SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )

Filed by the registrant [X]

Filed by a party other than the registrant [ ]

Check the appropriate box:

[ ] Preliminary proxy statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))

[X] Definitive proxy statement

[ ] Definitive additional materials

[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12

Damen Financial Corporation
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)

- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of filing fee (Check the appropriate box):

[X] No fee required.

[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.

(1) Title of each class of securities to which transaction applies:

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

(2) Aggregate number of securities to which transaction applies:

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

(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):

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

(4) Proposed maximum aggregate value of transaction:

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

(5) Total fee paid:

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

[ ] Fee paid previously with preliminary materials.

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

[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.

(1) Amount previously paid:
- --------------------------------------------------------------------------------

(2) Form, schedule or registration statement no.:
- --------------------------------------------------------------------------------

(3) Filing party:
- --------------------------------------------------------------------------------

(4) Date filed:
- --------------------------------------------------------------------------------
2

Damen Financial Corporation

JANUARY 28, 1999

Dear Fellow Stockholder:

On behalf of the Board of Directors and management of Damen Financial
Corporation, I cordially invite you to attend the Company's Annual Meeting of
Stockholders. The meeting will be held at 9:30 a.m. Central Standard Time on
February 26, 1999 at the Embassy Suites, located at 1939 North Meacham Road,
Schaumburg, Illinois.

Your Board of Directors considers it important that you be informed of
recent developments regarding your Company. A disruptive proxy contest has been
initiated by dissident stockholders calling themselves the Committee to Enhance
Shareholder Value (the "Committee"). The enclosed Proxy Statement provides you
with important information about matters discussed in the Committee's proxy
materials which have been distributed to stockholders.

Your Company has just completed its most successful year in its history, a
fact the self-styled "Committee" (which consists solely of three stockholders
and entities controlled by one of these stockholders) has chosen to ignore,
electing instead to wage a wasteful, time consuming and disruptive proxy
contest. In fact, fiscal 1998 net income increased 10.5% when compared with
fiscal 1997, earnings per share increased $.12 or 22.6% for the same period and
the Company's return on average assets increased 10.7% from .75% for fiscal 1997
to .83% for fiscal 1998. In addition, the Company doubled its dividend payment
from $.06 per share per quarter to $.12 per share per quarter, paying out
dividends of $.40 per share in fiscal 1998, an increase of 67% from the $.24 per
share paid out in fiscal 1997. The Company's non-performing loans equaled just
.27% of total assets at September 30, 1998, while its ratio of net charge-offs
(totaling only $30,000) to average loans outstanding for fiscal 1998 was a mere
.03%.

The Board believes your Company has made, and continues to make,
significant improvements in its business through a combination of hard work and
disciplined investment of your capital. To further enhance stockholder value,
the Company has engaged Keefe Bruyette and Woods, Inc., to assist the Board in
considering its strategic options, including the possible sale of the Company.
Keefe Bruyette, pursuant to the instructions given by your Board, has held
discussions with other companies to determine if there is any interest in
acquiring the Company.

Your Board is urging you to vote "FOR" three current directors (Messrs.
Tybor and Caputo and Ms. Poronsky) who collectively have faithfully served the
interests of the Company and its stockholders, depositors and customers for over
60 years. Your Board is urging you to vote "AGAINST" a proposal supported by the
Committee, the implementation of which your Board believes is unnecessary in
light of actions taken by the Board.

THE BOARD URGES YOU TO SUPPORT YOUR BOARD BY PROMPTLY SIGNING, DATING AND
MAILING THE ENCLOSED WHITE PROXY CARD INDICATING YOUR VOTE FOR THE COMPANY'S
NOMINEES FOR DIRECTORS AND THE SELECTION OF THE COMPANY'S AUDITORS AND YOUR VOTE
AGAINST THE STOCKHOLDER PROPOSAL.

THE BOARD ALSO UNANIMOUSLY AND VIGOROUSLY OPPOSES THE COMMITTEE'S
SOLICITATION OF PROXIES AND URGES YOU NOT TO SIGN ANY PROXY YOU MAY RECEIVE FROM
THE COMMITTEE.
3

It is unfortunate that this costly and disruptive proxy contest has arisen
at a time when the efforts of your Board and management should be devoted
exclusively to the business affairs of the Company. We will continue every
effort to protect and maximize stockholder value and we are committed to keeping
you informed.

In addition to the stockholder vote on corporate business items, the
meeting will include management's report to you on Damen Financial Corporation's
1998 financial and operating performance.

I encourage you to attend the meeting in person. WHETHER OR NOT YOU ATTEND
THE MEETING, HOWEVER, PLEASE READ THE ENCLOSED PROXY STATEMENT AND THEN
COMPLETE, SIGN AND DATE THE ENCLOSED PROXY CARD AND RETURN IT AS PROMPTLY AS
POSSIBLE IN THE POSTAGE PREPAID ENVELOPE PROVIDED. This will save the Company
additional expense in soliciting proxies and will ensure that your shares are
represented. Please note that you may vote in person at the meeting even if you
have previously returned the proxy.

IF YOUR SHARES ARE HELD IN THE NAME OF A BANK, BROKER OR OTHER NOMINEE, WE
URGE YOU TO CONTACT THE PARTY RESPONSIBLE FOR YOUR ACCOUNT AND DIRECT HIM OR HER
TO VOTE "FOR" YOUR COMPANY'S NOMINEES AND "AGAINST" THE STOCKHOLDER PROPOSAL ON
THE COMPANY'S WHITE PROXY CARD.

Thank you for your prompt attention to this important matter.

Sincerely,

/s/ MARY BETH PORONSKY STULL

Mary Beth Poronsky Stull
Chairman, President and Chief
Executive Officer

--------------------------------------
200 West Higgins Road - Schaumburg, IL
60195
Phone: 847/882-5320
4

DAMEN FINANCIAL CORPORATION
200 WEST HIGGINS ROAD
SCHAUMBURG, ILLINOIS 60195
847/882-5320
------------------------

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON FEBRUARY 26, 1999
------------------------

Notice is hereby given that the Annual Meeting of Stockholders (the
"Meeting") of Damen Financial Corporation (the "Company") will be held at the
Embassy Suites, located at 1939 North Meacham Road, Schaumburg, Illinois, at
9:30 a.m., Central Standard Time, on February 26, 1999.

A Proxy Card and a Proxy Statement for the Meeting are enclosed.

The Meeting is for the purpose of considering and acting upon:

1. The election of three directors of the Company;

2. The ratification of the appointment of Cobitz, VandenBerg & Fennessy as
the auditors of the Company for the fiscal year ending September 30,
1999;

3. A proposal by a stockholder of the Company;

and such other matters as may properly come before the Meeting, or any
adjournment thereof. The Board of Directors is not aware of any other business
to come before the Meeting.

Any action may be taken on the foregoing proposals at the Meeting on the
date specified above, or on any date or dates to which the Meeting may be
adjourned. Stockholders of record at the close of business on January 11, 1999
are the stockholders entitled to vote at the Meeting and any adjournment
thereof. A complete list of stockholders entitled to vote at the Meeting will be
available for inspection by registered stockholders at the main office of the
Company at the address listed above during the ten days prior to the Meeting, as
well as at the Meeting.

You are requested to complete, sign and date the enclosed WHITE proxy card,
which is solicited on behalf of the Board of Directors, and to mail it promptly
in the enclosed envelope. The proxy will not be used if you attend and vote at
the Meeting in person.

By Order of the Board of Directors,

/s/ MARY BETH PORONSKY STULL

Mary Beth Poronsky Stull
Chairman, President and Chief
Executive Officer

Schaumburg, Illinois
January 28, 1999

IMPORTANT: THE PROMPT RETURN OF PROXIES WILL SAVE YOUR COMPANY THE EXPENSE
OF FURTHER REQUESTS FOR PROXIES TO ENSURE A QUORUM AT THE MEETING. A
SELF-ADDRESSED ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE. NO POSTAGE IS REQUIRED
IF MAILED WITHIN THE UNITED STATES. PLEASE ACT TODAY.
5

DAMEN FINANCIAL CORPORATION
200 WEST HIGGINS ROAD
SCHAUMBURG, ILLINOIS 60195
847/882-5320

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

PROXY STATEMENT

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

ANNUAL MEETING OF STOCKHOLDERS
FEBRUARY 26, 1999

This Proxy Statement is furnished in connection with the solicitation on
behalf of the Board of Directors of Damen Financial Corporation (the "Company"),
the parent company of Damen National Bank (the "Bank"), of proxies to be used at
the Annual Meeting of Stockholders of the Company (the "Meeting"), which will be
held at the Embassy Suites, located at 1939 North Meacham Road, Schaumburg,
Illinois, on February 26, 1999, at 9:30 a.m. Central Standard Time, and all
adjournments of the Meeting. The accompanying Notice of Annual Meeting, this
Proxy Statement and WHITE proxy card are first being mailed to stockholders on
or about January 28, 1999.

At the Meeting, stockholders of the Company are being asked to consider and
vote upon (i) the election of three directors, (ii) the appointment of Cobitz,
VandenBerg & Fennessy as auditors for the Company for the fiscal year ending
September 30, 1999 and (iii) a proposal by a stockholder, as described elsewhere
herein (the "Stockholder Proposal").

Your Board of Directors considers it important that you be informed of
recent developments regarding the Company. Sections of this Proxy Statement
contain information which your Board believes should be provided to you in
response to criticisms of your Board and your Company's operations contained in
proxy materials which have been circulated as part of a disruptive proxy contest
initiated by dissident stockholders calling themselves the Committee to Enhance
Shareholder Value (the "Committee"). The Committee is soliciting proxies for the
Meeting. In addition, a member of the Committee has initiated litigation against
the Company and members of the Board in an unsuccessful attempt to force the
Company to change its annual meeting to January 25, 1999. See "CERTAIN
LITIGATION." The Committee filed proxy materials with the Securities and
Exchange Commission (the "SEC") on December 22, 1998, and amended such materials
on December 31, 1998. The Company's discussion of the criticisms made by the
Committee is based upon these filings with the SEC.

Your Company has just completed its most successful year in its history, a
fact the self-styled "Committee" (which consists solely of Paul Duggan, two of
his friends and entities controlled by Duggan) has chosen to ignore. In fact,
fiscal 1998 net income increased 10.5% when compared with fiscal 1997, earnings
per share increased $.12 or 22.6% for the same period and the Company's return
on average assets increased 10.7% from .75% for fiscal 1997 to .83% for fiscal
1998. In addition, the Company doubled its dividend payment from $.06 per share
per quarter to $.12 per share per quarter, paying out dividends of $.40 per
share in fiscal 1998, an increase of 67% from the $.24 per share paid out in
fiscal 1997. The Company's non-performing loans equaled just .27% of total
assets at September 30, 1998, while its ratio of net charge-offs (totaling only
$30,000) to average loans outstanding for fiscal 1998 was a mere .03%.

The Board believes your Company has made, and continues to make,
significant improvements in its business through a combination of hard work and
disciplined investment of your capital. Above all else, your Board is committed
to enhancing the value of your investment in the Company. To further enhance
stockholder value, the Company has engaged Keefe Bruyette and Woods, Inc., to
assist the Board in considering its strategic options, including the possible
sale of the Company. Keefe Bruyette, pursuant to the instructions given by your
Board, has held discussions with other companies to determine if there is any
interest in acquiring the Company.
6

Your Board is urging you to vote "FOR" three current directors (Messrs.
Tybor and Caputo and Ms. Poronsky) who collectively have faithfully served the
interests of the Company and its stockholders, depositors and customers for over
60 years. See discussion below, "PROPOSAL I -- ELECTION OF DIRECTORS." Your
Board is also urging you to vote "AGAINST" a proposal supported by the
Committee, the implementation of which your Board believes is unnecessary in
light of actions taken by the Board. See discussion below, "PROPOSAL
III -- STOCKHOLDER PROPOSAL."

FOR THE REASONS DISCUSSED BELOW, THE BOARD URGES YOU TO SUPPORT YOUR BOARD
BY PROMPTLY SIGNING, DATING AND MAILING THE ENCLOSED WHITE PROXY CARD INDICATING
YOUR VOTE FOR THE COMPANY'S NOMINEES FOR DIRECTORS AND THE SELECTION OF THE
COMPANY'S AUDITORS AND YOUR VOTE AGAINST THE STOCKHOLDER PROPOSAL.

THE BOARD ALSO UNANIMOUSLY AND VIGOROUSLY OPPOSES THE COMMITTEE'S
SOLICITATION OF PROXIES AND URGES YOU NOT TO SIGN ANY PROXY YOU MAY RECEIVE FROM
THE COMMITTEE.

VOTE REQUIRED AND PROXY INFORMATION

All shares of the Company's common stock, par value $.01 per share (the
"Common Stock"), represented at the Meeting by properly executed proxies
received prior to or at the Meeting, and not revoked, will be voted at the
Meeting in accordance with the instructions thereon. If no instructions are
indicated, properly executed proxies will be voted "FOR" the director nominees
named herein and for the appointment of Cobitz, VandenBerg & Fennessy and
"AGAINST" the Stockholder Proposal. The Company does not know of any matters,
other than as described in the Notice of Annual Meeting, that are to come before
the Meeting. If any other matters are properly presented at the Meeting for
action, the persons named in the enclosed form of proxy and acting thereunder
will have the discretion to vote on such matters in accordance with their best
judgment.

Directors shall be elected by a plurality of the votes cast. The
ratification of the appointment of Cobitz, VandenBerg & Fennessy as auditors and
approval of the Stockholder Proposal each require the affirmative vote of a
majority of the votes cast on the matter. Proxies marked to abstain with respect
to a proposal have the same effect as votes against the proposal. Votes withheld
(for election of directors) and broker non-votes will have no effect on the
vote. One-third of the shares of the Common Stock, present in person or
represented by proxy, shall constitute a quorum for purposes of the Meeting.
Abstentions and broker non-votes are counted for purposes of determining a
quorum.

A proxy given pursuant to the solicitation may be revoked at any time
before it is voted. Proxies may be revoked by: (i) filing with the Secretary of
the Company at or before the Meeting a written notice of revocation bearing a
later date than the proxy, (ii) duly executing a subsequent proxy relating to
the same shares and delivering it to the Secretary of the Company at or before
the Meeting, or (iii) attending the Meeting and voting in person (although
attendance at the Meeting will not in and of itself constitute revocation of a
proxy). Any written notice revoking a proxy should be delivered to Janine M.
Poronsky, Secretary, Damen Financial Corporation, 200 West Higgins Road,
Schaumburg, Illinois 60195.

2
7

PROPOSAL I -- ELECTION OF DIRECTORS

COMPANY'S NOMINEES

The Company's Board of Directors is currently composed of seven members,
five of whom are not, and have not been, officers of the Company. Directors of
the Company are generally elected to serve for three-year terms or until their
respective successors shall have been elected and shall qualify. Approximately
one-third of the directors are elected annually.

Your Board has unanimously nominated Edward R. Tybor, Janine M. Poronsky
and Charles J. Caputo for election as directors at the Meeting. These directors
have collectively provided over 60 years of service to your Company and its
stockholders, depositors and customers and have extensive knowledge of the
Company's operations.

Because the views of the Committee's nominees (the "Dissident Candidates")
on the operations of the Company may be different than those of your current
Board, the Board believes the election of the Dissident Candidates would serve
to distract your Board from continuing its efforts to maximize stockholder value
and to represent the interests of all stockholders. The Board would point out,
however, that the Dissident Candidates, if elected, would be subject to the same
fiduciary duties owed to stockholders as are current Board members.

The following table sets forth certain information regarding the Board of
Directors of the Company, including their terms of office and the nominees for
election as director. It is intended that the proxies solicited on behalf of the
Board of Directors (other than proxies in which the vote is withheld as to the
nominee) will be voted at the Meeting for the election of the nominees
identified in the following table. If a nominee is unable to serve, the shares
represented by all such proxies will be voted for the election of such
substitute as the Board of Directors may recommend. At this time, the Board of
Directors knows of no reason why any nominee might be unable to serve if
elected. Except as described herein, there are no arrangements or understandings
between any director or nominee and any other person pursuant to which such
director or nominee was selected.

SHARES OF COMMON
TERM STOCK BENEFICIALLY PERCENT
DIRECTOR TO OWNED AT OF
NAME AGE POSITION(S) HELD SINCE(1) EXPIRE JANUARY 11, 1999(2) CLASS
---- --- ---------------- -------- ------ ------------------- -------

NOMINEES
Edward R. Tybor 81 Chairman of the Board of the 1967 2002 25,608 .91
Bank and Director of the Company
Janine M. Poronsky 40 Executive Vice President, 1995 2002 76,105 2.67
Corporate Secretary and Director
Charles J. Caputo 79 Director 1976 2002 36,108 1.28

DIRECTORS CONTINUING IN OFFICE
Albert C. Baldermann 57 Director 1998 2000 2,587 .09
Carol A. Diver 59 Director 1983 2001 16,108 .57
Nicholas J. Raino 66 Director 1997 2001 14,381 .53
Mary Beth Poronsky Stull 51 President, Chief Executive 1990 2000 98,472 3.45
Officer, Chairman of the Board
of the Company and Director of
the Bank

- ---------------
(1) Includes service as director of the Bank.

(2) Includes shares held directly and vested restricted shares, as well as
shares held in retirement accounts, shares allocated to the ESOP accounts of
certain of the named persons, held by certain members of the named
individuals' families, or held by trusts of which the named individual is a
trustee or substantial beneficiary, with respect to which shares the named
individuals may be deemed to have sole or shared voting and/or investment
power. Amounts include 3,967, 28,652, 3,967, 5,934, 3,967 and 33,734 shares
of Common Stock which Directors Tybor, Poronsky, Caputo, Diver, Raino and
Poronsky Stull have the

3
8

right to acquire, respectively, pursuant to stock options which are
currently exercisable with respect to such shares or which will become
exercisable with respect to such shares within 60 days of the Record Date.
Does not include unvested restricted shares which are voted by a trustee.

The business experience of each director and director nominee is set forth
below. All directors have held their present positions for at least the past
five years, except as otherwise indicated.

ALBERT C. BALDERMANN. Mr. Baldermann served as the Chairman of the Board
and Chief Executive Officer of Southwest Financial Bank & Trust Company, Orland
Park, Illinois, until it was acquired in 1997. Prior to his service with
Southwest Financial, he had served as President of Standard Bank, Hickory Hills,
Illinois. Mr. Baldermann is an adjunct professor at local colleges, a director
of a hospital and an advisor to charitable organizations. Mr. Baldermann, who
joined the Board in 1998, serves as the Chairman of the Company's Strategic
Planning Committee.

CHARLES J. CAPUTO. From 1947 until his retirement in 1996, Mr. Caputo owned
Caputo Southwest Cement, a construction company located in Orland Hills,
Illinois. Mr. Caputo has served as a director of the Bank since 1976. He
currently serves as Chairman of the Company's Audit Committee.

CAROL A. DIVER. Ms. Diver has been the Corporate Secretary for the Chicago
Park District since 1991. Prior to that time, Ms. Diver was a legal secretary
and office manager for the law firm of John B. Wheeler & Co. located in Chicago,
Illinois. Ms. Diver has served as a director of the Bank since 1983 and
currently serves on the Company's Audit and Strategic Planning Committees.

NICHOLAS J. RAINO. Mr. Raino, who joined the Board in 1997, is the Chairman
and former President and Chief Executive Officer of Dale, Smith & Associates,
Inc., a firm that specializes in financial marketing and communications located
in Rosemont, Illinois. From 1972 to 1975, Mr. Raino served on the Board of
Directors and Executive Committee of American Savings Bank, Schaumburg,
Illinois. From 1985 to 1990, Mr. Raino served on the Board of Directors of
Riverside Savings Bank, Riverside, Illinois. From 1990 to 1994, Mr. Raino served
on the Board of Directors of Cragin Federal Bank for Savings, Chicago, Illinois,
an institution with assets of approximately $2.4 billion which was acquired by
another institution in 1994. Mr. Raino is a member of the Board of Trustees of
Kendall College, Evanston, Illinois.

JANINE M. PORONSKY. Ms. Poronsky has served as Vice President (Compliance,
Human Resources and Operations) since 1995, Corporate Secretary since 1992 and
as the Bank's Compliance Officer since 1991 and was promoted to Executive Vice
President in December of 1998. From 1987 to 1991, Ms. Poronsky was employed as
an attorney for the United States Internal Revenue Service. Ms. Poronsky also
serves on the Company's Strategic Planning Committee. Ms. Poronsky is the sister
of President Poronsky Stull.

MARY BETH PORONSKY STULL. Ms. Poronsky Stull joined the Bank in 1965 and
has served as the Bank's Chief Executive Officer since 1984 and as its President
since 1992. Ms. Poronsky Stull is currently Chairman, President and Chief
Executive Officer of the Company. Ms. Poronsky Stull is the sister of Director
Janine M. Poronsky, who serves as the Company's Executive Vice President,
Corporate Secretary and Compliance Officer.

EDWARD R. TYBOR. Since 1951, Mr. Tybor has owned and operated the
Kubina-Tybor funeral home located in Chicago, Illinois in one of the Company's
key markets. He has served as a director of the Bank since 1967 and currently
serves as Chairman of the Company's Compensation Committee and as a member of
the Company's Audit and ALCO Committees.

THE BOARD UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" THE COMPANY'S NOMINEES
AND "AGAINST" THE STOCKHOLDER PROPOSAL BY EXECUTING THE ENCLOSED WHITE PROXY
CARD. YOUR PROXY WILL BE SO VOTED UNLESS YOU SPECIFY OTHERWISE.

WE URGE YOU NOT TO SIGN ANY PROXY YOU RECEIVE FROM THE COMMITTEE.

4
9

RECENT DEVELOPMENTS

The Board has unanimously nominated Edward R. Tybor, Janine M. Poronsky and
Charles J. Caputo to serve as directors, three individuals who have served the
Company and its stockholders, depositors and customers well for over 60 years
and who have extensive knowledge of your Company's operations. A disruptive
proxy contest has been initiated by the Committee against these directors. The
Committee is asking stockholders to reject this slate in favor of the Dissident
Candidates (Duggan and his two friends).

THE BOARD BELIEVES THAT THE DISSIDENT CANDIDATES DO NOT POSSESS THE
MANAGEMENT EXPERIENCE OF THE COMPANY'S CANDIDATES AND ARE ILL-EQUIPPED TO SERVE
AS DIRECTORS OF YOUR COMPANY BECAUSE THEY LACK EXPERIENCE IN MANAGING AND
SUPERVISING FINANCIAL INSTITUTIONS. FURTHERMORE, YOUR BOARD BELIEVES THAT IN AN
ATTEMPT TO SHOW THE COMPANY'S CANDIDATES IN AN UNFAVORABLE LIGHT AND TO SWAY
YOUR VOTE, THE COMMITTEE (ALL THREE DISSIDENT CANDIDATES ARE MEMBERS OF THE
COMMITTEE) HAS MADE WHAT YOUR BOARD BELIEVES ARE MISLEADING STATEMENTS IN ITS
PROXY MATERIALS AND HAS DEMONSTRATED, IN YOUR BOARD'S VIEW, AN INABILITY TO
CORRECTLY INTERPRET FINANCIAL DATA ABOUT THE COMPANY.

While the Committee states that it believes its candidates have superior
experience in the management and supervision of financial institutions, by
reviewing the information the Committee has provided, a stockholder would
realize that two of the Dissident Candidates have never served as directors or
executive officers of a financial institution. We strongly question their
qualifications. In your Board's view, they are not suitable replacements for
persons who have over 60 years of such experience and extensive knowledge of the
Company's operations such as Messrs. Caputo and Tybor and Ms. Poronsky.

The Committee touts its third candidate as having

". . . spent 20 years in banking before leaving the position of chief
operating officer of Beverly Bank, the lead bank for Beverly
[Bancorporation], a $600 million institution with 5 branches. He was a bank
director and served as board liaison between the client banks. During [his]
term at Beverly, the bank merged with Matteson Richton Bank, opened
branches in Orland Park and West Beverly, as well as acquired a bank in
Wilmington, Illinois. Beverly [Bancorporation] recently merged with St.
Paul Bancorp."

The Board believes this statement is misleading. It appears to the Board
that the Committee is trying to create the impression that until the very recent
past this Dissident Candidate was actively involved in the management of Beverly
Bank and that during the time of his involvement Beverly Bank was significantly
larger than the Company ($600 million of assets vs $228 million of assets for
the Company at September 30, 1998). Furthermore, the Board can not see what
relevance the fact that Beverly Bancorporation was acquired by St. Paul Bancorp
has to this candidate's qualifications.

As far as the Company has been able to discover, the Committee's Dissident
Candidate left Beverly Bank in 1989 or 1990 at which time Beverly Bank had $240
million in assets. Public records indicate that a new Chief Operations Officer
was hired by Beverly Bancorporation in 1991. Thus, the Dissident Candidate has
not been actively involved in the management of Beverly Bank, or any bank for
that matter, for about nine years; secondly, Beverly Bank was not a $600 million
institution when he served as an officer for the bank; and finally, the
Dissident Candidate could have had nothing to do with the sale of Beverly
Bancorporation to St. Paul Bancorp which was announced in January of 1998 and
completed in June of 1998, long after he left the bank.

5
10

The following information about Beverly Bancorporation appeared in its
Prospectus (released in August of 1996) pursuant to which it offered to sell
1,000,000 shares of its common stock. Although the role the Committee's
candidate played in the problems that plagued Beverly Bancorporation in the late
1980's and early 1990's cannot be determined, the Committee has stated that the
Dissident Candidate was the chief operating officer of Beverly Bank and, as far
as the Company can ascertain, he left Beverly Bank in 1989 or 1990. In the
following quoted passage, Beverly Bancorporation is describing its problems in
the late 1980's and early 1990's:

"Although the acquisitions of the late 1980's increased the size of
the organization, [Beverly Bancorporation] experienced weakened internal
controls and a number of poor quality loans were made. [Beverly
Bancorporation] 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 [Beverly Bancorporation]. The Board of Directors was
reconstituted and new management, including [Beverly Bancorporation's]
current Chief Executive Officer [hired in August of 1989] and Chief
Financial Officer [hired in 1990], were hired. During the next several
years, this new management team strengthened internal controls, identified
and resolved problems within [Beverly Bancorporation] and took steps to
improve [Beverly Bancorporation's] asset quality. . . .

"Because of the problems [Beverly Bancorporation] experienced, bank
regulatory agencies imposed restrictions on [Beverly Bancorporation] and
its subsidiaries. Between June 1990 and January 1993, the Federal Reserve
Board ("FRB") did not permit [Beverly Bancorporation] to pay dividends on
its stock without the FRB's prior consent or notification. In January 1993,
because of [Beverly Bancorporation's] improved financial condition, the FRB
informed [Beverly Bancorporation] 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."

WHEN ONE REALIZES THAT TWO OF THE DISSIDENT CANDIDATES HAVE NO EXPERIENCE
SERVING AS A DIRECTOR OR EXECUTIVE OFFICER OF A FINANCIAL INSTITUTION, ONE
UNDERSTANDS WHY, IN YOUR BOARD'S OPINION, THE COMMITTEE FAILED TO NOTE THAT THIS
DISSIDENT CANDIDATE HAD NOT BEEN INVOLVED IN BANKING FOR OVER NINE YEARS.

TWO OF THE DISSIDENT CANDIDATES HAVE NO EXPERIENCE MANAGING A FINANCIAL
INSTITUTION. ARE YOU PREPARED TO GIVE THEM ON-THE-JOB-TRAINING? THE THIRD
DISSIDENT CANDIDATE'S EXPERIENCE MAY BE LESS THAN WHAT HAS BEEN TOUTED BY THE
COMMITTEE. AT BEST, WE BELIEVE HE IS A QUESTIONABLE CHOICE TO SERVE ON YOUR
BOARD. FURTHERMORE, IT WOULD APPEAR THAT TWO OF THE DISSIDENT CANDIDATES ARE
FRIENDS OF DUGGAN; IN THE BOARD'S OPINION, THEY WOULD HARDLY BE EXPECTED TO
BRING ANY INDEPENDENCE TO THE BOARD OR TO ACT IN THE BEST INTERESTS OF ALL
STOCKHOLDERS. IN OUR VIEW, THEIR ELECTION COULD ONLY SERVE TO DISRUPT THE
MANAGEMENT OF YOUR COMPANY AND DIVERT US FROM OUR GOAL OF BUILDING VALUE FOR
YOU. THE BOARD WOULD POINT OUT, HOWEVER, THAT THE DISSIDENT CANDIDATES, IF
ELECTED, WOULD BE SUBJECT TO THE SAME FIDUCIARY DUTIES OWED TO STOCKHOLDERS AS
ARE THE CURRENT BOARD MEMBERS.

THE BOARD BELIEVES THAT DUGGAN (ACTING NOW UNDER THE AURA OF A SELF-STYLED
"COMMITTEE") DESIRES TO FORCE A SALE OF THE COMPANY. AS INDICATED IN THE
COMMITTEE'S PROXY MATERIALS, DUGGAN HAS INVESTED IN OVER 150 FINANCIAL
INSTITUTIONS, INCLUDING 40 OF WHICH HAVE BEEN ACQUIRED BY OR MERGED WITH OTHER
FINANCIAL INSTITUTIONS, ONE OF THE ENTITIES DUGGAN CONTROLS MANAGES HEDGE FUNDS
WHICH CONCENTRATE IN INVESTING IN THE THRIFT AND SMALL CAP BANK AREAS, AND A
LIMITED PARTNERSHIP HE CONTROLS WAS ORGANIZED FOR THE "PURPOSE OF INVESTING IN
MARKETABLE SECURITIES WITH AN EMPHASIS ON SECURITIES OF SAVINGS AND LOANS, BANKS
AND OTHER COMPANIES IN THE BANKING FIELD." THE BOARD BELIEVES THESE STATEMENTS
SHOW THAT DUGGAN'S INTERESTS (AND THOSE OF HIS TWO FRIENDS WHO ARE THE OTHER
DISSIDENT CANDIDATES) ARE CLOSELY ALIGNED WITH TAKEOVER SPECULATORS AND
PROFESSIONAL TRADERS RATHER THAN THOSE OF THE STOCKHOLDERS.

6
11

The Board feels the Committee has engaged in a campaign of providing
misinformation about the Company's operations so as to obtain your vote. The
Board feels the Committee has unfairly criticized the Company's stock repurchase
programs, dividend policy, borrowings from the Federal Home Loan Bank, marketing
strategy, efficiency ratio, and return on its Common Stock. In so doing, the
Board feels that the Committee has shown its lack of familiarity with the
operations of financial institutions and demonstrated its inability to analyze
the Company's financial statements. As established below, the Board believes
these criticisms are groundless.

In its proxy materials, the Committee states that by a letter dated August
24, 1998, Duggan urged the Company to undertake another stock repurchase
program. The Committee then proceeds to criticize the Company for not announcing
a repurchase program until September 11, 1998, thereby missing an opportunity
(in the Committee's words) to support the stock price, redeem shares at prices
far below book value and make effective use of excess capital. As the Committee
is aware (from information provided by the Company to Duggan), the Company has
actively supported its stock price and made effective use of its excess capital,
having conducted seven buy-back programs since January 1, 1996, which have
resulted in the purchase of more than 1,160,000 shares in the open market as of
December 9, 1998. In purchasing these shares, the Company has used over $16.89
million of its capital to acquire approximately 29.2% of its outstanding shares
at an average cost of $14.55 per share which is less than the Company's per
share book value at September 30, 1998 ($15.30) and September 30, 1997 ($14.78).
The Board believes these results demonstrate that it has made effective use of
the Company's excess capital, supported the stock price and purchased shares for
less than book value.

Furthermore, what the Committee conveniently fails to note when criticizing
the Board's alleged inaction in late August of 1998 is that in his August 24th
letter, Duggan (in urging the Board to implement another repurchase program)
pointed out that the Company's Common Stock was trading at $15.00 per share,
near its 52 week low of $14.00 per share. In the Board's view, the Committee
implies in its proxy materials that the Company failed to take advantage of this
low price purchase opportunity. However, the Company advised the Committee
(through Duggan) on December 17, 1998, that under its new stock repurchase
program (the one announced only 18 days after his August 24th letter), the
Company had repurchased through December 9, 1998, 147,000 shares at an average
price of $14.43, which was below the $15.00 price cited in Duggan's letter and
less than the September 30, 1998 book value of $15.30 per share. The Committee's
proxy materials were initially filed with the SEC on December 22, 1998. Thus,
the Committee knew at the time of filing its proxy statement was filed with the
SEC that the repurchase program announced on September 11, 1998 was successful,
having achieved Duggan's goals of purchasing a significant number of shares
(about 5% of the outstanding shares) at less than book value and leading to the
expenditure of over $2.1 million of excess capital by the Company.

The Committee states in its proxy materials that the Dissident Candidates
intend to recommend that dividends be increased to $.25 per share per quarter.
The Board believes the Committee is implying that the Company is not properly
monitoring its dividend policy. What the Committee fails to point out is that
the Company's dividend in the last 12 months has been increased 100% to $.12 per
share per quarter and that the fiscal 1998 dividend payout was $.40 per share, a
67% increase over the $.24 per share paid out in fiscal 1997. For the two-year
fiscal period ending September 30, 1998, the Company paid out dividends of
$1,921,424 representing more than 52% of the Company's net income for this
period. In addition, the Company repurchased its stock at a cost of over $12.6
million during the same period.

THE BOARD REGULARLY EXAMINES ITS DIVIDEND POLICY AND STOCK REPURCHASE
PROGRAMS AND IS CONTINUALLY REVIEWING ITS DEPLOYMENT OF THE COMPANY'S EXCESS
CAPITAL. THE COMPANY HAS SPENT OVER $16.89 MILLION TO ACQUIRE SHARES OF ITS
COMMON STOCK AT LESS THAN BOOK VALUE IN THE LAST THREE YEARS AND HAS PAID OUT
$2.347 MILLION IN DIVIDENDS DURING THE SAME PERIOD. DESPITE THE BOARD'S
SUCCESSFUL EFFORTS TO SUBSTANTIALLY INCREASE THE DIVIDEND AND USE EXCESS CAPITAL
TO REDEEM SHARES AT LESS THAN BOOK VALUE, THE COMMITTEE CHOOSES TO CRITICIZE THE
BOARD'S ACTIONS. RATHER THAN BEING SUPPORTIVE OF BOARD POLICIES THAT ARE
CONSISTENT WITH HIS GOALS, DUGGAN CONTINUES TO CRITICIZE THE BOARD'S ACTIONS.
THE BOARD BELIEVES THAT ITS POLICIES WITH RESPECT TO THESE MATTERS HAVE BEEN
IMPLEMENTED IN THE BEST INTERESTS OF ALL STOCKHOLDERS, WITH THE BOARD KEEPING IN

7
12

MIND THAT A SIGNIFICANT DECLINE IN THE COMPANY'S CAPITAL OVER A SHORT PERIOD OF
TIME COULD ADVERSELY IMPACT EARNINGS PER SHARE AND RETURN ON ASSETS.

The Committee, for reasons the Board cannot fathom, has expressed concern
in its proxy materials over the increase in the Company's borrowing from the
Federal Home Loan Bank ("FHLB") from $56.5 million at September 30, 1997 to
$61.8 million at September 30, 1998. This concern demonstrates, in the Board's
view, the Committee's inability to analyze the Company's financial statements.
In the Board's opinion, the important analysis is of the average volume of FHLB
borrowings, not the year-end totals. The average balances for these borrowings
for fiscal 1997 and 1998, respectively, were $58.328 million and $59.304
million. Thus, in actuality there was only a slight increase in the Company's
FHLB borrowings between 1997 and 1998. Furthermore, the Board is aware of the
risk presented by such borrowings (as there are many risks associated with
managing a financial institution whose assets and liabilities are rate
sensitive). As a consequence, the Company has discussed its strategy with
consulting firms; all have agreed with this strategy.

The Committee criticizes the Company's marketing strategy because,
according to the Committee, the Company's three branches are not located within
close proximity to each other, again demonstrating, in the Board's view, the
Committee's lack of experience in managing financial institutions. In the
Board's opinion, the fact that the Company's branches are not located in close
proximity to each other has little impact on the Company's marketing strategy.
The Company competes in the Chicago metropolitan banking market where the
ability to offer competitive products and competent service and the ability to
conduct multi-media ad campaigns are more important to the Company's
profitability then the proximity of its offices to each other.

The Committee also recommends (without giving any basis for the
recommendation) that the Company's Schaumburg office be sold. Later, however,
the Committee states it would support an evaluation of "the need for, and
potentially closing," the Schaumburg office. This confusion between a sale and a
closing of an office further demonstrates, in the Board's view, the Committee's
lack of familiarity with the operations of financial institutions, for the sale
of the Schaumburg branch is a substantially different transaction (with much
different implications) then the closing of this office. The Board believes that
the sale or closure of the Schaumburg office would not serve any useful purpose,
would cripple the remaining operations of the Company and would significantly
reduce the value to a potential purchaser of what would remain of the Company.
The Board wonders how the Committee could be recommending such a transaction
when, in the Board's opinion, the Committee lacks the relevant data on how this
sale would affect the Company. We would note, too, that in December of 1997,
Duggan recommended that the Chicago branch be sold without offering any factual
basis for this recommendation.

The Committee also states that it believes that the salaries and other
expenses paid by the Company are excessive as evidenced by the Company's high
efficiency ratio, which stood at 72.12% at September 30, 1998, and suggests that
officers' salaries be reduced. As reported in part in last year's proxy
statement and as reported herein, management of the Company recommended that the
executive officers not be awarded bonuses for fiscal 1997 or 1998 (and no
bonuses were awarded) or pay raises for fiscal 1998 and 1999; the Board,
however, did vote to give one officer (Mr. Vanek) a modest salary increase for
1999. Furthermore, these executive officers took voluntary paycuts during the
first quarter of 1997.

According to the Committee, the mean efficiency ratio for banks with assets
of less than $500 million is 62.5%, while the Company's 1998 efficiency ratio
was 72.12%. The Committee (which wishes to place three candidates on the Board
who allegedly "have superior experience in the management and supervision of
financial institutions") again demonstrates, in the Board's opinion, its
inability to analyze the Company's financial statements.

The efficiency ratio for 1998 was calculated by dividing non-interest
expense by net interest income plus other income except for gains and losses on
investments available-for-sale. In the Board's opinion, what the Committee fails
to understand is that non-interest expense for 1998 has been adversely affected
by three items: amounts amortized in connection with the Company's Recognition
and Retention Plan ("RRP") (totaling $373,032 for 1998); accounting adjustments
mandated by accounting rule SOP 93-6 which is applicable to the Company's ESOP
(totaling $138,947 in 1998); and increased legal fees (totaling $192,116 in
1998) incurred primarily in dealing with matters raised by Duggan, including his
unsuccessful attempt prior to
8
13

last year's annual meeting to nominate two persons to serve as directors and to
submit a proposal (similar to the current Stockholder Proposal) for the
consideration of the stockholders. By eliminating these items from non-interest
expense, the Company's 1998 efficiency ratio would be 61.95%. The Company's RRP
was approved by the stockholders in 1996 and they were advised at that time that
the Company would incur deductible compensation expense in connection with the
issuance of awards under the RRP. The RRP adjustments will conclude in fiscal
2001. The adjustments related to the RRP and the ESOP have been reflected each
year in the Company's financial statements.

In its proxy materials, the Committee sets forth a table that purports to
compare the returns on the Company's Common Stock against other indexes. As
shown below, the Board believes this table was prepared by the Committee in a
way guaranteed to show that the Company's Common Stock has been a poor
investment.

Although the Committee's preliminary proxy materials were filed with the
SEC on December 22, 1998 and updated on December 31, 1998 and although the
Company's Common Stock traded as high as $16.75 during the period from December
17, 1998 through December 31, 1998 and its closing price on December 31, 1998
was $16.50, the Committee chose to use the closing price for the Company's
Common Stock on December 16, 1998 of $13.75 per share (ITS LOWEST CLOSING PRICE
IN DECEMBER) and compared it against the closing price for the Company's Common
Stock on its first day of trading ($11.50) rather than against its initial
public offering price of $10.00 per share. The Board believes that the selection
of these dates and prices by the Committee was an attempt by the Committee to
sway your votes hoping to show that you have not received a fair return on your
investment.

Comparing the December 31, 1998 closing price of $16.50 per share against
the initial offering price of $10.00 indicates that the return on the Company's
shares has been 65% for the period, exclusive of dividends. Adding in the
dividends paid of $.88 per share since January 1, 1996, improves the return to
73.5%. The Board believes that a 73.5% return on an investment in the Company's
Common Stock, a small bank holding company, which has a thinly-traded stock,
represents a fair return on your investment and is comparable with the returns
garnered by similarly situated financial institutions and is not far below the
returns of three of the indexes cited by the Committee. The Board would note
that, as reported by the Committee, St. Paul Bancorp, a widely-held,
actively-traded, $4.0 billion financial institution headquartered in Chicago,
had a 67.59% return for the same period, exclusive of dividends, a further
indication to the Board that a 73.5% return represents a fair return on your
investment.

The Company is a publicly traded company subject to the supervision of the
SEC. The Board believes it is appropriate to advise stockholders how Duggan (the
driving force behind the Committee's actions) has handled his SEC reporting
obligations as a stockholder of the Company. Stockholders should carefully
consider how Duggan has treated his own SEC obligations before deciding whether
to permit him to be involved in the management of a company that is subject to
extensive SEC regulation.

THE BOARD FEELS DUGGAN HAS BEEN LATE IN FILING CERTAIN REPORTS WITH THE SEC
AND UNTIL RECENTLY HAS NOT FILED OTHERS. THE BOARD BELIEVES THIS SHOWS THAT
DUGGAN HAS APPROACHED HIS SEC REPORTING OBLIGATIONS IN A CAVALIER MANNER.

Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and the rules and regulations adopted thereunder by the SEC,
require a person who beneficially owns more than 10% of the Common Stock of the
Company to file reports on Forms 3, 4 and 5 with the SEC and the Company. Duggan
beneficially owned more than 10% of the Company's Common Stock from April 3,
1997 to December 2, 1998. Under the SEC rules, a Form 3 must be filed with the
SEC within ten days after a person (such as Duggan) becomes the beneficial owner
of 10% or more of the Common Stock of the Company. At the time the Form 3 is
transmitted to the SEC, it must also be sent (by Duggan) to the Company. A Form
4 must be filed with the SEC within ten days of the end of a month in which a
change in beneficial ownership occurs. This Form must be sent to the Company (by
Duggan) on the date it is transmitted to the SEC. A Form 5 must be filed with
the SEC within 45 days of the end of the Company's fiscal year with such Form
being sent to the Company (by Duggan) on the date it is transmitted to the SEC.

9
14

Although Duggan was the beneficial owner of more than 10% of the Company's
Common Stock from April 3, 1997 through December 2, 1998, until recently he has
provided only one report to the Company. Under the SEC's rules, Duggan was
obligated to file a Form 3 with the SEC by April 13, 1997 (within ten days of
the date he become a 10% stockholder) and to send a copy of this filing to the
Company. Based upon a review of the SEC's records as of January 7, 1999, no Form
3 had been filed by Duggan with the SEC; obviously, no such Form had been filed
with the Company as of such date. Furthermore, the Company searched the SEC's
records through January 7, 1999, and found only one filing by Duggan, a Form 5
which was filed on February 13, 1998. The Company's fiscal year ends on
September 30. Thus, in order to be deemed timely filed, a Form 5 filing for the
fiscal year ending September 30, 1997 had to be made by November 14, 1997. As a
consequence, this Form 5 was filed 91 days late. Moreover, based upon
information provided in the Committee's proxy materials, the Company believes
that Duggan has failed to file a Form 4 with respect to transactions conducted
in October of 1998 by entities that he controls, which had to be filed by
November 10, 1998.

A preliminary copy of this Proxy Statement was filed with the SEC on
Friday, January 15, 1999. On January 18, 1999, in a belated effort to comply
with the SEC's rules, Duggan delivered copies of a Form 3 and a Form 4 to the
Company by placing them in an envelope and stuffing the envelope under the door
of the Company's principal office. (ARE THESE ACTIONS THE WELL-ORGANIZED EFFORTS
OF AN INDIVIDUAL WHO HAS "SUPERIOR EXPERIENCE IN THE MANAGEMENT AND SUPERVISION
OF FINANCIAL INSTITUTIONS?"). In the letter which accompanied these Forms,
Duggan claimed the Forms had been filed with the SEC on January 8, 1999. As
indicated above, the SEC's rules require Duggan to transmit these Forms to the
Company the day they are filed with the SEC (on January 8, 1999). The Board
believes Duggan provided these Forms to the Company on January 18, 1999 only
after reviewing the preliminary copy of the Proxy Statement.

Furthermore, the Form 3 delivered to the Company related to April 3, 1997,
the date Duggan became the owner of 10% or more of the Company's Common Stock.
This filing was due on April 13, 1997, and, as such, was made almost 21 months
late.

Duggan became the beneficial owner of more than 5% of the Company's Common
Stock on or about October 2, 1995. As a consequence (and as required by the
Exchange Act and the SEC's rules), Duggan filed a Schedule 13D on or about
October 2, 1995 with the SEC. This Schedule 13D has been amended eleven times
(the "13D"). One of the Dissident Candidates, who is also a member of the
Committee, joined in the filing of Amendment Nos. 7 - 11 to this 13D, while
another Dissident Candidate and Committee member joined in filing Amendment Nos.
8 - 11 to the 13D. As such, they are also required to ensure that these
Amendments are accurate and filed in a timely manner.

The SEC's rule 13d-2 requires that material amendments to Schedule 13D be
filed "promptly" with the SEC and Rule 13d-7 provides that a copy of any
amendment be sent by certified or registered mail to the Company's principal
executive office. The Company does not believe that Duggan and the two other
Dissident Candidates have promptly filed with the SEC certain of their
Amendments to the 13D. In addition, the Company believes certain of these
Amendments may contain misleading information or may not have been answered
completely.

The SEC has not defined the term "promptly." Although an amendment to a 13D
need not be filed on the date of the event requiring the filing, the Board
believes the SEC's rules require that an amendment should be filed as soon as
possible. For example, the SEC has determined in one case that the filing of an
amendment five business days after the event was not "prompt." The SEC has also
stated that any "delay beyond the time the amendment reasonably could have been
filed may not be deemed to be [prompt]." Set forth below is a

10
15

listing of the filing of: (a) certain Amendments to the 13D; (b) the date of the
event requiring the filing (as reported by Duggan); (c) the date of filing with
the SEC; and (d) the time elapsed between (b) and (c):

(a) (b) (c) (d)
AMENDMENT DATE OF DATE OF ELAPSED
NO. THE EVENT FILING WITH SEC TIME
--------- --------- --------------- -------

4 12-5-97 12-15-97 10 days
5 1-23-98(1) 2-6-98 14 days
7 11-16-98 11-27-98(2) 11 days
8 12-2-98(3) 12-14-98 12 days
9 12-22-98 12-30-98 8 days
10 12-30-98 1-8-99 9 days

- ---------------
(1) Duggan filed Amendment No. 4 with the SEC on December 15, 1997. Immediately
thereafter, he took a number of actions that the Company believes required
him to file Amendment No. 5 on or shortly after December 17, 1997. Among
other things, Duggan delivered to the Company on or about December 17, 1997
a proposal he wished to have submitted to the Company's stockholders for
their review at last year's annual meeting which if approved would have
required the Company to engage an investment banker to sell the Company and
also indicated therein his intent to nominate at last year's meeting two
persons to serve on the Company's Board. Between December 17, 1997 and
January 7, 1998, Duggan or his attorneys were in constant contact with the
Company concerning this and other matters. Yet despite this activity, Duggan
chose not to file Amendment No. 5 to the 13D until February 6, 1998. In this
Amendment, it is stated that the date of the event requiring the filing is
January 23, 1998. The Company believes the date of the event which required
the filing of this Amendment was December 17, 1997 when Duggan submitted a
notice of his intention to introduce a stockholders' proposal at the annual
meeting and to nominate at this meeting two persons to serve as directors.
The Company believes Duggan was obligated under the SEC's rules to promptly
file an amendment to the 13D disclosing his plans on or shortly after
December 17, 1997. In the Company's view, the February 6, 1998 filing date
means this Amendment was filed 51 days late.

(2) The Company received this Amendment only after requesting a copy from
Duggan.

(3) Among other matters reported in this Amendment, Duggan stated that he and
entities he controlled sold 99,800 shares of the Company's Common Stock (or
almost 3.54% of the outstanding shares and more than 27% of his holdings) on
December 2, 1998. Despite this material change in his ownership position,
Duggan did not file Amendment No. 8 for 12 days (or 8 business days). The
SEC has stated that under certain circumstances the filing of an amendment
to a 13D seven calendar days after the reporting party had disposed of 1% of
the company's common stock was not "prompt" under the SEC's rules.

THE BOARD UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" THE COMPANY'S NOMINEES
AND "AGAINST" THE STOCKHOLDER PROPOSAL BY EXECUTING THE ENCLOSED WHITE PROXY
CARD, YOUR PROXY WILL BE SO VOTED UNLESS YOU SPECIFY OTHERWISE.

WE URGE YOU NOT TO SIGN ANY PROXY YOU RECEIVE FROM THE COMMITTEE.

BOARD OF DIRECTORS' MEETINGS AND COMMITTEES

BOARD AND COMMITTEE MEETINGS OF THE COMPANY. Meetings of the Company's
Board of Directors are held at least quarterly. The Board of Directors of the
Company held 21 meetings during fiscal 1998. No incumbent director attended
fewer than 75% of the aggregate of the total number of meetings held by the
Board of Directors and by all committees of the Board of Directors on which he
or she served during the fiscal year.

In order to assist it in discharging its duties, the Board of Directors of
the Company has standing Audit, Compensation, Nominating,
Investment/Asset-Liability and Strategic Planning Committees.

11
16

The Audit Committee reviews audit reports and related matters to ensure
compliance with regulations and internal policies and procedures, and consists
solely of non-employee directors. This Committee also acts as a liaison between
the Company's internal and outside auditors and the Board. Directors Caputo,
Diver and Tybor are the current members of this Committee. This Committee met
two times during fiscal 1998.

The Company has established a Compensation Committee to review and approve
all executive officer compensation plans. The current members of this Committee
are Directors Tybor, Baldermann, Diver and Raino, all non-employee directors.
This Committee met one time during fiscal 1998.

The Nominating Committee meets annually in order to nominate candidates for
membership on the Board of Directors. This Committee is comprised of the entire
Board of Directors. While the Board of Directors will consider nominees
recommended by stockholders, the Committee has not actively solicited such
nominations. Pursuant to the Company's Bylaws, nominations by stockholders
generally must be delivered in writing to the Secretary of the Company at least
seventy days before the date of an annual meeting of stockholders.

BOARD AND COMMITTEE MEETINGS OF THE BANK. The Bank's Board of Directors
meets monthly and may hold additional special meetings upon the request of the
Chairman or at least three directors. The Board of Directors met 13 times during
the fiscal year ended September 30, 1998. The Bank also has standing Asset
Classification, Audit, Investment/Asset-Liability and Loan Committees. During
the last fiscal year, no director of the Bank attended fewer than 75% of the
aggregate of the total number of Board meetings and the total number of meetings
held by the committees of the Board of Directors on which he or she served.

DIRECTOR COMPENSATION

Each member of the Board of Directors of the Company is paid a fee of $500
per Board meeting. Non-employee directors of the Company each receive an
additional fee of $350 for each Committee meeting attended; non-employee
directors of the Company receive $500 for each Strategic Planning Committee
meeting attended if such meeting is not held on the same day as another Board or
committee meeting and $350 if such meeting is held on the same day. Edward R.
Tybor, Chairman of the Board of the Bank, is paid a fee of $1,200 and the other
non-employee directors of the Bank are each paid a fee of $1,100 for each
regular meeting of the Board of Directors of the Bank. Non-employee directors of
the Bank each receive an additional fee of $350 for each Committee meeting
attended.

Each non-employee director participates in the Company's Recognition and
Retention Plan ("RRP") which was approved by stockholders in 1996. Under the
RRP, each non-employee director has been awarded restricted shares which vest at
the rate of 20% per year. During fiscal year 1998, each of Messrs. Tybor,
Caputo, and Raino and Ms. Diver became vested with respect to 1,587 shares which
had an aggregate market value of $23,012 based on the closing market price of
$14.50 per share at September 30, 1998. Based on this price, the 4,761 shares of
unvested restricted stock held for the benefit of each of these directors had an
aggregate market value of $69,035 at September 30, 1998.

During fiscal 1998, Director Baldermann was awarded 7,935 shares of
restricted stock under the RRP, which are scheduled to vest in five equal annual
installments with the first installment of 1,587 shares, with a market value (as
of September 30, 1998) of $23,012, vesting in January of 1999. Director
Baldermann also serves as a consultant to the Company and the Bank. He will
receive a $2,300 per month fee through January of 1999 and a $1,700 per month
fee from February of 1999 through January of 2000.

The Company adopted a "Director Emeritus Program" during 1998. Under this
program, any current director of the Company who terminates his/her service as a
director of the Company for any reason (other than removal for cause) may
participate as a "Director Emeritus" for up to five years. A Director Emeritus
may attend Board meetings but will not be eligible to vote and will be obligated
to provide limited consulting services to the Board. A Director Emeritus will
receive an annual fee of $1,200 payable in monthly installments of $100. Service
as a Director Emeritus will be counted for purposes of the accrual and the
vesting of benefits under the Company's RRP and its Stock Option Plan. The Bank
operates a "Director Emeritus Program" for any current director of the Bank who
terminates his/her service as a director of the

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17

Bank for any reason (other than removal for cause). A Bank Director Emeritus
will receive an annual fee of $3,000 payable in monthly installments of $250 and
may participate in this program for up to five years.

EXECUTIVE COMPENSATION

The Company has not paid any compensation to its executive officers since
its formation and does not presently anticipate paying any compensation to such
persons.

The following table sets forth information concerning the compensation for
services in all capacities to the Company for the three fiscal years ended
September 30, 1998 to: (i) Mary Beth Poronsky Stull, the Company's Chief
Executive Officer, (ii) Gerald J. Gartner, (iii) Janine M. Poronsky and (iv)
Kenneth D. Vanek, each of whose salary and bonus for fiscal 1998 exceeded
$100,000 (the "Named Officers").

SUMMARY COMPENSATION TABLE

LONG-TERM COMPENSATION
AWARDS
ANNUAL COMPENSATION -------------------------------------
----------------------------------------- RESTRICTED SECURITIES
FISCAL OTHER ANNUAL STOCK LTIP UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($)(1) COMPENSATION($) AWARD($) PAYOUTS($) OPTIONS(#)
--------------------------- ------ --------- ----------- --------------- ---------- ---------- ----------

Mary Beth Poronsky Stull..... 1998 $195,000 $ -- $-- $ -- $-- --
Chairman, President and 1997 203,210 30,000 -- -- -- --
Chief Executive Officer 1996 200,544 16,150 -- 461,222(2) -- 99,187
Gerald J. Gartner............ 1998 $143,000 $ -- $-- $ -- $-- --
Treasurer and Chief 1997 154,347 20,000 -- -- -- --
Financial Officer 1996 155,158 15,275 -- 230,605(2) -- 61,496
Janine M. Poronsky........... 1998 $130,000 $ -- $-- $ -- $-- --
Vice President and 1997 133,675 20,000 -- -- --
Secretary 1996 132,850 14,400 -- 322,850(2) -- 75,382
Kenneth D. Vanek............. 1998 $123,500 $ -- $-- $ -- $-- --
Senior Vice President 1997 127,750 15,000 -- -- --
1996 131,977 4,400 -- 230,605(2) -- 61,496

ALL OTHER
NAME AND PRINCIPAL POSITION COMPENSATION($)
--------------------------- ---------------

Mary Beth Poronsky Stull..... $43,906(3)
Chairman, President and 35,362
Chief Executive Officer 31,938
Gerald J. Gartner............ $36,406(3)
Treasurer and Chief 31,362
Financial Officer 28,438
Janine M. Poronsky........... $43,906(3)
Vice President and 34,787
Secretary 25,966
Kenneth D. Vanek............. $35,859(3)
Senior Vice President 28,514
23,415

- ---------------
(1) Bonuses paid during fiscal year listed are for services performed during
previous fiscal year. No bonuses were awarded for services performed during
fiscal 1997. No bonuses will be awarded for services performed during fiscal
1998.

(2) Represents the value of 39,675, 19,837, 27,772 and 19,837 shares of
restricted stock granted to Ms. Poronsky Stull, Mr. Gartner, Ms. Poronsky
and Mr. Vanek, respectively, based on the $11.625 closing market price per
share of the Common Stock on June 13, 1996, the date of grant. Twenty
percent of the shares vested on June 13, 1997 and June 13, 1998, with the
remaining 60% scheduled to vest in three equal installments beginning June
13, 1999. Dividends are paid on the restricted shares to the extent and on
the same date as dividends are paid on all other outstanding shares of
Common Stock. Based on the closing market price per share of the Common
Stock on September 30, 1998 of $14.50, the 23,805, 11,903, 16,664 and 11,903
shares of unvested restricted stock held for the benefit of Ms. Poronsky
Stull, Mr. Gartner, Ms. Poronsky and Mr. Vanek, respectively, had aggregate
market values of $345,173, $172,594, $241,628 and $172,594, respectively.

(3) Includes allocations made during fiscal 1998 for fiscal 1997 to the ESOP for
Ms. Poronsky Stull, Mr. Gartner, Ms. Poronsky and Mr. Vanek, as follows:
$36,406, $36,406, $36,406 and $35,859. Amounts for Ms. Poronsky Stull and
Ms. Poronsky also include $7,500 in fees for service as members of the
Company's Board of Directors. Excluded from amounts listed is an allocation
of $38,169 made during fiscal 1999 for fiscal 1998 to the ESOP for each of
Ms. Poronsky Stull, Mr. Gartner, Ms. Poronsky and Mr. Vanek.

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18

Set forth below is information concerning the number and value of stock
options at September 30, 1998 held by the Named Officers. No stock options or
stock appreciation rights were granted during fiscal 1998.

AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES

NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS
FISCAL YEAR-END AT FISCAL YEAR-END($)(1)
SHARES ACQUIRED VALUE -------------------------- -------------------------
NAME UPON EXERCISE REALIZED EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- --------------- -------- -------------------------- -------------------------

Mary Beth Poronsky Stull..... 2,500 $10,470 33,734/62,953 $96,985/$180,990
Gerald J. Gartner............ -- -- 24,598/36,898 $70,719/$106,082
Janine M. Poronsky........... 1,500 6,282 28,652/45,230 $82,375/$130,036
Kenneth D. Vanek............. -- -- 24,598/36,898 $70,719/$106,082

- ---------------
(1) Represents the difference between the aggregate exercise price of such
options and the aggregate fair market value of the shares of Common Stock
that would be received upon exercise, assuming such exercise occurred on
September 30, 1998, at which date the closing market price per share of the
Common Stock was $14.50.

EMPLOYMENT AGREEMENTS. The Bank has entered into employment agreements with
President Poronsky Stull, Ms. Poronsky, Mr. Gartner and Mr. Vanek providing for
initial terms of three years, three years, two years and two years,
respectively. The employment agreements each provide for an annual base salary
in an amount not less than the employee's respective current salary and provide
for extension subject to the performance of an annual formal evaluation by
disinterested members of the Board of Directors of the Bank. The agreements also
provide for termination upon the employee's death, for cause or in certain other
events specified in the agreements. The employment agreements are also
terminable by the employee upon 90 days notice to the Bank.

The employment agreements provide for payment (in lieu of salary) to
President Poronsky Stull, Ms. Poronsky, Mr. Gartner and Mr. Vanek, respectively,
of an amount equal to 299%, 299%, 200% and 200% of their five-year average base
compensation, respectively, in the event there is a "change-in-control" of the
Bank where employment terminates in connection with such change-in-control or
within twelve months thereafter. If the employment of President Poronsky Stull,
Ms. Poronsky, Mr. Gartner and Mr. Vanek had been terminated as of September 30,
1998 under circumstances entitling such officers to severance pay as described
above, such officers would have been entitled to receive lump sum cash payments
of approximately $561,000, $361,282, $291,736 and $238,581, respectively.

COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION

The Compensation Committee of the Company's Board of Directors has
furnished the following report on executive compensation:

The Company's Compensation Committee has responsibility for reviewing the
compensation policies and plans for the Bank and its affiliates. The policies
and plans established are designed to enhance both short-term and long-term
operational performance of the Bank and to build stockholder value through
anticipated appreciation in the Company's Common Stock price.

The Company provides certain benefits to all officers and employees who
meet certain minimum requirements, regardless of position. These benefits
include health, life and long-term disability insurance. They also include
participation in a Profit Sharing Plan and an Employee Stock Ownership Plan. The
Board of Directors also has a policy of paying a bonus to all employees,
including officers, at least annually. This bonus is approximately 5% of annual
salary. The executive officers recommended to the Committee that they should not
be awarded bonuses this year or for the 1997 fiscal year; therefore, no bonuses
were awarded to the executive officers for the 1997 or the 1998 fiscal year.

14
19

One of the Committee's primary objectives is to develop and maintain
compensation plans which provide the Bank with the means of attracting and
retaining quality executives at competitive compensation levels and to implement
compensation plans which seek to motivate executives to perform to the full
extent of their abilities and which seek to enhance stockholder value by
aligning closely the financial interests of the Company's executives with those
of its stockholders. In determining compensation levels, plans and adjustments,
the Committee takes into account, among other things, compensation reviews made
by third parties. These studies primarily compare the compensation of the Bank's
executive officers to the compensation of executive officers of other local
financial institutions. Although no company is an exact match, consideration was
given by the Committee to salaries and bonuses that are paid to executives at
other similar public companies.

With respect to President Poronsky Stull's compensation for the fiscal year
ended September 30, 1998, the Committee took into account a comparison of
salaries of chief executive officers of local financial institutions. Likewise,
each executive officer's base salary was determined utilizing financial
institution compensation surveys. President Poronsky Stull's base salary for
fiscal year 1999 was increased by the Committee because it was the judgment of
the Committee that the competitive salary data indicated that President Poronsky
Stull's base salary was lower than appropriate. The Committee also determined,
based upon the Bank's success in strengthening its capital ratios and the
implementation of cost reduction measures and in recognition of the improved
performance of the Bank, to award President Poronsky Stull a bonus for fiscal
1998. While the Committee believed that a bonus for fiscal 1998 and a salary
increase for fiscal 1999 for President Poronsky Stull were warranted, President
Poronsky Stull declined an increase in her base salary and also declined a
bonus.

In December 1996, the Committee reviewed several salary studies of
executive officers of other financial institutions. Salaries were increased from
1996 levels; however, all officers took voluntary pay reductions during fiscal
1997. Although the Committee determined that certain executive officers earned
salary increases for fiscal 1998, the executive officers declined such proposed
increases. And, although the Committee determined that certain executive
officers should be given salary increases for fiscal 1999, the officers declined
such proposed increases. A nominal increase in salary was given to Mr. Vanek,
however.

The Board of Directors as a whole, and the Compensation Committee in
particular, recognizes that attracting and retaining key executives is critical
to the Company's long-term success. This report reflects the compensation
policies ratified by all outside directors. The Compensation Committee, with
recommendations from the Board of Directors, has set certain guidelines
regarding executive officer compensation, and has also set certain goals which
must be met to achieve all incentives possible. These goals include:

- Maintaining a below average ratio of full-time employees per million
dollars of assets while maintaining good customer service and high
employee morale

- Maintaining a low level of non-performing loans

- Increasing the interest rate spread

- Increasing net income

- Improving the net interest margin

- Maintaining risk-based capital ratios above regulatory requirements

- Maintaining at least a CAMEL 2 rating by the Bank

Since the mutual to stock conversion of the Bank, the Bank and the Company
have included stock option and restricted stock awards as key elements in its
total compensation package. Equity based compensation provides a long-term
alignment of interests and results achieved for stockholders with the
compensation rewards provided to executive officers by providing those
executives and others on whom the continued success of the Company most depends
with a proprietary interest in the Company. In 1996, a Stock Option and
Incentive Plan and a Recognition and Retention Plan were adopted, allowing for
the grant of equity-based

15
20

awards, including stock options and restricted stock. These plans were ratified
by the Company's stockholders at a Special Meeting of Stockholders held during
fiscal 1996.

In fiscal year 1996, all of the Bank's executive officers were granted
restricted stock and stock options, generally vesting over a five-year schedule.
Since the initial awards in fiscal year 1996, no additional restricted stock or
stock options have been awarded to executive officers. During fiscal 1998, an
option awarded to President Poronsky Stull with an exercise price of $11.625 per
share vested as to 18,117 shares and 7,935 shares of restricted stock awarded to
President Poronsky Stull vested as well.

Through the compensation programs described above, a significant portion of
the Bank's executive compensation is linked directly to individual and corporate
performance. The Committee will continue to review all elements of compensation
to ensure that the compensation objectives and plans meet the Company's business
objectives and philosophy of linking executive compensation to stockholder
interests of corporate performance as discussed above.

In 1993, Congress amended the Internal Revenue Code of 1986 to add Section
162(m) to limit the corporate deduction for compensation paid to a corporation's
five most highly compensated officers to $1.0 million per executive per year,
with certain exemptions. The Committee carefully reviewed the impact of this
legislation on the cost of the Bank's current executive compensation plans.
Under the legislation and regulations adopted thereunder, it is not expected
that any portion of the Company's (or subsidiaries') deductions for employee
remuneration will be non-deductible in fiscal 1998 or in future years by reason
of compensation awards granted in fiscal 1998. The Committee intends to review
the Company's (and subsidiaries') executive compensation policies on an ongoing
basis, and propose appropriate modifications, if the Committee deems them
necessary, to these executive compensation plans with a view toward implementing
the Company's compensation policies in a manner that avoids or minimizes any
disallowance of tax deductions under Section 162(m).

The foregoing report is furnished by the Compensation Committee of the
Board of Directors.

EDWARD R. TYBOR ALBERT C. BALDERMANN CAROL A. DIVER NICHOLAS J.
RAINO

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21

STOCKHOLDER RETURN PERFORMANCE PRESENTATION

The following graph compares the cumulative total stockholder return on the
Company's Common Stock to the NASDAQ U.S. Stock Index (which includes all NASDAQ
traded stocks of U.S. companies) and a bank industry index for the period from
October 2, 1995, the date the Company's Common Stock commenced trading on the
NASDAQ National Market System, through September 30, 1998. The Company deleted
the Savings and Loan Index provided in last year's Proxy Statement because the
Bank converted to a national bank in February 1997. The Board believes the use
of a bank index is more appropriate. The graph assumes that $100 was invested on
October 2, 1995 and that all dividends were reinvested.

DAMEM FINANCIAL
CORPORATION S&P MIDCAP BANKING INDEX NASDAQ INDEX
--------------- ------------------------ ------------

'10/2/95' 100.00 100.00 100.00
'3/29/96' 116.25 116.24 107.18
'9/30/96' 122.45 125.83 119.40
'3/31/97' 145.55 145.56 118.89
'9/30/97' 159.90 205.12 164.05
'3/31/98' 177.15 247.28 178.64
'9/30/98' 149.60 205.44 164.84

PERIOD ENDING
--------------------------------------------------------------------------
INDEX 10/02/95 03/29/96 09/30/96 03/31/97 09/30/97 03/31/98 09/30/98
- ----- -------- -------- -------- -------- -------- -------- --------

Damen Financial Corporation..... $100.00 $116.25 $122.45 $145.55 $159.90 $177.15 $149.60
S&P Midcap Banking Index........ 100.00 116.24 125.83 145.56 205.12 247.28 205.44
NASDAQ Index.................... 100.00 107.18 119.40 118.89 164.05 178.64 164.84

CERTAIN TRANSACTIONS

The Bank follows a policy of granting loans to eligible directors, officers
and employees, subject in each case to Board approval. Loans to employees,
officers and directors are made in the ordinary course of business and on the
same terms, including collateral and interest rates, as those prevailing at the
time for comparable transactions and do not involve more than the normal risk of
collectibility at the time of origination. At September 30, 1998, the Bank's
loans to directors, officers and members of their immediate families totaled
approximately $212,691, which was .47% of the Company's stockholders' equity on
such date. All of these loans were current at fiscal year end.

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22

As of September 30, 1998, Director Nicholas J. Raino had a greater than 10%
equity interest in Dale, Smith & Associates, Inc. ("Dale Smith"), which has long
been utilized by the Bank and, since its formation, the Company, to provide
marketing, advertising and other services. During fiscal year 1998, the Company
and the Bank paid Dale, Smith $28,786 for its services. During fiscal 1998, the
Company and the Bank also reimbursed Dale, Smith $240,470 for services and
products provided by third party sources, such as newspapers and financial
printers.

PROPOSAL II -- RATIFICATION OF APPOINTMENT OF AUDITORS

The Board of Directors of the Company has appointed Cobitz, VandenBerg &
Fennessy, independent accountants, to be the Company's auditors for the fiscal
year ending September 30, 1999. Representatives of Cobitz, VandenBerg & Fennessy
are expected to attend the Meeting to respond to appropriate questions and to
make a statement if they so desire.

THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE
RATIFICATION OF THE APPOINTMENT OF COBITZ, VANDENBERG & FENNESSY AS THE
COMPANY'S AUDITORS FOR THE FISCAL YEAR ENDING SEPTEMBER 30, 1999.

PROPOSAL III -- STOCKHOLDER PROPOSAL

The Company has received from a stockholder, Paul Duggan (a member of the
Committee), for consideration at the Meeting the proposal set forth below.

RESOLVED, that the stockholders of the Company, believing that the value of
their investment in the Company can best be maximized through a sale or merger
of the Company, hereby request that the Board of Directors promptly proceed to
effect such a sale or merger by (i) retaining a leading qualified investment
banking firm for the specific purpose of soliciting offers to acquire the
Company by sale or merger and (ii) establishing a committee of the Board of
Directors consisting of all directors, who are not current or former officers or
employees of the Company or related by blood or marriage to a current or former
officer or employee of the Company, to consider and recommend to the full Board
of Directors for approval the best available offer to acquire the Company by
sale or merger.

SUPPORTING STATEMENT

This Resolution and Supporting Statement were written with facts available
to this writer (Paul Duggan) as of August 18, 1998. Results of the Company's
fiscal year will not be available until December of 1998. A similar proposal was
on last year's ballot and failed to carry by a narrow margin.

Damen went public in October of 1995. On its first day of trading, I paid
$12.00 for Damen stock. In the 34 months since that point, Damen's stock has
risen to $15.25 per share (current bid). This represents a 27% increase in the
price of Damen stock. During the same time frame, the value of the Dow Jones
Industrial Average has grown at the rate of 76.64% and the NASDAQ Bank Index has
grown 97.21%. The stock of Damen has underperformed its peer group, ignoring the
dividends that have been paid by Damen (as does the performance of all the Dow
Jones Industrial Average and NASDAQ Bank Index quoted).

I believe there are a number of reasons for the miserable performance of
Damen stock; failure to properly carry out a stock buy-back program,
mismanagement of a dividend program, mismanagement of excess capital and failure
to pay special dividends. I also feel that the Corporation may have suffered
from poor legal advice from its outside counsel.

Ultimately, the blame must fall on Management. Management has chosen its
financial advisors and lawyers. Management should explore other alternatives
including the marketing of the Company for sale, the sale of specific branches
or the payment of a large dividend. Since Management was given a warning by its
shareholders last year, the stock has gone down.

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23

Management bragged that the stock price increased to $15.75 during the 1997
fiscal year. The stock price is down in the ensuing period of time. It is time
to do something different. A No vote is a vote for Management and mediocre
performance. A Yes vote for the shareholder proposal is a vote to move forward
and a vote for change. I urge you to consider voting Yes for the proposal.

VOTE "YES"

YOUR BOARD'S RESPONSE

FOR THE FOLLOWING REASONS, THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE
"AGAINST" THE STOCKHOLDER PROPOSAL AND YOUR PROXY WILL BE SO VOTED UNLESS YOU
SPECIFY OTHERWISE:

Since the Company's inception, your Board of Directors has solicited the
advice of investment bankers and has acted on such advice where appropriate. The
Board of Directors has always recognized its primary duty to be the maximization
of stockholder value and, to that end, has consulted with investment bankers on
an ongoing basis to explore various options available to the Company to enhance
stockholder value. Evaluation of options is a continuing process, but the Board
of Directors has taken a number of specific steps designed to maximize
stockholder value since the Company began publicly trading its stock in October
1995.

Recently, the Company announced that it had engaged the services of Keefe
Bruyette and Woods, Inc., a leading investment banking firm ("Keefe Bruyette"),
to serve as its financial adviser to assist the Board in considering the
Company's strategic options, including the possible sale of the Company.
Although, this announcement was made on December 16, 1998, Keefe Bruyette has
been assisting the Board in reviewing its strategic options, including the
possible sale of the Company, for some time before this announcement. Keefe
Bruyette, pursuant to the instructions given by your Board, has held discussions
with other companies to determine if there is any interest in acquiring the
Company.

The Board engaged another investment banking firm in March of 1998 to
assist it in exploring its strategic options, including a possible sale of the
Company. The representative of this firm provided advice to the Board through
the summer of 1998. This individual left his firm and joined Keefe Bruyette
during the summer of 1998. He continued to consult with management and the Board
on these matters. On October 20, 1998, the Board directed management to
formalize the Company's relationship with Keefe Bruyette. The engagement of
investment banking firms in March of 1998 and October of 1998 to assist the
Board in reviewing strategic options, including a possible sale of the Company,
were made by the Board as part of its ongoing effort to maximize stockholder
value and were not made in response to Duggan's suggestions.

The Board did not announce its engagement of Keefe Bruyette (or the other
investment banking firm) earlier because the Board believes that the disclosure
of such information would be disruptive to this review process, could possibly
deter prospective buyers who might be reluctant to become involved or drawn into
what they might perceive as a "bidding" process, and could result in offers
being made by parties seeking to acquire the Company for a bargain price,
feeling a bargain might be available because the Board was being pressured to
act by a disgruntled stockholder. The Board, however, felt that it was necessary
to assume these risks now because of the contentious nature of Duggan's demands,
the unfair nature of his criticisms and the Board's desire to ensure that
stockholders receive all relevant information prior to voting on the Stockholder
Proposal.

The Board of Directors has taken several steps in order to enhance
stockholder value. The Board of Directors evaluates the Company's dividend
policy on a regular basis. The Company's dividend increased from $.06 per share
per quarter to $.10 per share per quarter for the quarter ending December 31,
1997, a 67% increase. The dividend was increased again to $.12 per share per
quarter beginning with the quarter ending March 31, 1998, a 20% increase. During
the fiscal year 1998, the Company's dividends paid totaled $.40 per share,
representing 62% of the Company's net income for 1998.

The Board of Directors has also been working on maximizing stockholder
value by taking action intended to increase the overall franchise value of the
Company's major asset, the Bank. The Bank significantly
19
24

increased its commercial loan portfolio and began offering new products and
services over the past year. Indicative of the Company's success is that it has
reported net income of $1.9 million, or $.65 per share on a fully diluted basis,
for the fiscal year, an increase of $.12 per share over the fiscal year 1997, or
22.6%. The Company's return on average assets increased 10.7%, from .75% in 1997
to .83% in 1998.

Since January 1, 1996, the Company has approved seven stock repurchase
programs, which, as of December 9, 1998, have resulted in the Company's
repurchase of over 1,160,000 shares of its Common Stock. On September 11, 1998,
the Company announced a stock repurchase program pursuant to which it intends to
acquire up to 10% of the Company's shares. As of December 9, 1998, the Company
had repurchased 147,000 shares at an average price of $14.43.

The Board of Directors believes the Proponent's emphasis on the price of
the Company's stock in August 1998 is misleading. Although the Board of
Directors is certainly unhappy with the price of the Company's stock, a one-time
snapshot of the Company's stock price does not give a complete picture of the
value of the Company. The stock market in general experienced a drastic decline
this past summer, especially in August. Many companies, including large and
small Midwest banks and thrifts, saw their stock prices drop as their
stockholders followed the market's negative reaction to the economic failure
abroad and excessive leveraged investments. It is unrealistic to expect the
Company's stock price to be unaffected by a turbulent stock market.

The Board of Directors is continually evaluating ways to improve
stockholder value and has consulted with experienced, knowledgeable and
competent investment bankers and legal experts. The Board of Directors takes
seriously its duty to run a safe and sound financial institution while working
towards maximization of stockholder value. It knows that no action occurs in a
vacuum and that prudence requires it to look at the long term, as well as the
short term, effects of a business plan. The Board of Directors and Management
have appropriately consulted with experts regarding the future of the Company
and believe the Company is on the right track for continued successful
operations.

The value of the Company's Common Stock has increased since its initial
public offering on September 30, 1995, and dividends have been declared every
quarter since June 1996. At September 30, 1998, the return on an investment made
at the initial public offering price of $10.00 per share was 52.6%. The Board of
Directors believes a return of 52.6% over a three year period is a good return.
Based upon the closing price of $16.50 on December 31, 1998, this return was
73.5%.

The Stockholder Proposal recommends that your Board of Directors appoint an
investment banker to pursue a sale of the Company and to establish a committee
consisting of all outside directors to consider and recommend to the full Board
of Directors for its approval the best available offer to acquire the Company.
In its proxy materials, the Committee states that Duggan has repeatedly asked
the Board to engage the services of an investment banker to explore the sale of
your Company. The Committee also alleges that the reluctance of the Board to
engage an investment banker demonstrates management's influence over the Board
of Directors and the insufficient responsiveness of the Board to stockholder
concerns.

THE BOARD BELIEVES THAT THIS CHARACTERIZATION OF ITS ACTIONS BY THE
COMMITTEE IS MISLEADING IN THAT, AS INDICATED ABOVE, THE BOARD HAS ENGAGED THE
SERVICES OF AN INVESTMENT BANKING FIRM TO STUDY ITS STRATEGIC OPTIONS, INCLUDING
A POSSIBLE SALE OF THE COMPANY, SINCE MARCH OF 1998 AS PART OF ITS CONTINUING
EFFORT TO MAXIMIZE STOCKHOLDER VALUE. THE BOARD BELIEVES THAT ITS ENGAGEMENT OF
KEEFE BRUYETTE IMPLEMENTS THE RECOMMENDATION SET OUT IN THE FIRST PART OF THE
STOCKHOLDER PROPOSAL AND, THEREFORE, BELIEVES THERE IS NO NEED FOR STOCKHOLDERS
TO CONSIDER THIS MATTER.

Furthermore, the Board does not believe it is necessary, as the Committee
contends, to appoint a committee consisting of all outside directors to review
the results of the efforts of Keefe Bruyette. The Board of Directors is fully
capable of evaluating any materials submitted by Keefe Bruyette. The Board of
Directors is composed of five outside directors and two employee directors. The
outside directors operate independently of management.

Two of the outside directors (Messrs. Raino and Baldermann) have extensive
experience serving as directors of other financial institutions. In fact,
Messrs. Raino and Baldermann were serving as directors, respectively, of Cragin
Federal Bank for Savings and Southwest Financial Bank & Trust Company when these
20
25

institutions were acquired. The three other outside directors (Messrs. Tybor and
Caputo and Ms. Diver) have faithfully served as directors of the Company and the
Bank and have successfully represented the interests of depositors, borrowers
and stockholders collectively for more than 72 years. Instead of recognizing the
qualities that these five individuals possess, and their dedication to the
Company and its stockholders, the Committee contends that they cannot review any
offers for the Company and exercise their own judgment if the two employee
directors are present at such meetings.

THE BOARD OF DIRECTORS BELIEVES THE FACT THAT FIVE OF THE SEVEN MEMBERS OF
THE BOARD ARE OUTSIDE DIRECTORS WITH SIGNIFICANT EXPERIENCE IN MANAGING
FINANCIAL INSTITUTIONS DEMONSTRATES THAT THERE IS NO NEED TO APPOINT A SPECIAL
BOARD COMMITTEE TO EVALUATE OFFERS AS CONTEMPLATED BY THE STOCKHOLDER PROPOSAL.

IN LIGHT OF THE FOREGOING, THE BOARD OF DIRECTORS FEELS THERE IS NO REASON
TO CONSIDER THE STOCKHOLDER PROPOSAL SET FORTH ABOVE AND, ACCORDINGLY, THE
COMPANY PROVIDED DUGGAN ON DECEMBER 17, 1998 WITH A REVISED DRAFT OF ITS
RESPONSE TO THE STOCKHOLDER PROPOSAL WHICH, AS REVISED, INDICATED THAT THE BOARD
CONTACTED DUGGAN AND ASKED HIM TO WITHDRAW HIS PROPOSAL. DUGGAN HAS NOT
RESPONDED TO THIS MATERIAL. UNFORTUNATELY, BUT NOT UNEXPECTEDLY, IN LIGHT OF THE
CONTENTIOUS WAY DUGGAN HAS CONDUCTED HIMSELF, HE HAS ELECTED TO CONTINUE THIS
DISRUPTIVE FIGHT, WASTING THE TIME AND EFFORT OF THE BOARD OF DIRECTORS AND
MANAGEMENT AND THE FUNDS OF THE COMPANY.

The Committee states in its proxy materials that the stockholder proposal
submitted at last year's annual meeting (which is similar to the current
Stockholder Proposal) was defeated, although receiving 1,180,889 votes "for" and
1,168,000 votes "against," because of a bylaw restriction which reduced the
number of votes "for" by 51,672. This is simply untrue. This proposal would have
failed even if the 51,672 votes (which were cast by Duggan) had been counted.
Under the rules governing the voting on this proposal, in order for the proposal
to pass it had to receive a majority of the votes cast. As indicated in the
instructions for voting at last year's annual meeting (and as the Committee
notes correctly in its own proxy materials), proxies marked to "abstain" have
the same affect as votes "against" the proposal. There were sufficient votes
cast as "abstentions" at last year's annual meeting to defeat the proposal even
if the 51,672 votes had been counted. What is interesting is that the Committee
fails to note that holders of almost 20% of the shares represented at last
year's meeting declined to vote on this proposal, meaning that this proposal
only received 38.6% of the votes eligible to be cast.

It is also interesting to note that the votes rejected were those of Duggan
who apparently had not read the Company's charter which contains the voting
restriction before casting his votes. The Board believes that Duggan and
entities he controls, in anticipation of being unable to vote certain of his
shares, sold 99,800 shares (almost 27% of his holdings) for $14.50 a share on
December 2, 1998, so that his ownership interest would be less than 10% and he
would not run afoul of this charter restriction. Showing its lack of familiarity
with the Company's organizational documents (copies of which were provided to
Duggan prior to last year's annual meeting), the Committee describes this voting
restriction as being contained in the bylaws. It is not in the bylaws; it is in
the Company's charter.

THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "AGAINST" THIS PROPOSAL,
AND YOUR PROXY WILL BE SO VOTED UNLESS YOU SPECIFY OTHERWISE.

WE URGE YOU NOT TO SIGN ANY PROXY YOU RECEIVE FROM THE COMMITTEE.

VOTING SECURITIES AND CERTAIN HOLDERS THEREOF

Stockholders of record as of the close of business on January 11, 1999 (the
"Record Date") will be entitled to one vote for each share of Common Stock then
held. As of the Record Date, the Company had 2,820,154 shares of Common Stock
issued and outstanding. The following table sets forth, as of the Record Date,
information regarding share ownership of (i) those persons or entities known by
management to beneficially own more than five percent of the outstanding shares
of the Common Stock, (ii) the executive officers of the Company who are not
directors of the Company and whose salary and bonus for fiscal 1998 exceeded
$100,000 and (iii) all directors and executive officers of the Company as a
group. Information

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26

concerning share ownership by directors of the Company is contained elsewhere
herein under "PROPOSAL I -- ELECTION OF DIRECTORS."

SHARES
BENEFICIALLY
OWNED AT PERCENT
BENEFICIAL OWNER JANUARY 11, 1999 OF CLASS
---------------- ---------------- --------

Paul J. Duggan(1)........................................... 273,800 9.71
Jackson Boulevard Capital Management, Ltd.
Jackson Boulevard Equities, L.P.
Jackson Boulevard Investments, L.P.
Jackson Offshore Fund, Ltd.
Jackson Boulevard Partners
Vincent Cainkar
J. Dennis Huffman
Suite 400
53 West Jackson Boulevard
Chicago, Illinois 60604
Damen Financial Corporation Employee Stock Ownership
Plan(2)................................................... 314,902 11.17
200 West Higgins Road
Schaumburg, Illinois 60195
Gerald J. Gartner(3)(4)..................................... 83,288 2.83
200 West Higgins Road
Schaumburg, Illinois 60195
Kenneth D. Vanek(3)(4)...................................... 54,276 1.82
200 West Higgins Road
Schaumburg, Illinois 60195
Directors and executive officers of the Company and the
Bank, as a group (10 persons)(4)(5)....................... 416,757 14.09

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

(1) As reported by Paul J. Duggan, Jackson Boulevard Capital Management, Ltd.
("Jackson Capital"), Jackson Boulevard Equities, L.P. ("Jackson Equities"),
Jackson Boulevard Investments, L.P. ("Jackson Investments"), Jackson
Offshore Fund, Ltd. ("Jackson Offshore"), Jackson Boulevard Partners
("Jackson Partners"), Vincent Cainkar and J. Dennis Huffman in Amendment No.
11 to a Schedule 13D, dated January 13, 1999, filed with the SEC pursuant to
the Exchange Act. Vincent Cainkar joined in Amendment Nos. 7 - 11 to said
Schedule 13D and Jackson Partners and J. Dennis Huffman joined in Amendment
Nos. 8 - 11 to said Schedule 13D as members of a group consisting of Duggan,
Jackson Capital, Jackson Equities, Jackson Investments, Jackson Offshore,
Jackson Partners, Cainkar and Huffman. Of the shares listed, Mr. Duggan
reported sole voting and dispositive powers as to 400 shares and shared
voting and dispositive powers as to 266,200 shares. Jackson Capital, Jackson
Equities, Jackson Investments and Jackson Offshore reported shared voting
and dispositive powers as to 92,200 shares, 60,622 shares, 31,578 shares and
-0- shares, respectively. Jackson Partners reported sole voting and
dispositive powers with respect to 174,000 shares. Mr. Duggan is the sole
stockholder and a director and officer of Jackson Capital, which is the sole
general partner of Jackson Equities and Jackson Investments. Mr. Duggan
through Jackson Capital controls all decisions regarding voting and
investment of the shares held by Jackson Offshore. Mr. Duggan and his spouse
are the general partners of Jackson Partners. Mr. Cainkar reported sole
voting and dispositive powers with respect to 100 shares and shared voting
and dispositive powers with respect to 4,100 shares. Mr. Huffman reported
sole voting and dispositive powers with respect to 3,000 shares.

(2) The amount reported represents shares held by the Company's Employee Stock
Ownership Plan ("ESOP"), of which 80,982 shares have been allocated to
accounts of participants. Suburban Bank and Trust Company, the trustee of
the ESOP, may be deemed to beneficially own the shares held by the ESOP
which have not been allocated to accounts of participants. Participants in
the ESOP are entitled to
22
27

instruct the trustee as to the voting of shares allocated to their accounts
under the ESOP. Unallocated shares held in the ESOP's suspense account or
allocated shares for which no voting instructions are received are voted by the
trustee in the same proportion as allocated shares voted by participants.

(3) Amount includes 24,598 shares subject to stock options which are currently
exercisable with respect to such shares or which will become exercisable
with respect to such shares within 60 days of the Record Date.

(4) Amount includes shares held directly and vested restricted shares, as well
as shares held jointly with family members, shares held in retirement
accounts, held in a fiduciary capacity or by certain family members, with
respect to which shares the named individual or group members may be deemed
to have sole or shared voting and/or investment power; amount does not
include unvested restricted shares which are voted by a trustee.

(5) Amount includes an aggregate of 137,351 shares which directors and executive
officers as a group have the right to acquire pursuant to stock options
which are currently exercisable with respect to such shares or which will
become exercisable with respect to such shares within 60 days of the Record
Date.

STOCKHOLDER PROPOSALS -- NEXT ANNUAL MEETING

In order to be eligible for inclusion in the Company's proxy materials for
the next annual meeting of stockholders, any stockholder proposal to take action
at such meeting must be received at the Company's office located at 200 West
Higgins Road, Schaumburg, Illinois 60195, no later than September 30, 1999. Any
such proposal shall be subject to the requirements of the proxy rules adopted
under the Exchange Act.

CERTAIN LITIGATION

On December 21, 1998, management of the Company, after consulting with
legal counsel, recommended to the Board of Directors that it would be in the
best interests of the Company and its stockholders if this year's annual meeting
were to be delayed from January 25, 1999 to February 26, 1999 and that the
record date for the meeting were to be changed from December 9, 1998 to January
11, 1999. At a meeting held on December 21, 1998, the Board of Directors, after
reviewing the relevant facts, decided to reset the annual meeting and record
dates.

The Committee filed its preliminary proxy materials with the SEC on
December 22, 1998 on which date the Company was notified of the filing. On
December 30, 1998, Duggan filed a lawsuit in the Delaware Court of Chancery
against the Company and each of its directors. The suit alleged that the meeting
and record dates for this year's annual meeting were changed by the Board
because of a challenge to their incumbency by Duggan's solicitation of proxies
for this year's meeting. Duggan asked the Court to force the Company to hold the
annual meeting on January 25, 1999 and to reset the record date to December 9,
1998.

THE BOARD OF DIRECTORS AND THE COMPANY BELIEVES THERE IS NO MERIT TO
DUGGAN'S CLAIMS AND INTENDS TO DEFEND THEMSELVES VIGOROUSLY. The basic fact is
that the Board of Directors elected on December 21, 1998, for reasons unrelated
to Duggan's solicitations, to postpone the annual meeting for only one month to
February 26, 1999. The record date was changed, not for any nefarious reasons as
suggested by Duggan, but because the Company's bylaws provide that the record
date for a meeting cannot be set more than 60 days prior to the meeting date.
The Board of Directors changed the meeting date for valid reasons and not
because of concerns over a possible proxy contest being conducted by Duggan.

THE COMPANY HAS HAD TO EXPEND SUBSTANTIAL FUNDS AND WASTE THE TIME OF ITS
OFFICERS AND DIRECTORS IN DEFENDING WHAT THE BOARD BELIEVES IS A FRIVOLOUS
LAWSUIT. AGREEING WITH THE COMPANY'S POSITION, THE DELAWARE COURT OF CHANCERY
DENIED DUGGAN'S REQUEST ON JANUARY 12, 1999. AS A CONSEQUENCE, THE MEETING WILL
BE HELD ON FEBRUARY 26, 1999 WITH A RECORD DATE OF JANUARY 11, 1999, THE DATES
ESTABLISHED BY YOUR BOARD.

23
28

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Exchange Act requires the Company's directors and
executive officers, and persons who own more than 10% of a registered class of
the Company's equity securities, to file with the SEC reports of ownership and
reports of changes in ownership of common stock and other equity securities of
the Company. Officers, directors and greater than 10% stockholders are required
by SEC regulation to furnish the Company with copies of all Section 16(a) forms
they file.

To the Company's knowledge, based solely on a review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, during the fiscal year ended September 30, 1998, all
Section 16(a) filing requirements applicable to the Company's officers,
directors and greater than 10 percent beneficial owners were met, with the
exception of filings made by Paul Duggan. See "PROPOSAL I -- ELECTION OF
DIRECTORS," for discussion of Duggan's compliance with his Section 16(a) filing
requirements.

OTHER MATTERS

The Board of Directors is not aware of any business to come before the
Meeting other than those matters described above in this Proxy Statement.
However, if any other matter should properly come before the Meeting, it is
intended that holders of the proxies will act in accordance with their best
judgment.

CERTAIN INFORMATION CONCERNING PARTICIPANTS

The directors of the Company are participants in the solicitation of
proxies on behalf of the Company. Certain information with respect to such
participants is set forth in Annex A hereto. For additional information
concerning each director, see the Proxy Statement.

SOLICITATION OF PROXIES

In addition to the solicitation of proxies by use of the mails, proxies may
also be solicited by the Company and its directors, officers and employees (who
will receive no compensation therefor in addition to their regular salaries) by
telephone, telegram, facsimile transmission or other electronic communication
methods or personal interview.

The Company has retained D.F. King & Co., Inc. ("D.F. King"), to assist in
the solicitation of proxies. Pursuant to the Company's agreement, D.F. King will
provide various advisory and proxy solicitation services on behalf of the
Company at a fee estimated not to exceed $30,000, plus reasonable out-of-pocket
expenses. It is expected that D.F. King will utilize approximately 25 persons in
such solicitation, which may be made by use of the mails and by telephone,
telegram, facsimile transmission and other electronic communication methods, and
in-person interviews. In addition, the Company may reimburse banks and brokers
who hold shares of the Company's stock in their name or custody or in the name
of nominees for others, for their out-of-pocket expenses incurred in forwarding
copies of the proxy materials to those persons for whom they hold such shares.

Although no precise estimate can be made at this time, the Company
estimates that the aggregate amount to be spent by the Company in connection
with the solicitation of proxies by the Company (including costs of litigation)
will be approximately $150,000. This amount includes fees payable to D.F. King,
legal fees related to the solicitation and printing and mailing costs, but
excludes amounts normally expended in the event of an uncontested election of
directors and the salaries and fees of regular officers, directors and employees
of the Company. To date, the Company knows it has incurred significant fees and
expenses (estimated to be $75,000), but it has not yet been billed for such
services. The actual aggregate amount to be spent by the Company will vary
depending on, among other things, the nature and extent of any litigation that
may arise relating to the proxy contest initiated by the Committee.

Schaumburg, Illinois
January 28, 1999

24
29

ANNEX A

CERTAIN INFORMATION REGARDING PARTICIPANTS

SHARES OF
COMPANY COMMON STOCK
BENEFICIALLY OWNED PERCENT OF
NAME AS OF JANUARY 11, 1999(1) CLASS
---- ------------------------- ----------

Albert C. Baldermann................................. 2,587 .09
Charles J. Caputo.................................... 36,108 1.28
Carol A. Diver....................................... 16,108 .57
Janine A. Poronsky................................... 76,105 2.67
Nicholas J. Raino.................................... 14,381 .53
Mary Beth Poronsky Stull............................. 98,472 3.45
Edward R. Tybor...................................... 25,608 .91

None of the foregoing persons is a record owner of shares in addition to
those noted above and none beneficially owns securities of the subsidiary of the
Company. To the knowledge of the Company, none of the associates of the
foregoing persons beneficially own additional shares of the Company's Common
Stock. None of the foregoing persons or their associates has any understanding
or arrangement with any person with respect to any future employment by the
Company or its affiliates (except for the employment agreements of Ms. Poronsky
and Ms. Poronsky Stull as described in the Proxy Statement) or with respect to
any future transaction to which the Company or any of its affiliates will or may
be a party. None of the foregoing persons is, or was within the past year, a
party to any contract, arrangement or understanding with any person with respect
to securities of the Company, except with respect to the stock options described
above and vested restricted shares and unvested restricted shares granted under
the Company's Recognition and Retention Plan.
- ---------------
(1) Includes shares held directly and vested restricted shares, as well as
shares held in retirement accounts, shares allocated to the ESOP accounts of
certain of the named persons, held by certain members of the named
individuals' families, or held by trusts of which the named individual is a
trustee or substantial beneficiary, with respect to which shares the named
individuals may be deemed to have sole or shared voting and/or investment
power. Amounts include 3,967, 5,934, 28,652, 3,967, 33,734 and 3,967 shares
of Common Stock which Directors Caputo, Diver, Poronsky, Raino, Poronsky
Stull and Tybor have the right to acquire, respectively, pursuant to stock
options which are currently exercisable with respect to such shares or which
will become exercisable with respect to such shares within 60 days of the
Record Date. Does not include unvested restricted shares which are voted by
a trustee.

A-1
30

TRADING INFORMATION

The following table sets forth information with respect to all purchases
and sales of shares by the Company's directors during the past two years:

NUMBER OF SHARES
NAME TRADE DATE BOUGHT/(SOLD)
---- ---------- ----------------

Albert C. Baldermann............................. 1/6/98 7,935(1)
1/16/98 1,000(2)
Charles J. Caputo................................ 12/11/97 3,967(3)
Carol A. Diver................................... 12/11/97 2,000(3)
Janine M. Poronsky............................... 1/10/97 2,438.565(4)
11/4/97 3,100(2)
12/11/97 1,500(3)
12/12/97 2,329.978(5)
1/21/98 400(2)
1/30/98 600(2)
2/11/98 110(2)
12/2/98 2,632.35(6)
Nicholas J. Raino................................ 4/1/97 7,935(1)
4/30/97 4,000(2)
Mary Beth Poronsky Stull......................... 1/10/97 2,487.107(4)
12/11/97 2,500(3)
12/12/97 2,329.978(5)
1/21/98 1,000(2)
2/11/98 4,674(2)
12/2/98 2,632.35(6)
Edward R. Tybor.................................. 1/8/98 3,967(3)

- ---------------
(1) Grant of shares under the Company's RRP.

(2) Purchase.

(3) Purchase made pursuant to the exercise of options.

(4) 1996 ESOP allocation.

(5) 1997 ESOP allocation.

(6) 1998 ESOP allocation.

ADDITIONAL INFORMATION REGARDING PARTICIPANTS

The following table sets forth the name and principal business address of
each director. (Their principal occupations are set forth in the Proxy):

ALBERT C. BALDERMANN -- Damen Financial Corporation, 200 West Higgins Road,
Schaumburg, Illinois 60195 (Mr. Baldermann is retired).

CHARLES J. CAPUTO -- Damen Financial Corporation, 200 West Higgins Road,
Schaumburg, Illinois 60195 (Mr. Caputo is retired).

CAROL A. DIVER -- Chicago Park District, 425 East McFedridge Drive,
Chicago, Illinois 60605.

JANINE M. PORONSKY -- Damen Financial Corporation, 200 West Higgins Road,
Schaumburg, Illinois 60195.

NICHOLAS J. RAINO -- Damen Financial Corporation, 200 West Higgins Road,
Schaumburg, Illinois 60195 (Mr. Raino is retired).

MARY BETH PORONSKY STULL -- Damen Financial Corporation, 200 West Higgins
Road, Schaumburg, Illinois 60195.

EDWARD R. TYBOR -- Kubina-Tybor Funeral Home, 1938 West 47th Street,
Chicago, Illinois 60609.

A-2
31

IMPORTANT

Your vote is important, no matter how many shares you own. Please support
your Board of Directors by signing, dating and promptly mailing your enclosed
WHITE proxy card. Remember, only your latest dated card will count. DO NOT SIGN
ANY CARD SENT TO YOU BY THE SO-CALLED COMMITTEE.

If you have already submitted a proxy to the Committee, you may change your
vote to a vote "FOR" the election of the Company's nominees and "AGAINST" the
Stockholder Proposal by signing, dating and returning the WHITE proxy card,
which must be dated after the proxy you submitted to the Committee. Only your
latest dated proxy for the Meeting will count at the Meeting.

If your shares are held in a brokerage firm, bank, bank nominee or other
institution, only it can vote your shares and only after receiving specific
instructions. Accordingly, please call the person responsible for your account
and instruct that person to execute the WHITE card on your behalf.

If you have any questions or need assistance, please call us at
847-882-5320 and ask to speak to Janine Poronsky or Mary Beth Poronsky Stull.
You may also call D.F. King, which is assisting us, toll-free at:

D.F. KING & CO., INC.
77 WATER ST.
NEW YORK, NY 10005
1-800-628-8538
32

REVOCABLE PROXY
DAMEN FINANCIAL CORPORATION

ANNUAL MEETING OF STOCKHOLDERS
FEBRUARY 26, 1999

The undersigned hereby appoints the Board of Directors of Damen Financial
Corporation (the "Company"), and its survivor, with full powers of substitution,
to act as attorneys and proxies for the undersigned to vote all shares of
capital stock of the Company which the undersigned is entitled to vote at the
Company's Annual Meeting of Stockholders (the "Meeting"), to be held at the
Embassy Suites, located at 1939 North Meacham Road, Schaumburg, Illinois on
February 26, 1999 at 9:30 a.m., Central Standard Time, and at any and all
adjournments and postponements thereof.

THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE SPECIFIED, THIS
PROXY WILL BE VOTED FOR THE NOMINEES FOR ELECTION AS DIRECTORS LISTED IN ITEM 1
ON THE REVERSE AND FOR THE RATIFICATION OF THE APPOINTMENT OF AUDITORS NAMED IN
ITEM 2 ON THE REVERSE AND AGAINST THE PROPOSAL SET FORTH IN ITEM 3 ON THE
REVERSE. IF ANY OTHER BUSINESS IS PRESENTED AT THE MEETING, THIS PROXY WILL
BE VOTED BY THOSE NAMED IN THIS PROXY IN THEIR BEST JUDGMENT. AT THE PRESENT
TIME, THE BOARD OF DIRECTORS KNOWS OF NO OTHER BUSINESS TO BE PRESENTED AT THE
MEETING.

This Proxy may be revoked at any time before it is voted by:(i) filing with the
Secretary of the Company at or before the Meeting a written notice of revocation
bearing a later date than this Proxy; (ii) duly executing a subsequent proxy
relating to the same shares and delivering it to the Secretary of the Company at
or before the Meeting; or (iii) attending the Meeting and voting in person
(although attendance at the Meeting will not in itself constitute revocation of
this Proxy). If this Proxy is properly revoked as described above, then the
power of such attorneys and proxies shall be deemed terminated and of no further
force and effect.

The undersigned acknowledges receipt from the Company, prior to the execution of
this proxy, of notice of the Meeting, a Proxy Statement and an Annual Report to
Stockholders.

PLEASE ACT PROMPTLY
SIGN, DATE & MAIL YOUR PROXY CARD TODAY

DAMEN FINANCIAL CORPORATION
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. /X/

[ ]

THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE
ELECTION OF THE NOMINEES LISTED IN ITEM 1 BELOW. RATIFICATION OF THE APPOINTMENT OF AUDITORS NAMED
IN ITEM 2 BELOW.

1. The Election as Directors of all nominees 2. The ratification of the appointment of Cobitz,
listed (except as marked to the contrary below): VandenBerg & Fennessy as auditors for the
EDWARD R. TYBOR, JANINE M. PORONSKY AND CHARLES J. CAPUTO Company for the fiscal year ending September
30, 1999:
FOR WITHHOLD FOR ALL
EXCEPT FOR AGAINST ABSTAIN

/ / / / / / / / / / / /

(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL THE BOARD OF DIRECTORS RECOMMENDS A VOTE "AGAINST" THE
NOMINEE, MARK "FOR ALL EXCEPT" AND WRITE THAT NOMINEE'S NAME PROPOSAL SET FORTH BELOW IN ITEM 3.
IN THE SPACE PROVIDED BELOW.)

- -------------------------------------------------------------- 3. A proposal by a stockholder of the Company, as described
in the accompanying Proxy Statement:

FOR AGAINST ABSTAIN

/ / / / / /

In their discretion, the proxies are authorized to vote on
such other matters as may properly come before the meeting
or any adjournments or postponements thereof.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

Please
-------------------------------------------------------
Sign
--------------------------------------------------------
Here
--------------------------------------------------------

Dated:
----------------------------------, 1999
Please sign exactly as your name(s) appear(s) on this proxy. When
signing as attorney, executor, administrator, trustee or guardian,
please give your full title. If shares are held jointly, each
holder should sign.