers and promote lending to
various sectors of the economy and population. Included among these are the
federal Home Mortgage Disclosure Act, Real Estate Settlement Procedures Act,
Truth-in-Lending Act, Equal Credit Opportunity Act, Fair Credit Reporting Act
and the CRA. The Illinois Banks are subject to similar Illinois laws applicable
to, among other things, usury, credit discrimination and business practices.

The CRA requires banks to define the communities that they serve, identify
the credit needs of those communities and adopt and implement a "Community
Reinvestment Act Statement" pursuant to which they offer credit products and
take other actions that respond to the credit needs of the community. Under
FIRREA, the responsible federal banking regulatory agency must conduct annual
CRA examinations of insured financial institutions and assign to them a CRA
rating of "outstanding," "satisfactory," "needs to improve" or "substantial
noncompliance."

51
<PAGE>
The federal banking regulatory agencies will take into account the CRA
ratings of institutions in connection with their consideration of applications
filed by the institutions, including applications to establish branch offices or
applications of depository institutions to convert to national bank charters. In
addition, regulatory agencies will take CRA ratings of combining organizations
into account in connection with acquisitions involving the change of control of
a financial institution. Based on the institutions' records of performance, the
appropriate agency may deny the application on CRA grounds or require corrective
action as a condition of its approval. In 1995, Beverly Bank's CRA rating was
outstanding, Beverly Bank Matteson's CRA rating was outstanding, Beverly Bank
Lockport's CRA rating was satisfactory, and Wilmington's CRA rating was
outstanding.

In September 1994, the Riegle Community Development and Regulatory
Improvement Act (the "Community Development Act") was enacted. The Community
Development Act includes (i) Subtitle A, the "Community Development and
Financial Institutions Act," which establishes the "Community Development
Financial Institutions Fund" to promote economic revitalization and community
development through investment in "Community Development Financial
Institutions," and (ii) Subtitle B, "The Home Ownership and Equity Protection
Act of 1994," which seeks to increase the protections afforded to individuals
most at risk from abusive lending practices, particularly high-interest
mortgages secured by the borrowers' homes.

The Community Development Act also provides a number of initiatives to
lessen the regulatory burden placed upon depository institutions and also
affects a number of the consumer compliance laws by allowing streamlined
disclosures for radio advertising of consumer leases, providing consumers with
information necessary to challenge an "adverse characterization" due to a credit
reporting agency report and by clarifying the disclosure requirements under the
Real Estate Settlement Procedures Act regarding the transfer of serviced
mortgage loans.

In addition, the Community Development Act reforms currency transaction
reports to increase their usefulness to the Federal Government and to various
law enforcement agencies in combating money laundering. The measure also calls
for improvement in the identification of money laundering schemes, better
controls over negotiable instruments drawn on foreign banks by making them
subject to reporting, and uniform licensing and registration of check cashing
and money transmitting businesses, which are often used to facilitate illegal
currency transactions.

ANNUAL AUDIT, REPORTING AND MANAGERIAL CONTROL REQUIREMENTS

Under FDICIA, the FDIC was required to promulgate regulations requiring FDIC
insured financial institutions over a certain size to have an annual independent
audit of their financial statements in accordance with generally accepted
auditing standards, to have an independent audit committee of outside directors,
and to file with the FDIC and their respective primary federal regulators annual
reports, attested to by their independent auditors, as to their internal control
structure and compliance with certain designated laws and regulations (including
laws and regulations governing insider transactions and payment of dividends).
The FDIC's regulations apply these requirements to insured depository
institutions with total assets of $500 million or more. The requirements can be
satisfied by audit procedures adhered to by a parent entity such as the Company
that is consolidated with the Banks for financial reporting purposes.

OTHER FDICIA RULES

Other rules adopted or currently proposed to be adopted pursuant to FDICIA
include: (i) real estate lending standards for banks, which provide guidelines
concerning loan-to-value ratios for various types of real estate loans; (ii)
revisions to the risk-based capital rules to account for interest rate risk,
concentration of credit risk and the risks posed by "non-traditional
activities"; (iii) rules requiring depository institutions to develop and
implement internal procedures to evaluate and control credit and settlement
exposure to their correspondent banks; (iv) rules implementing the FDICIA
provision prohibiting, with certain exceptions, state banks from making equity
investments of types and amounts not permissible for national banks; (v) rules
addressing various "safety and

52
<PAGE>
soundness" issues, including operations and managerial standards, standards for
asset quality, earnings and stock valuations, and compensation standards for the
officers, directors, employees and principal shareholders of the depository
institution; and (vi) rules restricting the ability of depository institutions,
in certain cases, to accept brokered deposits.

CHANGE IN CONTROL

In addition to the restrictions imposed by the BHCA, the Federal Deposit
Insurance Act imposes the requirements of prior notice to the appropriate
federal banking agency in the event of the acquisition of control of an insured
bank. The appropriate federal banking agency in the case of state nonmember
banks is the FDIC, in the case of state member banks and bank holding companies
is the FRB, and in the case of national banks is the OCC. In reviewing
change-in-control notices, the agencies generally review factors such as: the
effect of the transaction upon competition; the convenience and needs of the
community to be served; the financial history and condition of the institutions;
the existence of insider transactions; the competence of the acquiring person
and the impact on the BIF. In addition, each of the Illinois Banks is subject to
the rules regarding change in control of Illinois banks contained in the IBA.
The Company is also subject to these rules by virtue of its control of the
Illinois Banks. Generally, the IBA provides that no person or entity or group of
affiliated persons or entities may, without the Commissioner's consent, directly
or indirectly, acquire control of an Illinois bank. Such control is presumed if
any person owns or controls 20% or more of the outstanding stock of an Illinois
bank or such lesser amount as would enable the holder or holders, by applying
cumulative voting, to elect one director of the bank.

In evaluating applications for acquisition of control of an Illinois bank or
bank holding company, in addition to the Commissioner's consideration of other
factors deemed relevant, the Commissioner must find that the character of the
proposed management of the bank after the change in control will assure
reasonable promise of successful, safe and sound operation; that the future
earnings prospects of the bank after the proposed change in control are
favorable; and that any prior involvement that the proposed controlling persons
or the proposed management of the institution after the change in control have
had with any other financial institution has been conducted in a safe and sound
manner. See "--Regulation of Bank Holding Companies and Their Non-Bank
Subsidiaries -- Acquisition of Banks and Bank Holding Companies."

DESCRIPTION OF CAPITAL STOCK

As of June 30, 1996, the authorized capital stock of the Company consisted
of 8,000,000 shares of Common Stock, par value $.01 per share, of which
3,974,942 shares were outstanding and held of record by 314 stockholders, and
1,000,000 shares of Preferred Stock, par value $.01 per share, none of which was
outstanding.

COMMON STOCK

Each holder of Common Stock is entitled to one vote per share on all matters
voted upon by the Company's stockholders. Common stockholders have no preemptive
or other rights to subscribe for additional shares or other securities of the
Company. There are no cumulative voting rights, and, accordingly, holders of
more than fifty percent of the outstanding shares of Common Stock will be able
to elect all of the members of the Board of Directors.

Common stockholders are entitled to dividends in such amounts as may be
declared by the Board of Directors from time to time from funds legally
available therefor. In the event of liquidation, the common stockholders are
entitled to share ratably in any assets of the Company remaining after payment
in full of creditors and preferred stockholders to the extent of any liquidation
preferences.

The outstanding shares of Common Stock are, and the shares of Common Stock
to be issued in the offering will be (when issued and delivered in accordance
with the terms and conditions of the offering), validly issued, fully paid and
nonassessable.

53
<PAGE>
PREFERRED STOCK

The Board of Directors is authorized, pursuant to the Company's Certificate
of Incorporation, to issue one or more series of Preferred Stock with respect to
which the Board, without stockholder approval, may determine voting, conversion
and other rights which could adversely affect the rights of holders of Common
Stock. The rights of the holders of the Common Stock would generally be subject
to the prior rights of the Preferred Stock with respect to dividends,
liquidation preferences and other matters. Among other things, Preferred Stock
could be issued by the Company to raise capital or to finance acquisitions. The
issuance of Preferred Stock under certain circumstances could have the effect of
delaying or preventing a change in control of the Company. The Company has no
present plans to issue any shares of Preferred Stock.

CERTAIN ANTI-TAKEOVER PROVISIONS

The Company's Certificate of Incorporation establishes certain procedures,
including advance notice procedures, with regard to the nomination, other than
by or at the direction of the Board of Directors, of candidates for election as
directors and the proposal of business to be considered at annual stockholders
meetings. In general, notice must be delivered to the Company at its principal
executive offices not less than 60 days nor more than 90 days prior to the first
anniversary of the preceding year's annual meeting. The Company's Certificate of
Incorporation also provides that stockholders may not take action by written
consent. The Company's Bylaws also provide that special meetings of stockholders
may only be called by the Chairman of the Board or the Board of Directors. These
provisions could delay or defer a change in control of the Company if the Board
determines that such a change in control is not in the best interests of the
Company and its stockholders, and could have the effect of making it more
difficult to acquire the Company or remove incumbent management.

TRANSFER AGENT AND REGISTRAR

The Transfer Agent and Registrar for the Common Stock of the Company is
Harris Trust and Savings Bank, Chicago, Illinois.

SHARES ELIGIBLE FOR FUTURE SALE

All of the Restricted Shares will be eligible for sale pursuant to the
exemption contained in Rule 144 under the 1933 Act, if the conditions of that
rule have been met. In general, under Rule 144, as currently in effect, a person
(or persons whose shares are aggregated) who has beneficially owned Restricted
Shares for at least two years is entitled to sell within any three-month period
a number of shares that does not exceed the greater of one percent of the then
outstanding shares of Common Stock (49,832 shares immediately after this
offering) or the average weekly trading volume in the Common Stock during the
four calendar weeks preceding such sale. Sales under Rule 144 are also subject
to certain manner-of-sale provisions, notice requirements and the availability
of current public information about the Company. Approximately 964,600
Restricted Shares, including shares held by affiliates, will be eligible for
sale subject to the volume limitations described above, as such shares will have
been beneficially owned for at least two years by the holders thereof. However,
Rule 144 will not become available to any such two-year holders of the Common
Stock until 90 days after the date of this Prospectus.

54
<PAGE>
As of June 30, 1996, options to purchase 418,040 shares of Common Stock were
outstanding under the Company's stock option plan, of which options with respect
to 146,610 shares of Common Stock were exercisable. A total of 114,905 shares of
Common Stock were also available for future option grants under the Company's
stock option plan.

The Company and all directors and executive officers of the Company have
agreed with the Underwriters not to offer, sell or otherwise dispose of any
shares of Common Stock (except, in the case of the Company, shares issuable
pursuant to outstanding options, reinvestment of dividends and payment of
directors' fees) for a period of 180 days after the date of this Prospectus
without the prior written consent of the Representative.

Prior to this offering, there has been a limited public market for the
Common Stock, and no predictions can be made as to the effect, if any, that
market sales of shares or the availability of shares for sale will have on the
market price prevailing from time to time. Sales of substantial amounts of
Common Stock in the public market could adversely affect prevailing market
prices.

55
<PAGE>
UNDERWRITING

The Company has entered into an Underwriting Agreement (the "Underwriting
Agreement") with the underwriters listed in the table below (referred to
individually as an "Underwriter" and collectively as the "Underwriters"), for
whom Howe Barnes Investments, Inc. is acting as representative (the
"Representative"). Subject to the terms and conditions set forth in the
Underwriting Agreement, the Company has agreed to sell to each of the
Underwriters, and each of the Underwriters has severally agreed to purchase from
the Company, the number of shares of Common Stock set forth opposite each
Underwriter's name in the table below.

<TABLE>
<CAPTION>
UNDERWRITERS NUMBER OF SHARES
- --------------------------------------------------------------------------- -----------------
<S> <C>
Howe Barnes Investments, Inc. ............................................. 500,000
Advest, Inc................................................................ 29,500
Robert W. Baird & Co. Incorporated......................................... 29,500
J. C. Bradford & Co. ...................................................... 29,500
Dain Bosworth Incorporated................................................. 29,500
Equitable Securities Corporation........................................... 29,500
EVEREN Securities, Inc..................................................... 29,500
Friedman, Billings, Ramsey & Co., Inc. .................................... 29,500
Furman Selz LLC............................................................ 29,500
Legg Mason Wood Walker, Incorporated....................................... 29,500
McDonald & Company Securities, Inc. ....................................... 29,500
Morgan Keegan & Company, Inc............................................... 29,500
Principal Financial Securities, Inc........................................ 29,500
Roney & Co., L.L.C......................................................... 29,500
Stifel, Nicolaus & Company, Incorporated................................... 29,500
Cruttenden Roth Incorporated............................................... 14,500
Mesirow Financial, Inc..................................................... 14,500
David A. Noyes & Company................................................... 14,500
Parker/Hunter Incorporated................................................. 14,500
The Seidler Companies Incorporated......................................... 14,500
Van Kasper & Company....................................................... 14,500
-----------------
TOTAL.................................................................... 1,000,000
-----------------
-----------------
</TABLE>

Subject to the terms and conditions of the Underwriting Agreement, the
Underwriters have agreed to purchase all of the Common Stock being sold pursuant
to the Underwriting Agreement if any is purchased (excluding shares covered by
the over-allotment option granted therein). In the event of a default by any
Underwriter, the Underwriting Agreement provides that, in certain circumstances,
purchase commitments of the non-defaulting Underwriters may be increased or the
Underwriting Agreement may be terminated.

The Representative has advised the Company that the Underwriters propose to
offer the Common Stock to the public initially at the public offering price set
forth in the cover page of this Prospectus and to selected dealers at such price
less a concession of not more than $.55 per share. Additionally, the
Underwriters may allow, and such dealers may reallow, a concession not in excess
of $.25 per share to certain other dealers. After the initial public offering,
the public offering price and other selling terms may be changed by the
Underwriters.

The Company has granted to the Underwriters an option, exercisable within 30
days after the date of this Prospectus, to purchase up to an additional 150,000
shares of Common Stock at the same price per share to be paid by the
Underwriters for the other shares offered hereby. If the Underwriters purchase
any of such additional shares pursuant to this option, each Underwriter will be
committed to

56
<PAGE>
purchase such additional shares in approximately the same proportion as set
forth in the table above. The Underwriters may exercise the option only for the
purpose of covering over-allotments, if any, made in connection with the
distribution of the Common Stock offered hereby.

The Company, and the executive officers and directors of the Company who in
the aggregate own 728,707 shares of Common Stock as of the date hereof, have
agreed not to offer, sell, contract to sell or otherwise dispose of any capital
stock of the Company or any security convertible into or exchangeable for such
capital stock (except, in the case of the Company, shares issuable pursuant to
outstanding options, reinvestment of dividends and payment of directors' fees)
for a period of 180 days after the effective date of the Registration Statement
of which this Prospectus is a part without the written consent of the
Representative.

The initial public offering price of the shares of Common Stock has been
determined by negotiation between the Company and the Representative. Among the
factors considered in determining the initial public offering price were
prevailing market and economic conditions, revenues and earnings of the Company,
estimates of the business potential and prospects of the Company, the present
state of the Company's business operations, an assessment of the Company's
management and the consideration of the above factors in relation to market
valuations of companies in related businesses.

The Representative has informed the Company that the Underwriters will not,
without customer authority, confirm sales to any accounts over which they
exercise discretionary authority.

The Company has agreed to indemnify the Underwriters and their controlling
persons against certain liabilities, including civil liabilities under the 1933
Act, or to contribute to payments the Underwriters may be required to make in
respect thereof.

LEGAL MATTERS

Certain legal matters in connection with this offering are being passed upon
for the Company by Lord, Bissell & Brook, Chicago, Illinois, and for the
Underwriters by Chapman and Cutler, Chicago, Illinois.

EXPERTS

The consolidated financial statements of the Company as of December 31, 1995
and 1994 and for each of the years in the three-year period ended December 31,
1995 have been included herein in reliance on the report of Grant Thornton LLP,
independent certified public accountants, and upon the authority of said firm as
experts in accounting and auditing.

AVAILABLE INFORMATION

The Company has filed with the Securities and Exchange Commission (the
"Commission"), in Washington, D.C., a Registration Statement on Form S-1
(together with all amendments and exhibits thereto, the "Registration
Statement") under the 1933 Act with respect to the Common Stock offered hereby.
This Prospectus does not contain all the information set forth in the
Registration Statement, certain parts of which are omitted in accordance with
the Rules and Regulations of the Commission. Statements made in the Prospectus
as to the contents of any contract, agreement or other document referred to are
not necessarily complete. With respect to each such contract, agreement or other
document filed as an exhibit to the Registration Statement, reference is made to
the exhibit for a more complete description thereof, and each such statement
shall be deemed qualified in its entirety by such reference. The Registration
Statement, including the exhibits filed therewith, may be inspected and copied
at the public reference facilities maintained by the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, Room 1204; 500 West Madison Street,
Chicago, Illinois 60661, Suite 1400; and Seven World Trade Center, New York, New
York 10048. Copies of such material may be obtained at prescribed rates from the
Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549.

57
<PAGE>
BEVERLY BANCORPORATION, INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Report of Independent Certified Public Accountants......................................................... F-2

Consolidated Financial Statements

Consolidated Balance Sheets as of June 30, 1996 (unaudited) and as of December 31, 1995 and 1994......... F-3

Consolidated Statements of Income for the Six Months Ended June 30, 1996 and 1995 (unaudited) and the
Years Ended December 31, 1995, 1994 and 1993............................................................ F-4

Consolidated Statements of Changes in Stockholders' Equity for the Six Months Ended June 30, 1996
(unaudited) and the Years Ended December 31, 1995, 1994 and 1993........................................ F-5

Consolidated Statements of Cash Flows for the Six Months Ended June 30, 1996 and 1995 (unaudited) and the
Years Ended December 31, 1995, 1994 and 1993............................................................ F-6

Notes to Consolidated Financial Statements............................................................... F-8
</TABLE>

F-1
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

Board of Directors and Stockholders
Beverly Bancorporation, Inc.

We have audited the consolidated balance sheets of Beverly Bancorporation,
Inc. and Subsidiaries as of December 31, 1995 and 1994, and the related
consolidated statements of income, stockholders' equity, and cash flows for each
of the three years in the period ended December 31, 1995. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these 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 financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Beverly
Bancorporation, Inc. and Subsidiaries as of December 31, 1995 and 1994, and the
consolidated results of their operations and their consolidated cash flows for
each of the three years in the period ended December 31, 1995, in conformity
with generally accepted accounting principles.

As discussed in the notes to the consolidated financial statements, the
Company changed its method of accounting for investment securities in 1994 and
income taxes in 1993.

GRANT THORNTON LLP

Chicago, Illinois

February 9, 1996 (except for Note
17, as to which the date is
February 27, 1996 and Note 18,
as to which the date is
August 16, 1996)

F-2
<PAGE>
BEVERLY BANCORPORATION, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

JUNE 30, 1996 (UNAUDITED) AND DECEMBER 31, 1995 AND 1994
(AMOUNTS IN THOUSANDS)

ASSETS

<TABLE>
<CAPTION>
DECEMBER 31,
JUNE 30, --------------------
1996 1995 1994
----------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C>
Cash and due from banks................................... $ 26,708 $ 32,635 $ 34,572
Funds sold................................................ 6,475 20,075 500
Investment securities:
Available-for-sale, at fair value....................... 201,264 174,963 126,393
Held-to-maturity, at amortized cost (fair value $33,565,
$32,639, and $83,108, respectively).................... 34,113 32,644 87,372
Loans..................................................... 324,573 312,160 291,042
Less allowance for possible loan losses................. 3,943 3,524 3,995
----------- --------- ---------
Net loans............................................. 320,630 308,636 287,047
Premises and equipment, net............................... 14,507 13,204 13,944
Accrued interest receivable............................... 5,111 4,826 4,571
Other real estate......................................... 988 858 1,081
Intangible assets, net.................................... 1,161 1,301 1,606
Other assets.............................................. 3,612 2,061 4,253
----------- --------- ---------
TOTAL ASSETS........................................ $ 614,569 $ 591,203 $ 561,339
----------- --------- ---------
----------- --------- ---------

LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Interest bearing........................................ $ 468,880 $ 439,020 $ 403,771
Non-interest bearing.................................... 84,912 88,111 100,674
----------- --------- ---------
Total deposits........................................ 553,792 527,131 504,445
Securities sold under agreements to repurchase, funds
purchased, and treasury tax deposits..................... 5,770 6,292 9,614
Bank notes payable........................................ 9,000 11,000 1,800
Accrued expenses and other liabilities.................... 5,420 5,819 4,672
----------- --------- ---------
Total liabilities..................................... 573,982 550,242 520,531

STOCKHOLDERS' EQUITY:
Preferred stock, par value $.01 per share; authorized
1,000,000 shares; no shares issued and outstanding..... -- -- --
Common stock, $.01 par value; authorized 8,000,000
shares; issued and outstanding 3,974,942, 3,769,815 and
4,383,690, respectively................................ 40 38 44
Additional paid-in capital.............................. 11,410 9,005 17,792
Retained earnings....................................... 33,392 33,011 29,886
Net unrealized gains (losses) on available-for-sale
securities............................................. (2,575) 617 (5,175)
Note receivable -- officer stockholders................. (1,680) (1,710) (1,739)
----------- --------- ---------
Total stockholders' equity............................ 40,587 40,961 40,808
----------- --------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY.......... $ 614,569 $ 591,203 $ 561,339
----------- --------- ---------
----------- --------- ---------
</TABLE>

The accompanying notes are an integral part of these statements.

F-3
<PAGE>
BEVERLY BANCORPORATION, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

SIX MONTHS ENDED JUNE 30, 1996 AND 1995 (UNAUDITED) AND
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE
30, YEARS ENDED DECEMBER 31,
------------------------ -------------------------------------
1996 1995 1995 1994 1993
----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Interest income:
Interest and fees on loans................. $ 13,531 $ 12,997 $ 26,972 $ 22,343 $ 20,596
Interest on investment securities:
Taxable.................................. 5,983 5,673 11,168 11,393 11,680
Tax-exempt............................... 801 683 1,352 1,242 1,015
Funds sold................................. 463 159 478 228 177
----------- ----------- ----------- ----------- -----------
Total interest income.................. 20,778 19,512 39,970 35,206 33,468
Interest expense:
Deposits................................... 9,138 8,089 16,726 12,512 12,078
Securities sold under agreements to
repurchase, funds purchased, and treasury
tax deposits.............................. 142 195 379 231 350
Notes payable.............................. 369 51 79 206 377
----------- ----------- ----------- ----------- -----------
Total interest expense................. 9,649 8,335 17,184 12,949 12,805
----------- ----------- ----------- ----------- -----------
Net interest income.................... 11,129 11,177 22,786 22,257 20,663
Provision for loan losses.................... 75 103 159 311 1,299
----------- ----------- ----------- ----------- -----------
Net interest income after provision for
loan losses........................... 11,054 11,074 22,627 21,946 19,364
Other income:
Income from fiduciary activities........... 998 954 1,927 1,872 1,764
Service charges on deposit accounts........ 2,172 1,988 4,078 4,256 4,123
Net gains on sales of investment
securities................................ 35 33 49 207 1,421
Mortgage origination and servicing fees.... 312 343 761 532 1,464
Other...................................... 632 444 1,055 1,150 1,048
----------- ----------- ----------- ----------- -----------
Total other income..................... 4,149 3,762 7,870 8,017 9,820
Operating expenses:
Salaries and employee benefits............. 5,372 5,382 10,730 10,496 10,486
Occupancy.................................. 1,188 1,068 2,134 2,003 2,102
Equipment.................................. 797 1,111 1,918 2,155 2,156
FDIC insurance............................. 4 551 570 1,035 999
Marketing and promotion.................... 427 413 952 647 854
Computer system and services............... 515 56 492 124 158
Supplies................................... 456 341 724 717 782
Loan legal and collection.................. 184 136 257 143 443
Other real estate.......................... 13 -- 53 50 388
Other...................................... 1,923 1,669 3,586 3,505 3,801
----------- ----------- ----------- ----------- -----------
Total operating expenses............... 10,879 10,727 21,416 20,875 22,169
----------- ----------- ----------- ----------- -----------
Income before income taxes and
cumulative effect of change in
accounting principle.................. 4,324 4,109 9,081 9,088 7,015
Income tax expense........................... 1,317 1,257 2,877 2,672 2,143
----------- ----------- ----------- ----------- -----------
Income before cumulative effect of
change in accounting principle........ 3,007 2,852 6,204 6,416 4,872
Cumulative effect of change in accounting for
income taxes................................ -- -- -- -- 374
----------- ----------- ----------- ----------- -----------
NET INCOME............................. $ 3,007 $ 2,852 $ 6,204 $ 6,416 $ 5,246
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Income per share:
Income before cumulative effect of change
in accounting principle................... $ .74 $ .58 $ 1.26 $ 1.34 $ 1.05
Cumulative effect of change in accounting
for income taxes.......................... -- -- -- -- .08
----------- ----------- ----------- ----------- -----------
Net income per share......................... $ .74 $ .58 $ 1.26 $ 1.34 $ 1.13
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Common and common equivalent shares.......... 4,088,950 4,912,430 4,908,930 4,782,460 4,655,975
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
</TABLE>

The accompanying notes are an integral part of these statements.

F-4
<PAGE>

BEVERLY BANCORPORATION, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 1996 (UNAUDITED) AND THE
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
NET
UNREALIZED
GAINS
(LOSSES) ON
PREFERRED ADDITIONAL AVAILABLE-FOR-
STOCK PREFERRED COMMON PAID-IN RETAINED SALE
SERIES B STOCK STOCK CAPITAL EARNINGS SECURITIES
----------- ----------- ----------- ----------- --------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1993........................ $ 226 $ -- $ 37 $ 13,218 $ 22,562 $ --
Net income........................................ -- -- -- -- 5,246 --
Common stock cash dividend declared ($.17 per
share)........................................... -- -- -- -- (800) --
Preferred stock Series B dividends declared ($8.55
per share)....................................... 20 -- -- -- (20) --
Conversion of 2,590 shares of preferred stock
Series B into 33,980 shares of common stock...... (246) -- -- 246 -- --
Issuance of 52,780 shares of common stock......... -- -- 1 326 -- --
5% common stock dividend (188,115 shares)......... -- -- 2 1,182 (1,184) --
Note paydown...................................... -- -- -- -- -- --
----------- ----- ----- ----------- --------- -------------
Balance December 31, 1993......................... -- -- 40 14,972 25,804 --
Net income........................................ -- -- -- -- 6,416 --
Cumulative effect of change in accounting for
investment securities available-for-sale at
January 1, 1994.................................. -- -- -- -- -- 947
Common stock cash dividend declared ($.18 per
share)........................................... -- -- -- -- (870) --
5% common stock dividend (201,770 shares)......... -- -- 2 1,462 (1,464) --
Issuance of 149,455 shares of common stock........ -- -- 2 1,361 -- --
Cancellation of 500 shares of Treasury Stock...... -- -- -- (3) -- --
Note paydowns..................................... -- -- -- -- -- --
Change in net unrealized losses on
available-for-sale securities.................... -- -- -- -- -- (6,122)
----------- ----- ----- ----------- --------- -------------
Balance at December 31, 1994...................... -- -- 44 17,792 29,886 (5,175)
Net income........................................ -- -- -- -- 6,204 --
Common stock cash dividend declared ($.19 per
share)........................................... -- -- -- -- (887) --
5% common stock dividend (219,175 shares)......... -- -- 2 2,190 (2,192) --
Issuance of 48,290 shares of common stock......... -- -- 1 471 -- --
Repurchase and cancellation of 881,340 shares of
common stock..................................... -- -- (9) (11,448) -- --
Note paydowns..................................... -- -- -- -- -- --
Change in net unrealized gains on
available-for-sale securities.................... -- -- -- -- -- 5,792
----------- ----- ----- ----------- --------- -------------
Balance at December 31, 1995...................... -- -- 38 9,005 33,011 617
Net income (unaudited)............................ -- -- -- -- 3,007 --
Common stock cash dividend ($.10 per share)
(unaudited)...................................... -- -- -- -- (403) --
5% common stock dividend (188,473 shares)
(unaudited)...................................... -- -- 2 2,221 (2,223) --
Issuance of 8,195 shares of common stock
(unaudited)...................................... -- -- -- 184 -- --
Note paydowns (unaudited)......................... -- -- -- -- -- --
Change in net unrealized losses on
available-for-sale securities (unaudited)........ -- -- -- -- -- (3,192)
----------- ----- ----- ----------- --------- -------------
Balance at June 30, 1996 (unaudited).............. $ -- $ -- $ 40 $ 11,410 $ 33,392 $ (2,575)
----------- ----- ----- ----------- --------- -------------
----------- ----- ----- ----------- --------- -------------

NOTE
RECEIVABLE- TOTAL
OFFICER TREASURY STOCKHOLDERS'
STOCKHOLDERS STOCK EQUITY
------------- ----------- -------------
<S> <C> <C> <C>
Balance at January 1, 1993........................ $ (787) $ (3) $ 35,253
Net income........................................ -- -- 5,246
Common stock cash dividend declared ($.17 per
share)........................................... -- -- (800)
Preferred stock Series B dividends declared ($8.55
per share)....................................... -- -- --
Conversion of 2,590 shares of preferred stock
Series B into 33,980 shares of common stock...... -- -- --
Issuance of 52,780 shares of common stock......... -- -- 327
5% common stock dividend (188,115 shares)......... -- -- --
Note paydown...................................... 29 -- 29
------------- ----------- -------------
Balance December 31, 1993......................... (758) (3) 40,055
Net income........................................ -- -- 6,416
Cumulative effect of change in accounting for
investment securities available-for-sale at
January 1, 1994.................................. -- -- 947
Common stock cash dividend declared ($.18 per
share)........................................... -- -- (870)
5% common stock dividend (201,770 shares)......... -- -- --
Issuance of 149,455 shares of common stock........ (1,221) -- 142
Cancellation of 500 shares of Treasury Stock...... -- 3 --
Note paydowns..................................... 240 -- 240
Change in net unrealized losses on
available-for-sale securities.................... -- -- (6,122)
------------- ----------- -------------
Balance at December 31, 1994...................... (1,739) -- 40,808
Net income........................................ -- -- 6,204
Common stock cash dividend declared ($.19 per
share)........................................... -- -- (887)
5% common stock dividend (219,175 shares)......... -- -- --
Issuance of 48,290 shares of common stock......... -- -- 472
Repurchase and cancellation of 881,340 shares of
common stock..................................... -- -- (11,457)
Note paydowns..................................... 29 -- 29
Change in net unrealized gains on
available-for-sale securities.................... -- -- 5,792
------------- ----------- -------------
Balance at December 31, 1995...................... (1,710) -- 40,961
Net income (unaudited)............................ -- -- 3,007
Common stock cash dividend ($.10 per share)
(unaudited)...................................... -- -- (403)
5% common stock dividend (188,473 shares)
(unaudited)...................................... -- -- --
Issuance of 8,195 shares of common stock
(unaudited)...................................... -- -- 184
Note paydowns (unaudited)......................... 30 -- 30
Change in net unrealized losses on
available-for-sale securities (unaudited)........ -- -- (3,192)
------------- ----------- -------------
Balance at June 30, 1996 (unaudited).............. $ (1,680) $ -- $ 40,587
------------- ----------- -------------
------------- ----------- -------------
</TABLE>

The accompanying notes are an integral part of these statements.

F-5
<PAGE>
BEVERLY BANCORPORATION, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1996 AND 1995 (UNAUDITED) AND
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(AMOUNTS IN THOUSANDS)

<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEARS ENDED DECEMBER 31,
---------------------- -----------------------------------
1996 1995 1995 1994 1993
---------- ---------- ---------- ---------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income...................................... $ 3,007 $ 2,852 $ 6,204 $ 6,416 $ 5,246
Adjustments to reconcile net income to net cash
provided by operating activities
Provision for credit losses................... 75 103 159 311 1,299
Provision for depreciation and amortization... 788 857 1,560 1,813 1,823
Investment security accretion and amortization
-- net....................................... 391 381 673 825 1,204
Deferred tax expense (benefit)................ (258) (88) 189 (155) 635
Cumulative effect of change in accounting
principle.................................... -- -- -- -- (374)
Amortization of intangible assets............. 135 162 320 464 467
Realized investment security gains, net....... (35) (33) (49) (207) (1,421)
Realized gain on credit card and lease sale... -- -- -- -- (215)
Gain on sale of other real estate............. -- (25) (79) (180) (228)
(Increase) decrease in accrued interest
receivable................................... (285) (358) (255) (492) 574
Decrease (increase) in loans held for sale.... 1,033 (3,275) (4,374) 10,390 (6,527)
Decrease (increase) in other assets........... 346 (82) (243) (399) 2,098
(Decrease) increase in accrued expense and
other liabilities............................ (672) (935) 408 280 (563)
---------- ---------- ---------- ---------- -----------
Net cash provided by (used in)
operating activities..................... 4,525 (441) 4,513 19,066 4,018

Cash flows from investment activities:
Investment securities available-for-sale:
Proceeds from maturities and call of
securities................................... 20,099 14,378 13,646 2,044 --
Proceeds from sales of securities............. 19,305 1,444 15,394 32,900 --
Purchases of securities....................... (70,836) (3,030) (20,206) (50,826) --
Investment securities held-to-maturity:
Proceeds from maturities and calls of
securities................................... 890 2,792 11,059 10,783 40,784
Proceeds from sales of investment
securities................................... -- -- -- -- 61,559
Purchases of securities....................... (2,710) (1,926) (5,582) (9,152) (102,332)
Net increase in loans........................... (13,379) (20,879) (17,975) (36,617) (15,192)
Purchases of premises and equipment............. (2,110) (379) (936) (926) (1,227)
Proceeds from sale of other real estate and
equipment...................................... 148 301 1,004 610 2,065
---------- ---------- ---------- ---------- -----------
Net cash used in investment activities.... (48,593) (7,299) (3,596) (51,184) (14,343)
</TABLE>

F-6
<PAGE>

BEVERLY BANCORPORATION, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
SIX MONTHS ENDED JUNE 30, 1996 AND 1995 (UNAUDITED) AND
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(AMOUNTS IN THOUSANDS)

<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEARS ENDED DECEMBER 31,
---------------------- ----------------------------------
1996 1995 1995 1994 1993
---------- ---------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flow from financing activities:
Net increase in deposits.......................... $ 26,661 $ 3,501 $ 22,686 $ 45,313 $ 4,215
Net increase (decrease) in securities sold under
agreements to repurchase, funds purchased and
treasury tax deposits............................ 74 (2,436) (3,322) 968 5,005
Proceeds from notes payable....................... -- -- 11,000 -- --
Principal reductions on notes payable............. (2,000) (1,300) (1,800) (2,900) (2,850)
Capital lease payments............................ (5) -- -- -- --
Cash dividends.................................... (403) (467) (887) (870) (800)
Proceeds from issuance of common stock............ 184 234 472 142 298
Repurchase of common stock........................ -- -- (11,457) -- --
Proceeds from notes receivable -- officer
stockholders..................................... 30 29 29 240 29
---------- ---------- ---------- ---------- ----------
Net cash provided by financing activities... 24,541 (439) 16,721 42,893 5,897
---------- ---------- ---------- ---------- ----------
(Decrease) increase in cash and cash
equivalents................................ (19,527) (8,179) 17,638 10,775 (4,428)

Cash and cash equivalents, beginning of period...... 52,710 35,072 35,072 24,297 28,725
---------- ---------- ---------- ---------- ----------
Cash and cash equivalents, end of period............ $ 33,183 $ 26,893 $ 52,710 $ 35,072 $ 24,297
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest........................................ $ 9,483 $ 7,960 $ 16,641 $ 12,811 $ 13,002
Income taxes.................................... 1,300 1,400 2,900 2,775 2,000
Non-cash investing and financing activities:
Unrealized gain (loss) on available-for-sale
securities..................................... (5,125) 6,807 8,775 (7,841) --
Transfer of held-to-maturity securities to
available-for-sale............................. -- -- 49,472 -- --
Net change in loans transferred to other real
estate......................................... 278 430 472 110 1,071
Decrease in recourse obligations................ -- -- -- 2,710 1,749
Common stock issued for notes receivable........ -- -- -- 1,221 --
Common stock dividends.......................... 2,223 2,192 2,192 1,464 1,184
Capital lease obligations....................... 601 -- -- -- --
</TABLE>

The accompanying notes are an integral part of these statements.

F-7
<PAGE>
BEVERLY BANCORPORATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Beverly Bancorporation, Inc. (the "Company"), and its wholly-owned
subsidiaries (the "Banks"), Beverly Bank, Beverly Bank Matteson, Beverly Trust
Company, Beverly Bank Lockport, and First Wilmington Corporation and its
wholly-owned subsidiary, First National Bank of Wilmington, follow generally
accepted accounting principles including, where applicable, general practices
within the banking industry.

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of income and expenses during the reporting
period. Actual results could differ from those estimates.

BASIS OF PRESENTATION

The consolidated financial statements of the Company include the accounts of
its respective subsidiaries. All significant intercompany accounts and
transactions have been eliminated. Certain amounts in the 1993 and 1994
financial statements have been reclassified to conform to the 1995 presentation.

INTERIM FINANCIAL INFORMATION (UNAUDITED)

The unaudited interim financial statements have been prepared in conformity
with generally accepted accounting principles and include all adjustments which
are, in the opinion of management, normal and recurring in nature and necessary
to a fair presentation of the interim periods presented. Results of operations
for the six months ended June 30, 1996 are not necessarily indicative of the
results to be expected for the full year.

INVESTMENT SECURITIES

Effective January 1, 1994, the Company adopted the provisions of Statement
of Financial Accounting Standards ("SFAS") No. 115, "Accounting for Certain
Investments in Debt and Equity Securities." SFAS No. 115 requires that all debt
and equity securities be classified either as held-to-maturity,
available-for-sale or trading. Held-to-maturity securities are classified as
such only when the Company determines it has the ability and intent to hold
these securities to maturity. Held-to-maturity securities are carried at cost,
adjusted for amortization of premiums and accretion of discounts.
Available-for-sale securities and trading securities are carried at market
value. Net unrealized gains and losses on available-for-sale securities are
excluded from earnings and reported as a separate component of stockholders'
equity, net of tax. Unrealized gains and losses on trading securities are
included in earnings. The Company has not classified any securities as trading.
Gains or losses on the sale of investment securities are determined based on the
amortized cost of the specific securities sold.

On adoption of this standard, the Company classified debt securities with a
market value of $120,835,000 as available-for-sale and recorded a $947,000
increase in stockholders' equity.

LOANS

Loans are stated at the principal amount outstanding, net of allowance for
loan losses, unearned discount and deferred loan fees. Interest income is
accrued daily as earned. Loan origination fees in excess of incremental direct
costs are deferred and recognized to approximate a level yield. The accrual of
interest income is discontinued when management determines that there is doubt
as to future collectibility and the loan is impaired.

F-8
<PAGE>
BEVERLY BANCORPORATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The Company adopted SFAS No. 114, "Accounting by Creditors for Impairment of
a Loan," and SFAS No. 118, "Accounting by Creditors for Impairment of a
Loan-Income Recognition and Disclosures," as of January 1, 1995. SFAS No. 114
requires that certain impaired loans be measured based on the present value of
expected future cash flows discounted at the loans' original effective interest
rate. As a practical expedient, impairment may be measured based on the loan's
observable market price of the fair value of the collateral if the loan is
collateral dependent. When the measure of the impaired loan is less than the
recorded investment in the loan, the impairment is recorded through a valuation
allowance. Payments received on impaired loans are recorded as reductions of
principal. As a result of adopting these statements, no specific allowance for
possible loan losses was required as of January 1, 1995.

Loan balances less than $10,000 in each loan category are considered as
small balance homogeneous loan pools for purposes of impairment. All other loans
are specifically evaluated for impairment. The Company considers a loan impaired
when it is probable that all amounts of principal and interest due, according to
the contractual terms of the loan agreement, will not be collected, which is
also the criteria the Company uses for the transfer of loans to nonaccrual.
Therefore, the total of impaired loans generally equal nonaccrual loans. For
collateralized impaired loans, loan balances in excess of net realizable value,
are deemed impaired. In the determination of the valuation, the major risk
classifications such as historical net charge-offs over the last three calendar
years for each category of loans, local economic trends, the source of loans and
concentrations of credit in specific industries, if any, are considered.

ALLOWANCE FOR LOAN LOSSES

The allowance for loan losses is maintained at a level considered adequate
to provide for potential loan losses. The allowance is increased by provisions
charged to operations and by recoveries, and decreased by charge-offs. The
provision for loan losses is based on past loan loss experience and management's
evaluation of the loan portfolio under current economic conditions. Loans are
charged to the allowance for loan losses when, and to the extent, they are
deemed by management to be uncollectible. The allowance for loan loss is
composed of specific reserves for impaired loans and general reserves for all
other loans.

OTHER REAL ESTATE

Other real estate represents properties acquired through foreclosure or
other proceedings and is recorded at the lower of the amount of the loan
satisfied or the net realizable value of the property acquired. Any write-down
at the time of foreclosure is charged to the allowance for loan losses.

MORTGAGE SERVICING RIGHTS

Effective January 1, 1996, the Company adopted SFAS No. 122, "Accounting for
Mortgage Servicing Rights," for all residential mortgage loans originated for
sale to permanent investors, but with the servicing rights retained.

The Company allocates the total cost of the mortgage loans to the mortgage
servicing rights and the loans based on their relative fair values at the date
of origination. The allocation is based on the assumption that a normal
servicing fee will be received and that the rights to remaining cash flows from
the underlying mortgages will be sold. The Company only originates loans for
resale within permanent investor guidelines, with commitments from these
permanent investors to purchase the mortgage loans.

For the purpose of evaluating and measuring impairment of capitalized
mortgage servicing rights, the Company stratifies those rights based on the
predominant risk characteristics of the underlying loans, including the loan
type, size, interest rate, date of origination and term.

F-9
<PAGE>
BEVERLY BANCORPORATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Impairment is recognized through a valuation allowance for each individual
stratum. The amount of impairment recognized is the amount by which the
capitalized mortgage servicing rights for a stratum exceed their fair value. The
fair value of mortgage servicing rights, if any, that have not been capitalized
are not used in the evaluation of impairment. Subsequent to the initial
measurement of impairment, the Company periodically adjusts the valuation
allowance to reflect changes in the measurement of impairment. However, fair
value in excess of the amount capitalized as mortgage servicing rights, net of
amortization, is not recognized.

PREMISES AND EQUIPMENT

Premises, equipment and leasehold improvements are carried at cost, less
accumulated depreciation and amortization. Depreciation is charged to expense on
a straight-line basis over the estimated useful lives of the assets. Leasehold
improvements are amortized on a straight-line basis over the lease terms.

TRUST ASSETS

Assets held in fiduciary or agency capacities are not included in the
consolidated balance sheet, since such items are not assets of the Company.

INTANGIBLE ASSETS

The excess of cost over fair value of net assets acquired, resulting from
the acquisitions of Beverly Bank Matteson and First Wilmington Corporation, is
being amortized on a straight-line basis over periods of 10 and 15 years,
respectively.

INCOME TAXES

The Company and its subsidiaries file consolidated Federal and state income
tax returns. The Banks determine their income taxes on the separate return
method. Under this method, the Banks pay to or receive from the parent the
amount of income taxes which would have been calculated had each of the Banks
filed a separate return.

Amounts provided for income tax expense are based on income reported for
financial statement purposes, rather than amounts currently payable under tax
laws. Deferred taxes, which arise from temporary differences between the period
in which certain income and expenses are recognized for financial accounting
purposes and the period in which they affect taxable income, are included in the
amounts provided for income tax.

CASH FLOWS

For the purposes of the consolidated statement of cash flows, the Company
considers amounts due from banks and Federal funds sold to be cash equivalents.

PER SHARE COMPUTATIONS

Net income per share is based upon the weighted average number of common
shares and common share equivalents outstanding during each year. All per share
financial information has been adjusted to reflect the 5% stock dividends paid
to stockholders and the merger and conversion of shares (Note 18). The
calculation of net income per share reflects shares issuable upon exercise of
stock options under the treasury stock method for the years ended December 31,
1995, 1994 and 1993 and periods ended June 30, 1996 and 1995.

NEW ACCOUNTING PRONOUNCEMENTS

In March, 1995, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of," which is effective for financial
statements issued for fiscal years beginning after December 15, 1995.

F-10
<PAGE>
BEVERLY BANCORPORATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
SFAS No. 121 requires that long-lived assets and certain identifiable
intangibles that are used in operations be reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of assets
might not be recoverable. On January 1, 1996, the Company adopted this standard.
There was no material effect on the Company's consolidated financial condition
or consolidated results of operations as a result of this adoption nor is any
anticipated in fiscal 1996.

The FASB issued SFAS No. 122, "Accounting for Mortgage Servicing Rights."
The Company adopted this statement as of January 1, 1996. As a result of
applying the new rules, the value of retained servicing of loans sold subsequent
to January 1, 1996, will be capitalized and amortized over the expected life of
the loans. On January 1, 1996, the Company adopted this standard. There was no
material effect on the Company's consolidated financial condition or
consolidated results of operations as a result of this adoption nor is any
anticipated in fiscal 1996. Through June 30, 1996, the Company recorded mortgage
servicing rights under this new standard of $209,000, and mortgage servicing
income for the six months ended June 30, 1996 of $66,000 was recorded. The
balance of loans added to the serviced portfolio since January 1, 1996 was
$21,366,000, and the total balance of the servicing portfolio as of June 30,
1996 was $99,112,000.

The FASB issued SFAS No. 123, "Accounting for Stock Based Compensation." The
statement requires entities to disclose the fair value of their employee stock
options, but permits entities to continue to account for employee stock options
under APB 25, "Accounting for Stock Issued to Employees." The Company has
determined that it will continue to use the method prescribed by APB 25, which
recognizes compensation to the extent of the difference between the estimated
market value and the exercise price at the grant date. The only effect of the
Company's adoption of SFAS No. 123 on January 1, 1996 will be the new disclosure
requirements.

F-11
<PAGE>
BEVERLY BANCORPORATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 2 -- INVESTMENT SECURITIES AVAILABLE-FOR-SALE
A comparison of the amortized cost, fair value and unrealized gains and
losses of the investment securities available-for-sale is as follows (in
thousands):

<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED FAIR UNREALIZED UNREALIZED
DECEMBER 31, 1995 COST VALUE GAIN LOSS
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
U.S. Treasury.................................................. $ 69,576 $ 69,825 $ 411 $ 162
U.S. Treasury strips........................................... 1,661 1,679 18 --
U.S. government agencies....................................... 49,452 49,759 513 206
U.S. government agency strips.................................. 12,719 12,687 -- 32
Obligations of state and political subdivisions................ 15,692 15,974 325 43
Corporate debt securities...................................... 17,556 17,539 281 298
Adjustable rate mortgage pools................................. 7,266 7,393 127 --
Federal Reserve stock and other securities..................... 107 107 -- --
----------- ----------- ----------- -----------
Total........................................................ $ 174,029 $ 174,963 $ 1,675 $ 741
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
DECEMBER 31, 1994
U.S. Treasury.................................................. $ 76,772 $ 73,192 $ 18 $ 3,598
U.S. government agencies and corporations...................... 39,707 38,337 4 1,374
Corporate debt securities...................................... 17,653 14,762 -- 2,891
Federal Reserve stock.......................................... 102 102 -- --
----------- ----------- ----------- -----------
Total........................................................ $ 134,234 $ 126,393 $ 22 $ 7,863
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>

The amortized cost and fair value of debt securities available-for-sale at
December 31, 1995, by contractual maturity are shown below (in thousands).
Expected maturities will differ from contractual maturities because borrowers
may have the right to call or prepay obligations with or without call or
prepayment penalties.

<TABLE>
<CAPTION>
AMORTIZED FAIR
COST VALUE
----------- -----------
<S> <C> <C>
Due in one year or less................................................................. $ 40,922 $ 40,977
Due in one year through five years...................................................... 92,802 93,478
Due in five years through ten years..................................................... 14,689 14,790
Due after ten years..................................................................... 18,248 18,223
Federal Reserve stock................................................................... 102 102
Adjustable rate mortgage pools.......................................................... 7,266 7,393
----------- -----------
Total................................................................................. $ 174,029 $ 174,963
----------- -----------
----------- -----------
</TABLE>

At December 31, 1995, investment securities with a carrying value of
approximately $54,296,000 were pledged as collateral for public funds deposits
and other purposes.

For the year ended December 31, 1995, net realized gains on securities sales
were $37,000 comprised of gross realized gains of $73,000 and gross realized
losses of $36,000. Proceeds from sales of securities totaled $15,394,000 in
1995.

For the year ended December 31, 1994, net realized gains on securities sales
were $207,000 comprised of gross realized gains of $277,000 and gross realized
losses of $70,000. Proceeds from sales of securities totaled $32,900,000 in
1994.

F-12
<PAGE>
BEVERLY BANCORPORATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 2 -- INVESTMENT SECURITIES AVAILABLE-FOR-SALE (CONTINUED)
to 5.1 years. All adjustable rate mortgage pools and collateralized mortgage
obligations contain a certain amount of risk related to the uncertainty of
prepayments of the underlying mortgages. Interest rate changes have a direct
impact upon prepayment rates. The Company uses computer simulation models to
test the average life and yield volatility of adjustable rate mortgage pools and
collateralized mortgage obligations under various interest rate assumptions to
monitor volatility. At December 31, 1995 and 1994, the Company owned no high
risk collateralized mortgage obligations as defined by the Federal Financial
Institutions Examination Council's Supervisory Policy Statement on Securities
Activities.

The Company did not hold any off-balance sheet derivative financial
instruments such as futures, forwards, swaps or option contracts during 1995 or
1994. In accordance with the Company's investment policy, derivative securities
and derivative financial instruments, other than mortgage backed obligations,
may not be purchased without the prior approval of the Board of Directors.

Included in the investment portfolio are certain securities classified as
U.S. Treasury and U.S. government agency strips and structured notes. The U.S.
Treasury strips are direct obligations of the United States government which
have had the coupons removed. These securities are sold at a discount to par
similar to U.S. Treasury bills and pay no interest until maturity. The market
value fluctuation of these securities is greater than the fluctuation on similar
maturity full coupon U.S. Treasury securities because these types of securities
are more sensitive to changes in interest rates. U.S. government agency strips
held by the Company pay no interest until late 1996, are callable at par
beginning in late 1996 and, if not called, begin making coupon interest payments
thereafter until maturity. The market value fluctuation of these securities is
greater than the fluctuation on similar maturity full coupon U.S. government
agency securities due to the uncertainty of the redemption date. The interest
rates on the structured notes reprice based on formulas applied to various
indexes. The maturities on these securities range from one to four years.

The market values and amortized costs of the structured notes in the
available-for-sale portfolio are shown below (in thousands):

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1995 1994
--------- ---------
<S> <C> <C>
Market value.................................................................... $ 5,377 $ 5,100
Amortized cost.................................................................. 5,503 5,504
</TABLE>

The market values and amortized costs of the U.S. Treasury and U.S.
government agency strips in both the available-for-sale and held-to-maturity
portfolio are shown below (in thousands):

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1995 1994
--------- ---------
<S> <C> <C>
Market value.................................................................. $ 14,366 $ 12,882
Amortized cost................................................................ 14,380 13,356
</TABLE>

F-13
<PAGE>
BEVERLY BANCORPORATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 3 -- INVESTMENT SECURITIES HELD-TO-MATURITY
A comparison of the amortized cost, fair value and unrealized gains and
losses of the investment securities held-to-maturity is as follows (in
thousands):
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED FAIR UNREALIZED UNREALIZED
DECEMBER 31, 1995 COST VALUE GAIN LOSS
----------- --------- ----------- -----------
<S> <C> <C> <C> <C>
U.S. Treasury..................................................... $ 2,196 $ 2,173 $ -- $ 23
Obligations of state and political subdivisions................... 14,984 15,130 180 34
Adjustable rate mortgage pools.................................... -- 20 20 --
Collateralized mortgage obligations............................... 15,449 15,301 -- 148
Other securities.................................................. 15 15 -- --
----------- --------- ----- -----------
Total........................................................... $ 32,644 $ 32,639 $ 200 $ 205
----------- --------- ----- -----------
----------- --------- ----- -----------

DECEMBER 31, 1994
<S> <C> <C> <C> <C>
U.S. Treasury..................................................... $ 6,991 $ 6,417 $ -- $ 574
U.S. Treasury strips.............................................. 1,557 1,499 -- 58
U.S. government agency strips..................................... 9,523 8,718 30 835
U.S. government corporations...................................... 11,979 11,383 -- 596
Obligations of state and political subdivisions................... 30,537 29,507 219 1,249
Adjustable rate mortgage pools.................................... 10,045 9,884 -- 161
Collateralized mortgage obligations............................... 16,715 15,675 -- 1,040
Other securities.................................................. 25 25 -- --
----------- --------- ----- -----------
Total........................................................... $ 87,372 $ 83,108 $ 249 $ 4,513
----------- --------- ----- -----------
----------- --------- ----- -----------
</TABLE>

The amortized cost and fair value of debt securities held-to-maturity at
December 31, 1995, by contractual maturity are shown below (in thousands).
Expected maturities will differ from contractual maturities because borrowers
may have the right to call or prepay obligations with or without call or
prepayment penalties.

<TABLE>
<CAPTION>
AMORTIZED FAIR
COST VALUE
----------- ---------
<S> <C> <C>
Due in one year or less.................................................................... $ 3,688 $ 3,694
Due in one year through five years......................................................... 10,145 10,282
Due in five years through ten years........................................................ 2,863 2,844
Due after ten years........................................................................ 499 498
Mortgage backed securities................................................................. 15,449 15,321
----------- ---------
Total.................................................................................... $ 32,644 $ 32,639
----------- ---------
----------- ---------
</TABLE>

At December 31, 1995, investment securities with an adjusted cost of
approximately $8,302,000 were pledged as collateral for public funds deposits
and other purposes.

For the year ended December 31, 1995, a security was called. Gross realized
gain was $12,000 and proceeds from this security were $1,000,000. No
held-to-maturity securities were sold during 1994. For the year ended December
31, 1993, prior to the adoption of SFAS No. 115, net realized gains on
securities sales were $1,421,000. There were no realized losses in 1993.
Proceeds from sales of securities totaled $61,559,000 in 1993.

F-14
<PAGE>
BEVERLY BANCORPORATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 3 -- INVESTMENT SECURITIES HELD-TO-MATURITY (CONTINUED)
On November 30, 1995, the Company transferred certain investment securities
from held-to-maturity to available-for-sale in accordance with the guidance
issued in the SPECIAL REPORT ON STATEMENT NO. 115. At the date of transfer, the
amortized cost and unrealized gains on these securities were $49,472,000 and
$313,000, respectively.

NOTE 4 -- LOANS
The components of the loan portfolio are summarized as follows (in
thousands):

<TABLE>
<CAPTION>
DECEMBER 31,
------------------
JUNE 30, 1996 1995 1994
------------- -------- --------
<S> <C> <C> <C>
(UNAUDITED)
Commercial and industrial..... $ 54,414 $ 50,258 $ 50,339
Commercial real estate........ 73,630 74,199 64,789
Residential real estate....... 128,755 119,153 110,045
Home equity lines of credit... 29,053 31,152 32,256
Other consumer................ 38,721 37,398 33,613
------------- -------- --------
Total loans................. 324,573 312,160 291,042
Less allowance for loan
losses....................... 3,943 3,524 3,995
------------- -------- --------
Loans, net.................. $320,630 $308,636 $287,047
------------- -------- --------
------------- -------- --------
</TABLE>

The Company extends credit to businesses in the Chicago metropolitan area,
with minimal exposure in other geographic areas. The Company is primarily a
secured lender, with the security depending on the loan type. The Company's
opinion as to the ultimate collectibility of its loan portfolio is subject to
estimates regarding the future cash flows of its customers' operations, and the
value of customers' collateral utilized as security. These estimates are
affected by changing economic conditions and the economic prospect of the
customers.

Loans with three or more installment payments past due, and loans past due
90 days or more which are still accruing interest, amounted to $177,000 and
$167,000 at December 31, 1995 and 1994, respectively.

The Company has extended loans to directors and officers of the Company and
the Banks and their related interests. The aggregate loans outstanding as
reported by the directors and officers of the Company and the Banks and their
related interests, which exceeded $60,000, totaled $6,044,000 and $8,526,000 at
December 31, 1995 and 1994, respectively. During 1995, new loans totaled
$4,166,000 and repayments totaled $6,648,000. In the opinion of management,
these loans were made in the normal course of business and on substantially the
same terms for comparable transactions with other borrowers and do not involve
more than a normal risk of collectibility. The Company relies on its directors
and officers for identification of loans to their related interests.

F-15
<PAGE>
BEVERLY BANCORPORATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 5 -- ALLOWANCE FOR LOAN LOSSES
The following summarizes the changes in the allowance for loan losses (in
thousands):

<TABLE>
<CAPTION>
PERIOD ENDED JUNE
30, YEAR ENDED DECEMBER 31,
-------------------- -------------------------------
1996 1995 1995 1994 1993
--------- --------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Balance, beginning of period................................ $ 3,524 $ 3,995 $ 3,995 $ 4,026 $ 4,484
Recoveries.................................................. 605 251 471 626 346
Charge-Offs................................................. (261) (445) (1,101) (968) (2,103)
Provision for loan losses................................... 75 103 159 311 1,299
--------- --------- --------- --------- ---------
Balance, end of period.................................... $ 3,943 $ 3,904 $ 3,524 $ 3,995 $ 4,026
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>

As of December 31, 1995, the Company's recorded investment in impaired loans
was $1,606,000. No specific valuation allowance was required for these loans as
of December 31, 1995. The average recorded investment in impaired loans for the
year ended December 31, 1995 was $1,824,000. The Company recognized $110,000 of
interest on impaired loans for the year ended December 31, 1995. There was no
significant change in impaired loans as of June 30, 1996 or during the period
then ended.

NOTE 6 -- PREMISES AND EQUIPMENT
Premises and equipment are summarized as follows (in thousands):

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1995 1994
--------- ---------
<S> <C> <C>
Land....................................................................................... $ 2,482 $ 2,482
Buildings and improvements (Note 13)....................................................... 11,413 10,864
Furniture, equipment and leasehold improvements............................................ 12,563 14,312
--------- ---------
Total cost................................................................................. 26,458 27,658
Less allowance for depreciation and amortization........................................... 13,254 13,714
--------- ---------
Premises and equipment, net.............................................................. $ 13,204 $ 13,944
--------- ---------
--------- ---------
</TABLE>

Depreciation and amortization amounted to $1,560,000, $1,813,000 and
$1,823,000 for the years ended December 31, 1995, 1994 and 1993, respectively.

NOTE 7 -- DEPOSITS
Certificates of deposit, including public funds, greater than $100,000
totaled $50,635,000 and $41,315,000, at December 31, 1995 and 1994,
respectively.

NOTE 8 -- NOTES PAYABLE
At December 31, 1995, the $11,000,000 note payable bears interest at 30
basis points less than the prime rate of the lending bank (8.5% at December 31,
1995), is due on demand, requires quarterly interest payments and is
collateralized by shares of common stock of the Company's banking subsidiaries,
having book values of approximately $46,375,000 at December 31, 1995. In
January, 1996, the Company exercised its option under the note agreement to
split the note into two separate components: $7,000,000 bearing interest at
6-month LIBOR plus 200 basis points and $4,000,000 bearing interest at 30-day
LIBOR plus 200 basis points. The Company may repay principal for each component
on the interest repricing date. At June 30, 1996, the principal balance of the
30-day LIBOR component had been reduced to $2,000,000 resulting in a total note
payable balance at June 30, 1996 of $9,000,000.

F-16
<PAGE>
BEVERLY BANCORPORATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 8 -- NOTES PAYABLE (CONTINUED)
The note payable at December 31, 1994 was a demand note, bearing interest at
the lending bank's prime rate, and was collateralized by the shares of common
stock of the Company's banking subsidiaries. This loan was repaid in 1995.

The Company has a $500,000 demand line of credit, bearing interest on
advances at the lending bank's prime rate plus 30 basis points. At June 30,
1996, the Company had no borrowings outstanding under this line.

NOTE 9 -- EMPLOYEE BENEFIT PLANS

The Company's 401(k) plan covers all full-time and certain part-time
employees after completion of one year of service as defined. Contributions from
participants are voluntary and are limited to the Internal Revenue Code maximum
contribution.

The plan requires the Company to match 50% of the first 4% of a
participant's contributions. In addition, the Company contributes another 2% of
gross salaries of all participants. Total contributions to the plan for 1995,
1994 and 1993 were $290,000, $272,000 and $383,000, respectively.

NOTE 10 -- STOCK OPTIONS
The stockholders approved the adoption of an Incentive Stock Option Plan in
1994. The plan is administered by the Stock Option Plan Committee of the Board
of Directors. Directors and key officers of the Company are eligible to
participate in the plan. Under the plan, 532,945 shares of common stock are
available for distribution. The options allow for the purchase of common stock
at a price not less than fair market value on the date the option is granted.
The options vest ratably over a five year period and are exercisable no later
than ten years after the date of grant. In addition, the plan provides that all
options become fully vested upon a change of control of the Company as defined
in the plan. As of December 31, 1995 and June 30, 1996, 146,610 of the issued
options are vested and exercisable.

The following table summarizes the changes in the number of common shares
granted under the stock option plan:

<TABLE>
<CAPTION>
PRICE RANGE OF
SHARES OPTIONS
---------- ---------------
<S> <C> <C>
Options outstanding at January 1, 1993.................................... 42,500 $ 9.49
Granted................................................................. 62,500 9.49
----------
Options outstanding at December 31, 1993.................................. 105,000 9.49
Granted................................................................. 416,195 8.16
Exercised............................................................... (105,000) 9.49
----------
Options outstanding at December 31, 1994.................................. 416,195 8.16
Granted................................................................. 36,750 9.90 - 10.00
Exercised............................................................... (5,855) 8.16
Canceled or terminated.................................................. (24,465) 8.16
----------
Options outstanding at December 31, 1995.................................. 422,625 8.16 - 10.00
Granted (unaudited)..................................................... 13,125 11.43
Exercised (unaudited)................................................... (2,205) 8.16
Canceled or terminated (unaudited)...................................... (15,505) 8.16
----------
Options outstanding at June 30, 1996 (unaudited).......................... 418,040 8.16 - 11.43
----------
----------
</TABLE>

F-17
<PAGE>
BEVERLY BANCORPORATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 11 -- INCOME TAXES
The components of income tax expense for the periods indicated were as
follows (in thousands):

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Currently payable
Federal................................................................ $ 2,475 $ 2,827 $ 1,508
State.................................................................. 213 -- --
--------- --------- ---------
2,688 2,827 1,508
Deferred expense (benefit)
Federal................................................................ 153 (155) 635
State.................................................................. 36 -- --
--------- --------- ---------
189 (155) 635
--------- --------- ---------
Total.................................................................. $ 2,877 $ 2,672 $ 2,143
--------- --------- ---------
--------- --------- ---------
</TABLE>

Deferred tax assets (liabilities) consist of the following (in thousands):

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
Deferred tax assets 1995 1994
--------- ---------
<S> <C> <C>
Allowance for loan loss........................................... $ 887 $ 622
Deferred loan fees and other..................................... 163 160
Unrealized loss on available-for-sale securities................. -- 2,666
--------- ---------
Total deferred tax assets........................................ 1,050 3,448
Deferred tax liabilities
Premises and equipment........................................... (409) (453)
Deferred loan costs and other.................................... (370) (290)
Unrealized gain on available-for-sale securities................. (317) --
--------- ---------
Total deferred tax liabilities................................... (1,096) (743)
--------- ---------
Net deferred tax (liability) asset............................... $ (46) $ 2,705
--------- ---------
--------- ---------
</TABLE>

There was no valuation allowance for deferred tax assets as of December 31,
1995 or 1994. Management believes that it is more likely than not that the
deferred tax assets will be recoverable from available income tax carrybacks or
future taxable income.

The total income tax expense for the years ended December 31, 1995, 1994 and
1993 reflect effective tax rates of 31.7%, 29.4% and 30.5%, respectively. The
differences between the U.S. Federal income tax rate of 34% and the effective
rates derive from the following (in thousands):

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Provision computed at statutory rate..................................... $ 3,088 $ 3,090 $ 2,385
Tax-exempt interest, net of cost to carry................................ (498) (470) (407)
State income taxes, net of Federal tax benefit........................... 164 -- --
Non-deductible amortization of intangible assets......................... 109 158 159
Other.................................................................... 14 (106) 6
--------- --------- ---------
Total................................................................ $ 2,877 $ 2,672 $ 2,143
--------- --------- ---------
--------- --------- ---------
</TABLE>

F-18
<PAGE>
BEVERLY BANCORPORATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 12 -- FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK
During the normal course of meeting the needs of its customers, the Company
is a party to financial instruments with off-balance sheet risk. These financial
instruments include commitments to extend credit and letters of credit, and they
involve elements of credit risk in excess of the amount recognized in the
balance sheet. The contractual amounts of those instruments reflect the extent
of involvement the Company has in particular classes of financial instruments.
The Company's exposure to credit loss in the event of non-performance by the
debtor for commitments to extend credit and letters of credit is represented by
the contractual amount of those instruments. The Company uses the same credit
policies in making commitments and conditional obligations as it does for
on-balance sheet instruments. The Company requires collateral or other security
to support financial instruments with off-balance sheet credit risk. The
approximate amount of such commitments and conditional obligations is as
follows:

<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------
1995 1994
-------------- --------------
<S> <C> <C>
Stand-by letters of credit............................................. $ 2,729,000 $ 3,741,000
Unused home equity lines............................................... 18,150,000 19,554,000
Unused credit card lines............................................... 5,523,000 5,047,000
Other unused commitments............................................... 30,607,000 30,718,000
</TABLE>

Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the contract. Commitments
generally have fixed expiration dates or other termination clauses and may
require payment of a fee. Since many of the commitments are expected to expire
without being drawn upon, the total commitment amounts do not necessarily
represent future cash requirements.

Standby letters of credit are conditional commitments issued by the Company
to guarantee the performance of a customer to a third party. Such instruments
are generally issued for one year or less. The credit risk involved in issuing
letters of credit is essentially the same as that involved in extending loan
facilities to customers. The majority of the standby letters of credit are
collateralized by deposits.

NOTE 13 -- COMMITMENTS AND CONTINGENT LIABILITIES

LEASES

Rental expense related to facilities and equipment leases was $158,000 in
1995, $153,000 in 1994 and $150,000 in 1993. One of these facilities agreements
is with an entity in which a stockholder and director of the Company has an
interest. Future minimum rental commitments under these leases at December 31,
1995 are as follows (in thousands):

<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, RELATED PARTY OTHER
--------------- -----------
<S> <C> <C>
1996........................................................................... $ 97 $ 19
1997........................................................................... 99 21
1998........................................................................... 102 11
1999........................................................................... 104 6
2000........................................................................... 71 6
----- ---
Total Future Minimum Lease Payments............................................ $ 473 $ 63
----- ---
----- ---
</TABLE>

In February, 1996, the Company entered into a 20-year lease agreement for
ground and building leases with an entity in which a stockholder and director of
the Company has an interest. Currently, the lease provisions are being
finalized. The Company will account for the ground lease as an operating lease
and the building lease as a capital lease. The Company has the option to
purchase the building in years 11, 16, and 20 of the lease for approximately
$931,000, $1,112,000, and $1,289,000,

F-19
<PAGE>
BEVERLY BANCORPORATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 13 -- COMMITMENTS AND CONTINGENT LIABILITIES (CONTINUED)
respectively. The Company also has an option to renew the leases for another
10-year term at the expiration of the original 20-year lease term. At June 30,
1996, the Company capitalized building costs (included in premises and
equipment) and the obligation under capital lease (included in accrued expenses
and other liabilities) in the amount of $596,000. Estimated minimum future lease
payments, including interest, are as follows (in thousands):

<TABLE>
<CAPTION>
GROUND BUILDING
LEASE LEASE
--------- ---------
<S> <C> <C>
YEAR ENDING DECEMBER 31,
1996............................................................................. $ 23 $ 54
1997............................................................................. 30 72
1998............................................................................. 30 72
1999............................................................................. 31 74
2000............................................................................. 33 76
Thereafter....................................................................... 873 1,473
--------- ---------
$ 1,020 1,821
---------
---------
Amount representing interest....................................................... (1,225)
---------
Obligation under capital lease..................................................... $ 596
---------
---------
</TABLE>

LEGAL PROCEEDINGS

NOTE 14 -- STOCKHOLDERS' EQUITY AND REGULATORY RESTRICTIONS

In July 1995, the Company entered into Stock Repurchase Agreements with
certain of its shareholders. The agreements grant the Company the option to
repurchase common shares held by those shareholders upon the shareholders'
deaths. Pursuant to one of the agreements, the Company repurchased 881,340
common shares of stock from the estate of its late chairman in December, 1995.
The purchase price of $13.00 per share was based on a valuation by an
independent investment banking firm. As of December 31, 1995, agreements cover
772,335 shares of the Company's common stock.

Cash dividends paid to the parent Company by the Banks amounted to
$4,000,000, $3,424,000 and $4,000,000 for the years ended December 31, 1995,
1994 and 1993, respectively. The payment of dividends to the Company by the
Banks is subject to various state and Federal regulatory limitations. At
December 31, 1995, the total amount of subsidiary-retained earnings available
for dividends, while maintaining the subsidiaries in a well-capitalized status,
amounted to approximately $16,000,000.

The Company is required to maintain consolidated minimum levels of
"risk-based capital" and "leverage capital" as defined by banking regulations as
a "well-capitalized" institution. At December 31, 1995, the minimum Tier 1 and
total risk-based capital ratios required to be maintained to be considered
"well-capitalized," were 6% and 10%, respectively. Consolidated ratios were
approximately 12.25% and 13.34%, respectively. The Company's leverage ratio at
December 31, 1995 was 6.94% which is in excess of the minimum requirement of 5%
to be considered "well-capitalized." The subsidiary banks maintained capital
ratios in excess of the requirements to be considered "well-capitalized."

The Company has provided financing for certain officers to purchase common
stock of the Company. The notes are recourse, demand notes, secured by the
common stock, and require annual or

F-20
<PAGE>
BEVERLY BANCORPORATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 14 -- STOCKHOLDERS' EQUITY AND REGULATORY RESTRICTIONS (CONTINUED)

quarterly interest payments at either the prime rate (8.5% at December 31, 1995)
or the Company's dividend rate with an interest cap of 9.0%. The balance of
these notes as of June 30, 1996 was $1,680,000, and is shown as a reduction of
stockholders' equity.

The Banks are required to maintain average reserve balances with the Federal
Reserve Bank. The average amount of reserve balances for the years ended
December 31, 1995 and 1994 were approximately $6,777,000 and $6,086,000,
respectively.

NOTE 15 -- FAIR VALUE OF FINANCIAL INSTRUMENTS
SFAS No. 107, "Disclosures about Fair Value of Financial Instruments,"
requires disclosure of fair value information about those financial instruments
for which it is practicable to estimate that value. In cases where quoted market
prices are not available, fair values are based on estimates, using present
value or other valuation techniques. Those techniques are significantly affected
by the assumptions used, including the discount rate, and estimates of future
cash flows. In that regard, the derived fair value estimates cannot be
substantiated by comparison to independent markets and, in many cases, could not
be realized in immediate settlement of the instrument. The statement excludes
certain financial instruments, and all non-financial instruments from its
disclosure requirements. Accordingly, the aggregate fair value amounts presented
do not represent the underlying value of the Company.

The following table provides summary information on the carrying amounts and
fair values of the Company's financial instruments at December 31, 1995 and 1994
(in thousands):

<TABLE>
<CAPTION>
DECEMBER 31, 1995 DECEMBER 31, 1994
-------------------------- --------------------------
CARRYING ESTIMATED CARRYING ESTIMATED
AMOUNT FAIR VALUE AMOUNT FAIR VALUE
OF ASSETS OF ASSETS OF ASSETS OF ASSETS
(LIABILITIES) (LIABILITIES) (LIABILITIES) (LIABILITIES)
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Cash and equivalents...................................... $ 52,710 $ 52,710 $ 35,072 $ 35,072
Investment securities..................................... 207,607 207,603 213,765 209,501
Loans and notes receivable................................ 310,346 320,917 288,786 285,699
Non-Interest Bearing Demand Deposits...................... (88,111) (88,111) (100,674) (100,674)
Money Market, NOW and Savings Accounts.................... (218,943) (218,943) (215,124) (215,124)
Certificates of Deposit................................... (220,077) (221,962) (188,647) (188,432)
Short-Term Borrowings..................................... (17,292) (17,292) (11,514) (11,514)
</TABLE>

The following notes summarize the major methods and assumptions used in
estimating the fair values of financial instruments.

CASH AND CASH EQUIVALENTS

Fair value of cash, cash equivalents and Federal funds sold approximate
their carrying amounts. The Company places its cash and funds with various
financial institutions and, by policy, limits its credit exposure to only
well-capitalized institutions. The Company performs periodic evaluations on the
capital adequacy of the financial institutions.

INVESTMENT SECURITIES

Fair values of investments are based on quoted market prices.

F-21
<PAGE>
BEVERLY BANCORPORATION, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 15 -- FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)

LOANS AND NOTES RECEIVABLE

For variable-rate loans that reprice frequently and have no significant
change in credit risk, fair values are based on carrying values. The fair values
for other loans are estimated using discounted cash flow analysis, using
interest rates currently being offered for loans with similar terms to borrowers
of similar credit quality. The fair values do not include any potential value
from the bulk sale of loans.

DEPOSITS

The fair values disclosed for deposits payable on demand, interest and
non-interest bearing checking, savings accounts and money market accounts are,
by definition, equal to their carrying amounts. Fair values for fixed-rate
certificates of deposit are estimated using a discounted cash flow calculation
that applies interest rates currently being offered on certificates to a
schedule of aggregated expected monthly maturities on time deposits.

The value derived from retaining demand and savings deposits, commonly
referred to as core deposit intangibles, is not considered in the above fair
value amounts.

SHORT-TERM BORROWINGS

The carrying amounts of securities sold under repurchase agreements, funds
purchased, treasury tax deposits, bank notes payable and other short-term
borrowings approximate their fair values.

OFF-BALANCE-SHEET ITEMS

There is no material difference between the notional amount and the
estimated fair value of off-balance-sheet items, primarily comprised of unfunded
loan commitments, which are generally priced at the time of funding.

NOTE 16 -- CONDENSED FINANCIAL STATEMENTS -- PARENT COMPANY ONLY
The following presents the condensed Balance Sheets as of December 31, 1995
and 1994 and June 30, 1996 (unaudited), and Statements of Income and of Cash
Flows for each of the three years ended December 31, 1995 and the six months
ended June 30, 1996 and 1995 (unaudited), for Beverly Bancorporation, Inc. (in
thousands):

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
JUNE 30, 1996 1995 1994
------------- --------- ---------
<S> <C> <C> <C>
(UNAUDITED)
BALANCE SHEETS
Cash in non-interest-bearing deposits with subsidiaries..................... $ 266 $ 734 $ 270
Investment in subsidiaries.................................................. 45,868 50,856 41,955
Other assets, net........................................................... 3,670 1,030 1,003
------------- --------- ---------
Total assets............................................................ $ 49,804 $ 52,620 $ 43,228
------------- --------- ---------
------------- --------- ---------
Bank notes payable.......................................................... $ 9,000 $ 11,000 $ 1,800
Accrued interest, taxes and other liabilities............................... 217 659 620
Stockholders' equity........................................................ 40,587 40,961 40,808
------------- --------- ---------
Total liabilities and stockholders' equity.............................. $ 49,804 $ 52,620 $ 43,228
------------- --------- ---------
------------- --------- ---------
</TABLE>

F-22
<PAGE>
BEVERLY BANCORPORATION, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 16 -- CONDENSED FINANCIAL STATEMENTS -- PARENT COMPANY ONLY (CONTINUED)

<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEARS ENDED DECEMBER 31,
-------------------- -------------------------------
1996 1995 1995 1994 1993
--------- --------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
STATEMENTS OF INCOME
Income:
Dividends from subsidiaries................................. $ 3,226 $ 2,700 $ 4,000 $ 3,424 $ 4,000
Interest.................................................... 59 65 126 76 41
Intercompany fees........................................... 2,346 1,962 3,770 3,478 3,063
--------- --------- --------- --------- ---------
Total income.............................................. 5,631 4,727 7,896 6,978 7,104
Expenses:
Interest.................................................... 369 51 79 206 377
Salaries and benefits....................................... 1,912 1,570 3,263 2,810 2,261
Amortization of intangibles................................. 135 162 320 464 467
Other....................................................... 811 885 1,607 1,545 1,603
--------- --------- --------- --------- ---------
Total expenses............................................ 3,227 2,668 5,269 5,025 4,708
--------- --------- --------- --------- ---------
Income before income taxes and equity in undistributed net
income of subsidiaries....................................... 2,404 2,059 2,627 1,953 2,396
Income tax benefit............................................ 220 161 352 400 745
Equity in undistributed net income of subsidiaries............ 383 632 3,225 4,063 2,105
--------- --------- --------- --------- ---------
Net income................................................ $ 3,007 $ 2,852 $ 6,204 $ 6,416 $ 5,246
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>

F-23
<PAGE>
BEVERLY BANCORPORATION, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 16 -- CONDENSED FINANCIAL STATEMENTS -- PARENT COMPANY ONLY (CONTINUED)

<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEARS ENDED DECEMBER 31,
-------------------- --------------------------------
1996 1995 1995 1994 1993
--------- --------- ---------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
STATEMENTS OF CASH FLOWS (CONTINUED)
Cash flows from investing activities:
Investment in subsidiaries............................ $ (607) $ -- $ (200) $ -- $ --
--------- --------- ---------- --------- ---------
Net cash used in investment activities.............. (607) -- (200) -- --
Cash flows from financing activities:
Cash dividends........................................ (403) (467) (887) (870) (800)
Proceeds from issuance of stock....................... 184 234 472 142 298
Proceeds from note payable............................ -- -- 11,000 -- --
Repayments of note payable............................ (2,000) (1,300) (1,800) (2,900) (2,850)
Repurchase of common stock............................ -- -- (11,457) -- --
Proceeds from note receivable -- officer
stockholders......................................... 30 29 29 240 29
--------- --------- ---------- --------- ---------
Net cash used in financing activities............... (2,189) (1,504) (2,643) (3,388) (3,323)
--------- --------- ---------- --------- ---------
Net (decrease) increase in cash..................... (468) 292 464 (516) 383
Cash, beginning of period............................... 734 270 270 786 403
--------- --------- ---------- --------- ---------
Cash, end of period..................................... $ 266 $ 562 $ 734 $ 270 $ 786
--------- --------- ---------- --------- ---------
--------- --------- ---------- --------- ---------
</TABLE>

NOTE 17 -- SUBSEQUENT EVENTS
On February 27, 1996, the Board of Directors declared a 5% stock dividend on
the Company's common stock. The record date for the foregoing stock dividend is
April 5, 1996. The 5% stock dividend has been given retroactive effect in the
consolidated financial statements and notes thereto.

NOTE 18 -- PROPOSED INITIAL PUBLIC OFFERING, REINCORPORATION AND MERGER

The Company was incorporated in Delaware on June 13, 1996 as a wholly-owned
subsidiary of Beverly Bancorporation, Inc., an Illinois company ("Beverly
Illinois"). The Company has authorized 8,000,000 common shares with a par value
of $.01 per common share. The Company has filed a Registration Statement on Form
S-1 with the Securities and Exchange Commission for an offering of its common
stock and intends to sell 1,000,000 common shares with an additional 150,000
shares subject to the Underwriters' over-allotment option.

The Board of Directors is authorized to issue one or more series of
preferred stock. The Board, without stockholder approval, may determine voting,
conversion and other rights. Under the certificate of incorporation, the Board
of Directors has authorized 1,000,000 shares of preferred stock.

On August 16, 1996, Beverly Illinois was merged with and into the Company
and the Company is the surviving corporation. Each outstanding share of common
stock of Beverly Illinois was converted into five shares of common stock of the
Company.

The consolidated financial statements have been restated to reflect the
reincorporation and merger.

F-24
<PAGE>
[MAP]
<PAGE>
- -------------------------------------------
-------------------------------------------
- -------------------------------------------
-------------------------------------------

NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFER CONTAINED HEREIN AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY OR THE UNDERWRITERS. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE AS OF
WHICH INFORMATION IS SET FORTH HEREIN. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED
HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH
OFFER OR SOLICITATION.

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

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Prospectus Summary............................. 3
Risk Factors................................... 6
Use of Proceeds................................ 8
Market for Common Stock and Dividends.......... 9
Capitalization................................. 10
Dilution....................................... 11
Selected Consolidated Financial Data........... 12
Management's Discussion and Analysis of Results
of Operations and Financial Condition......... 14
Business....................................... 34
Management..................................... 39
Principal Stockholders......................... 43
Supervision and Regulation..................... 44
Description of Capital Stock................... 53
Shares Eligible for Future Sale................ 54
Underwriting................................... 56
Legal Matters.................................. 57
Experts........................................ 57
Available Information.......................... 57
Index to Consolidated Financial Statements..... F-1
</TABLE>

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

UNTIL SEPTEMBER 16, 1996 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATIONS OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.

1,000,000 SHARES

[LOGO]

COMMON STOCK

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

PROSPECTUS

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

HOWE BARNES INVESTMENTS, INC.

AUGUST 22, 1996

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