<PAGE> 1
[COBITZ, VANDENBERG & FENNESSY LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
To the Trustees of
Suburban Federal Savings, A Federal Savings Bank
Cash or Deferred Profit Sharing Plan
Flossmoor, Illinois
We have audited the accompanying statements of net assets available for
plan benefits of Suburban Federal Savings, A Federal Savings Bank Cash or
Deferred Profit Sharing Plan (the "Plan") as of December 31, 1997 and 1996, and
the related statements of changes in net assets available for plan benefits for
the years then ended. These financial statements are the responsibility of the
Plan's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audit 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 misstatements. 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 audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the net assets available for plan benefits of the
Plan at December 31, 1997 and 1996, and the changes in its net assets available
for plan benefits for the years then ended, in conformity with generally
accepted accounting principles.
Our audits were conducted for the purpose of forming an opinion on the
basic financial statements taken as a whole. The supplemental schedules listed
in the Contents are presented for purposes of additional analysis and are not a
required part of the basic financial statements, but are supplementary
information required by the Department of Labor's Rules and Regulations for
Reporting and Disclosure under the Employee Retirement Income Security Act of
1974. These schedules are the responsibility of the Plan's management. Such
schedules have been selected to the auditing procedures applied in the audit of
the basic 1997 financial statements and, in our opinion, are fairly stated in
all material respects when considered in relation to the basic financial
statements taken as a whole.
/s/ COBITZ, VANDENBERG & FENNESSY
- ---------------------------------
Cobitz, VandenBerg & Fennessy
March 23, 1998
Palos Hills, Illinois
-1-
<PAGE> 2
SUBURBAN FEDERAL SAVINGS, A FEDERAL SAVINGS BANK
CASH OR DEFERRED PROFIT SHARING PLAN
Statement of Net Assets Available for
Plan Benefits
<TABLE>
<CAPTION>
December 31,
--------------------------
1997 1996
---- ----
<S> <C> <C>
Assets:
Money market deposits held
by Suburban Federal Savings, A Federal
Savings Bank (note 2) $ 502,999 400,383
Stock investment in SuburbFed Financial
Corp (note 3) 2,824,900 965,447
Mutual fund investments (note 4) 456,337 292,225
Life insurance and annuity contracts - 9,953
Money market fund in brokerage accounts 16,034 57,983
----------- ---------
Total investments 3,800,270 1,725,991
----------- ---------
Receivables:
Employer contributions 1,297 8,931
Employee contributions 2,973 -
Loans to participants 2,970 2,582
Dividends 4,520 4,065
Other 89 597
----------- ---------
Total receivables 11,849 16,175
----------- ---------
Net assets available for plan benefits $ 3,812,119 1,742,166
=========== =========
</TABLE>
See notes to financial statements.
<PAGE> 3
SUBURBAN FEDERAL SAVINGS, A FEDERAL SAVINGS BANK
CASH OR DEFERRED PROFIT SHARING PLAN
Statement of Changes in Net Assets
Available for Plan Benefits
<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------
1997 1996
---- ----
<S> <C> <C>
Increase in net assets attributed to:
Employee contributions $ 194,539 169,539
Employer matching contributions, net of
forfeitures 63,100 30,240
Income from investments 108,488 85,329
Market appreciation 1,725,305 100,315
----------- ---------
Total additions 2,091,432 385,423
----------- ---------
Deductions from net assets attributed to:
Participant withdrawals 21,479 72,662
----------- ---------
Total deductions 21,479 72,662
----------- ---------
Net increase in net assets during the year 2,069,953 312,761
Net assets available for plan benefits:
Beginning of year 1,742,166 1,429,405
----------- ---------
End of year $ 3,812,119 1,742,166
=========== =========
</TABLE>
See notes to financial statements.
<PAGE> 4
SUBURBAN FEDERAL SAVINGS, A FEDERAL SAVINGS BANK
CASH OR DEFERRED PROFIT SHARING PLAN
Notes to Financial Statements
1. Description of the Plan
The following description of the Suburban Federal Savings, A Federal
Savings Bank Cash and Deferred Profit Sharing Plan (the "Plan") is
provided for general information purposes only. Participants should refer
to the Plan document for more complete information.
General
The Plan, which was established January 1, 1989 as amended and restated
January 1, 1994, is a defined contribution plan in which essentially all
employees of Suburban Federal Savings, A Federal Savings Bank (the "Bank")
may participate after meeting certain age and service requirements. The
Plan is intended to qualify as a salary reduction plan under Section
401(k) of the Internal Revenue Code (the Code).
Contributions
The Bank contributes and allocates to each participant's account the
amount withheld from each participant's compensation ("employee
contributions") pursuant to his or her elective deferral agreement and
within a range specified by the Plan. The Bank matches contributions to
the Plan in an amount equal to 50 percent of each employee's contributions
up to a specified percentage of the deferred contribution. Subsequent to
the Bank's conversion from a mutual to a stock form of ownership,
employees eligible under the stock option plan who contribute to the
401(k) are no longer eligible for the Bank's matching of their
contributions. Contribution limitations may be placed on deferred
deposits of highly compensated employees (as defined in the Plan document
and amendments) to ensure that no prohibited discrimination takes place
under the Code.
Participant Accounts
Each participant's account is credited with the participant's
contribution, the Bank's matching contribution and an allocation of Plan
earnings. Plan earnings from each investment are allocated to
participants based on their proportionate share of total assets in that
investment.
Vesting
Participants immediately vest in their employee contributions and the
interest thereon. Vesting in the employer matching contributions and
interest thereon is based on years of continuous service. A participant
is 100 percent vested after seven years of credited service.
Payment of Benefits
Payment of benefits to a participant who terminates employment may be made
in a lump sum or rolled into another qualified plan. A participant also
may elect to defer distribution of his or her account until attaining age
70 1/2.
Payment of benefits to the beneficiary of a deceased participant may also
be made in the form of a lump sum payment or rolled into another qualified
plan.
<PAGE> 5
Loans to Participants
Under the Plan, participants may borrow one-half of their vested account
balance up to a maximum of $50,000. The interest rate charged the
participant is fixed at the time of the loan at comparable interest rates
charged by persons in the business of lending money for loans which would
be made under similar circumstances. When a loan is made, the amount
borrowed is transferred from the participant's deposit account to the
participant's loan account. Loan repayments, including interest, are
immediately invested in the participant's deposit account.
Administrative Expenses
All administrative expenses pertaining to the operation of the Plan for
the years ended December 31, 1997 and 1996 were paid by the Bank. Also,
all administrative, legal, and accounting services were performed by Bank
personnel on behalf of the Plan and no charges were made to the Plan for
these services.
2. Money market deposits are valued at the principal amount which
approximates fair value. Funds are deposited in two money market deposits
at the Bank which are separately designated as employee and employer
contributions. The money market deposits earn market rates of interest
which are determined annually in November by the Bank's Board of
Directors. The rate earned for the 1997 and 1996 plan years was 5.90%.
The Plan's investment in money market deposits is managed by the trustees
of the Plan.
3. In conjunction with the Bank's conversion from a mutual to a stock form
of ownership, the Plan utilized funds from the money market deposit
accounts to purchase stock in SuburbFed Financial Corp., the Bank's
Holding Company (the "Company"). At the date of conversion, the Plan
purchased 38,776 shares of stock at $6.67 per share for participants
indicating a desire to purchase stock in the Company. Additional employee
contributions and cash dividends are utilized to purchase additional
shares on a regular basis. At December 31, 1997 and 1996, the Plan was
the beneficial owner of 56,498 and 50,813 shares respectively. The fair
value of this stock at December 31, 1997 was $50.00 per share, or
$2,824,900 as compared to $19.00 per share, or $965,447 at December 31,
1996. Total return on an investment in the Company's stock for the years
ended December 31, 1997 and 1996 amounted to approximately 165% and 17%
respectively.
On December 29, 1997, the Company's Board of Directors announced the
execution of a definitive agreement pursuant to which the Company will
merge with and into Citizens Financial Services, FSB of Munster, Indiana.
In connection with the merger, Citizens Financial will undertake to
convert from a mutual to a stock institution and form a holding company.
Under the terms of the agreement, each share of the Company will be
exchanged for shares of Citizens' common stock with an initial conversion
offering price equivalent to $36.00, based on the initial public offering
price of Citizens' common stock. Consummation of the merger is subject to
the approval of the Company's stockholders, the conversion of Citizens and
all required regulatory approvals.
The investment in the Company's common stock is recorded at fair value.
Recording this investment at fair value has resulted in a market
appreciation of net assets available for plan benefits of $1,725,305 and
$100,315 for the years ended December 31, 1997 and 1996.
<PAGE> 6
4. Mutual fund investments of the Plan are carried at fair value which
approximates cost. These investments are comprised of the following:
<TABLE>
<CAPTION>
December 31,
-----------------------
1997 1996
---- ----
<S> <C> <C>
AIM Constellation Fund $ 84,502 48,767
AIM Global Utilities Fund 18,322 18,539
AIM Value Fund 53,473 26,270
Fidelity Advisor Balanced Fund 42,079 38,393
Fidelity Advisor Growth Opportunities Fund 210,545 132,487
Fidelity Advisor High Yield Fund 40,668 27,769
Vanguard Wellington Fund 6,748 -
--------- -------
$ 456,337 292,225
========= =======
</TABLE>
The AIM Constellation Fund is a diversified portfolio which seeks to
provide capital appreciation through investments in common stocks, with
emphasis on medium-sized and smaller emerging growth companies. The total
return on the fund for the years ended December 31, 1997 and 1996 was
12.9% and 16.3% respectively. The AIM Global Utilities Fund seeks to
achieve a high level of current income by investing primarily in the
common and preferred stocks of public utility companies. The total return
on the fund for the years ended December 31, 1997 and 1996 was 23.7% and
13.3% respectively. The AIM Value Fund seeks long-term capital growth
with income as a secondary objective. The total return on the fund for
the years ended December 31, 1997 and 1996 was 23.9% and 14.5%
respectively.
The Fidelity Advisor Balanced Fund seeks both income and growth of capital
by investing in a diversified portfolio of equity and fixed income
securities, with income, growth of income and capital appreciation
potential. The total return on the fund for the years ended December 31,
1997 and 1996 was 22.3% and 8.4% respectively. The Fidelity Advisor
Growth Opportunities Fund seeks to provide capital growth by investing
primarily in common stocks and securities convertible into common stocks.
The total return on the fund for the years ended December 31, 1997 and
1996 was 28.6% and 17.7% respectively. The Fidelity Advisor High Yield
Fund seeks combination of a high level of income and the potential for
capital gains by investing in a diversified portfolio consisting primarily
of high-yielding fixed income and zero coupons such as bonds, debentures
and notes, convertible securities and preferred stocks. The total return
on the fund for the years ended December 31, 1997 and 1996 was 14.7% and
13.3% respectively.
The Wellington Fund seeks both income and growth of capital by investing
in a diversified portfolio of equity and fixed income securities. The
total return on the fund for the year ended December 31, 1997 was 23.2%.
5. Although it has not expressed any intent to do so, the Bank has the right
under the Plan to terminate its participation in the Plan at any time. In
the event of termination or partial termination of the Plan, all
participants affected shall become fully vested in their accounts.
6. The prior year financial statements have been restated to reflect a
$15,700 correction of accounts receivable.
<PAGE> 7
SUBURBAN FEDERAL SAVINGS, A FEDERAL SAVINGS BANK
CASH OR DEFERRED PROFIT SHARING PLAN
Item 30a - Schedule of Assets Held for Investment Purposes
December 31, 1997
<TABLE>
<CAPTION>
Fair
Description Cost Value
- ----------- ---- -----
<S> <C> <C>
Money market deposits held by Suburban
Federal Savings, A Federal Savings Bank -
5.90% no stated maturity $ 502,999 502,999
Stock investment in SuburbFed Financial Corp. 615,320 2,824,900
AIM Constellation Fund 84,502 84,502
AIM Global Utilities Fund 18,322 18,322
AIM Value Fund 53,473 53,473
Fidelity Advisor Balanced Fund 42,079 42,079
Fidelity Advisor Growth Opportunities Fund 210,545 210,545
Fidelity Advisor High Yield Fund 40,668 40,668
Vanguard Wellington Fund 6,748 6,748
Money market deposit held by Stifel,
Nicolaus & Company - variable rate,
no stated maturity 607 607
Money market deposit held by ABN-AMRO
Chicago Corporation - variable rate, no
stated maturity 32 32
Money market deposit held by LaSalle
Street Securities - variable rate,
no stated maturity 15,395 15,395
----------- ---------
$ 1,590,690 3,800,270
=========== =========
</TABLE>
<PAGE> 1
[COBITZ, VANDENBERG & FENNESSY LETTERHEAD]
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in Registration Statement No.
33-68538 of SuburbFed Financial Corp. on Form S-8 of our report dated March 23,
1998 appearing in this Annual Report on Form 11-K of SuburbFed Financial Corp.
for the year ended December 31, 1997.
/s/ Cobitz, VandenBerg & Fennessy
---------------------------------
Cobitz, VandenBerg & Fennessy
March 25, 1998
Palos Hills, Illinois
